Though my family lives in Chapel Hill, NC, we recently subscribed to a newspaper in Durham, NC. What on Earth, you might ask, does this have to do with direct and database marketing? As it turns out – plenty!
For years, the Wheaton family got several calls a month from this Durham newspaper, asking us to sign up. For years, the response was, “Why on Earth would we want to do that? We live in Chapel Hill.” Finally, someone put a stop to the calls by requesting that we be placed on the newspaper’s do-not-call list.
However, our 11-year-old son is a fanatical Duke Blue Devils basketball fan. Duke University is in Durham, about 10 miles from Chapel Hill. We joke that our son leads a Duke-centric existence. He owns Duke hats, shirts, shorts, socks and just about everything else with Duke’s name on it.
Duke’s arch-rival, the University of North Carolina, is in Chapel Hill, about five minutes from our house. Nevertheless, the town contains quite a few Duke fans and employees, especially on the north side, which borders Durham.
Recently, I stumbled upon the Durham newspaper’s Web site. It became apparent that it has the best coverage of Duke basketball in the area by far. Suddenly, the subscription price seemed a pittance. Well, perhaps not a pittance, but certainly worth 365 days a year of coverage of a team that is the focus of my son’s leisure hours.
In the dozens of calls over the years to get us to subscribe, no one ever had an effective response to our fundamental question, “Why on Earth would we want to subscribe to a Durham paper when we live in Chapel Hill?” Had someone listed a few possible compelling reasons, including the best coverage of Duke basketball, the subscription annuity from the Wheaton household would have started much sooner.
Don’t overlook the importance of focus group and survey research in order to understand non-response. Consider the transactional details of the subscription information available to the Durham newspaper, things such as dates, dollars and renewals. Nothing intrinsic about these data sources screams, “Lots of people in Chapel Hill subscribe to your paper because of its superior Duke basketball coverage!” The only way to gain this insight is to ask for it. This is where focus group and survey research plays its all-important role.
Once you have probed customers for the motivations behind their interest in your product or service, the next logical step is to do something with it. For the Durham newspaper, it could be as simple as altering the scripts of its telemarketing sales representatives to provide compelling reasons to subscribe – and reserving certain scripts and reasons for specific times of the year, such as during basketball season to highlight coverage of Duke.
Don’t be afraid to extend focus group and survey research to outside lists. Focus group and survey research also can be applied to non-customers.
Most DMers are lucky to generate a 1 percent response rate from outside lists.
In other words, 99 percent of everyone contacted will not respond.
But how many DMers have done focus group and survey work to probe the reasons for the non-response? Not many!
Of course, certain steps must be taken, such as securing list owner approval and carefully wording scripts and questionnaires.
Invariably, much of the non-response will reflect the inevitable imprecision of targeting. However, some will be because the optimal argument for purchase has not been identified and incorporated into the promotion.
Some would say, “How can I ask non-responders why they did not respond? Doesn’t their non-response suggest that they will not cooperate in focus group and survey work to probe their motivations?” Anyone who has been involved in the focus group and survey process understands the fallacy of this perspective. All sorts of ways exist to get people to share their thoughts and opinions, including paying them for their time.
The net effect can be significant. If just one non-responder out of every 500 could be persuaded to purchase, the overall response rate for the corresponding promotion would increase 20 percent, from 1 percent to 1.2 percent.
A case study. Some time ago, a client used focus group and survey research to identify a new and important target market. This market, it turned out, was more affluent than the core customer base. As a result, the client revamped its merchandise offerings within a specific high-margin category and altered its prospecting strategies and tactics.
Here is how this unfolded:
First, some background. The company sold hard goods across numerous merchandise categories. And its target market was decidedly middle class. During a data mining assignment on the marketing database, it was discovered that a small portion of the client’s customers was responsible for a drastically disproportionate percentage of revenue and profit. Most of these customers had one thing in common: many purchases within a single, high-margin merchandise category. The decision was made to perform a “deep dive” analysis of this customer subgroup.
The first step was to examine the merchandise being purchased by this very profitable customer group. The purchases turned out to be concentrated in the highest price points within the aforementioned high-margin merchandise category. A confluence of three factors – high average number of purchases, high margins and high price points – had created a small but powerful revenue and profit engine in the client’s customer base.
The second step of the analysis was to probe this group’s demographic characteristics. Demographic overlay data was applied to the marketing database, revealing that this customer group was more affluent than the balance of the customer base.
The third step was to understand the motivations behind the purchase behavior of these customers, via focus group and survey work. This produced several important conclusions, including:
· Most of the company’s merchandise, especially in the aforementioned high-margin category, was too downscale to interest this customer subset.
· Despite the small degree of overlap between the customer subset’s socioeconomic status and the client’s merchandise, the customer subset had developed significant loyalty to the company.
· With well-considered line extensions and revamped prospect and customer cultivation strategies and tactics tailored to this subset, overall loyalty and corresponding revenue and profit could be enhanced.
As a result, the company methodically tested its way into enhanced product offerings. It then featured these offerings in revamped specialty catalogs and standalone direct mail pieces that targeted customers and prospects.
For existing “core” mailings, additional high-quality, high price-point merchandise pages were included in catalogs directed to targeted prospects and customers. Likewise, ink-jet call-outs and cover wraps to this audience subset highlighted the pages of core catalogs featuring merchandise of particular interest.
And these sorts of prudent targeting initiatives were carried over to e-commerce via analogous strategies and tactics applied to the company’s Web site.
Ultimately, the company was able to test its way, over time, into a very profitable program of mass targeting.