Direct mail, direct marketing, targeted marketing, one-to-one marketing … we hear these terms every day and they are often used interchangeably. It can be quite maddening, really, because while some do mean the same thing, others do not, and it can create unnecessary confusion.
At its most basic, the following definitions apply:
- Direct mail is the marketing tactic that uses snail mail as its delivery system.
- Direct marketing is a strategy whereby marketers communicate an offer directly to a pre-determined audience and provide a method for a direct response. Targeted marketing means the same thing.
- One-to-one marketing is typically associated with CRM programs that are designed to retain customers after they make an initial purchase.
Today’s blog deals specifically with direct marketing and, most pointedly, how to increase customer response through its use. But here again is a confounding word: response.
For not everyone defines it the same way. Some campaigns set click-throughs as their response goal, while others may consider an inquiry a valid direct marketing response. There are many more “actions” a prospect can have to a direct marketing message, but for the sake of this article, we define direct response as an actual sale.
In fact, for the clients we serve, purchases are the only response that really matters because the primary goal is customer acquisition.
To explain how to increase response through direct marketing, we turned to our EVP of Operations, Lisa Owens, who oversees account management, steering teams toward the platforms and processes that deliver the intelligent insight our clients need to improve their bottom line.
In this Q&A Lisa takes a deep dive into the steps that must be taken to produce a direct marketing strategy and campaign that will maximize response rates.
Q: How do you increase response through direct marketing?
A: We look at your existing customers and find commonalities among them. This can include demographics like age, income, family and property ownership, and also behavioral characteristics, such as do they frequent fast food restaurants, or do they read a lot, or are they into arts and crafts?
We then use third-party data to find other people with the same or very similar characteristics from which we build a propensity model of targeted prospects. Because they look like people who have purchased from you before, we know they possess a propensity to buy and are most likely to increase the response rate.
Q: Define “response.”
A: DXM works mostly with clients that try to drive customers to a brick-and-mortar location, so in these cases a direct response is a purchase. In digital marketing, you can follow someone to the point of filling out a form or clicking to a product page on a website, but for DXM it’s not enough because the only way to provide our clients with a real ROI is to track the prospect through to an actual purchase. Otherwise, the best you can provide is a prospective ROI. Of course, for long lead purchase cycles, such as real estate, we track leads and then follow them through to the point of purchase.
Q: Explain how DXM captures real ROI from direct response marketing.
A: Sure. It goes back to the targeted prospect file we build at the beginning. Prior to running the ad campaign, we determine how long it will run. At the end of the campaign, we collect the customer data from all purchases made during the life of the campaign and match it back to the prospect file to see if any purchases came from people on our prospect list who were exposed to the campaign. With this information you know exactly how much return you got from your marketing investment.
Q: Can’t anyone do this?
A: It would seem so right? But the key to unlocking real ROI is the way you build your prospect model file. DXM builds the prospect model file and then overlays software that tracks Device IDs. Tracking Device IDs connects a device, such as a smartphone or laptop, to a prospect model audience ensuring that you are reaching the ideal prospects and eliminating wasted ad spending.
Q: Is there magic to the number of methodologies incorporated into a direct marketing campaign?
A: Multimedia campaigns almost always work better than single medium but the mix you use depends entirely on the product that’s being sold, your goals, its typical purchase cycle, and the audience behavioral profile, among other things. For instance, we have an urgent care client whose goal is to acquire more customers for its individual facilities. Almost all of their purchases are made offline since you need to actually visit a doctor or NP when you’re sick. Also, because urgent care centers are quite common today, location is one of the top considerations when deciding where to go.
The customer acquisition campaign we managed for our client from last October through May of this year consisted of three methodologies: direct display, social media and direct mail. We chose these channels because a) they are measurable, and b) they support reaching the modeled prospect audience in three different channels. Although a prospect could respond to any single channel offer, our reach analysis typically shows less than a 20 percent overlap. (See chart.)
Q: How do you know that someone in the prospect file purchased because of exposure to the ad campaign?
A: This is another unique component of our approach to determining ROMI. It is not enough for marketers to calculate how likely it is that someone who sees an ad will convert. You must account for other the “noise” surrounding your product or brand that might affect a sale outside or your direct marketing channel. Random Control Tests are the only statistically valid way to determine whether an ad caused a conversion. The more channels you can accurately track, the better you can account for other intangible factors using Random Control Design and Testing.
Q: How do Random Control Tests work?
A: The most essential requisite for running an effective RCT is managing your audiences into the digital marketing platforms you’re using, such as Google and Facebook. If you only use the platform’s data, you won’t have transparency into who the audiences are.
When applying RCT methodology to a direct marketing campaign, we randomly remove a statistically valid number of individuals from the prospect file and set them aside. Once the campaign begins, the control group goes “dark” with no ads served to them. At the end of the trial period, we collect data from purchases made and match it back to both the prospect and control group lists. If someone from the control group purchased, we know it was not due to the direct marketing campaign since they were never exposed to it. It also provides a true measure of the campaign’s overall effectiveness and cost efficiency against the prospect list.
RCTs work extremely well for episodic brands where the sale occurs predominantly in a brick-and-mortar store and less frequently than relatively inexpensive commodities like milk or diapers. Close to 90 percent of all retail sales still happen offline. Industries like real estate, telecom, automotive, financial services and healthcare are examples of this. Brands in these categories want the reach and effectiveness that digital marketing provides, but they need to account for its effect on offline sales.
Q: You’ve shared a lot of important steps that should be taken to increase direct response. Which is the most important?
A: Targeting. It’s so important to make sure that you are targeting the right people in order to avoid wasted ad spend.
Building an effective direct marketing campaign with the right target audience, media mix, reach and frequency to consistently generate positive response rates takes time, persistence, the right tools and methodologies. If you’re not satisfied with your direct marketing response rates, or if believe you may not be maximizing your Return on Marketing Investment, send Lisa an email at firstname.lastname@example.org. She can discuss your unique situation and help guide you to a potential solution.