34. How can I spot good DM opportunities?
Some pertinent questions
I would frankly be astonished if somewhere in your business there were not obvious direct marketing potential. You can often find out where it exists by asking the right questions. And here are a few suggestions:
- Analyse your best customers to get more of the same.
- Review geographic/demographic distribution of customers to find best areas for new branches or sales drives.
- Use mailings or door-drops around a store when launching new products.
- Run contests to collect customer names and build your database.
- Mail special offers to shareholders and best customers.
- Send letters to recent customers with an incentive linked to catalogue.
- Offer your brochure or catalogue in ads: get leads and learn which media work best.
- Offer a store-card to good customers and create special events for them.
- Form a club to enhance loyalty.
- If you sell through intermediaries or retailers, launch new products and make offers via mail and phone
- Segment prospects by value, deploy sales people against best, plus phone and occasional mail, phone, mail plus occasional sales calls against middle group, phone plus mail against least valuable
- Use your imagination: look for opportunities.
Consider how many groups you can influence directly. For example:
- Employees, especially your sales force
- Distributors, retailers, brokers, intermediaries
- Influential customers
The possibilities are countless. The results might surprise you.
35. How can I plan a communications cycle?
- Build prospect database from advertising, PR, direct mail leads and other enquirers.
- Telemarketing confirms details
- Hot/high value leads get personal selling; others are phoned or mailed
- Customers contacted regularly to maintain loyalty, upgrade, re-sell and cross-sell.
- Enquiries are contacted through whatever medium until such time as it doesn’t pay you to do so. This will depend on how valuable a customer is to you, a subject dealt with in the previous point.
- Your database is money in the bank. Farm it diligently
36. Can my sales people help with DM?
Nobody is better able to tell the direct marketer about the motivations of customers than the salespeople. Nor about the techniques that make them buy – because direct marketing is merely salesmanship through different media.
Yet salesforces usually see DM as a threat, cutting them out of the sales process. It is essential to sell DM to the sales force. They could be powerful allies or complete pains in the arse.
37. How can DM help my sales people?
Here are some examples
A major US drug firm found their salespeople simply could only visit all the thousands of outlets they dealt U S very rarely. By segmenting the outlets, they were able to reallocate the salesmen so that they devoted most of their visits to the important top 10 %.
Less profitable outlets received only occasional visits, but were dealt with very effectively on the telephone and through direct mail. The overwhelming majority of outlets, which were barely profitable, were dealt with entirely through direct mail supplemented by telephone.
Launching new products has always been particularly expensive. Quite a few years ago in the UK we had to help a sales force introduce a new catering product to many thousands of outlets. We found that a simple mailing offering a free sample could get 25 % of the recipients to try the product. At the same time, we collected information about the outlet, numbers of meals served, what type of food sold, and so forth in order to enable the firm to build a better relationship with them.
In France, the Compagnie Coloniale supplied top quality tea with 25 different flavours. They wanted 3,000 owners of quality delicatessens and caterers to stock the product. But they only had a sales force of two. The answer was direct mail, followed up by telephone.
The result? 76 % of the prospects favourably considered the proposition on the phone. 44% requested a salesman’s visit. All the salesmen had to do was to go around signing people up. The proposition had been pre-sold. It cost them no more to sign up a pre-sold prospect than it did originally to go in and merely visit a prospect.
Some years ago one client found that less than 50% of the reported visits made by his sales force were genuine. By introducing a telephone unit to phone up the prospects afterwards the figure was raised to nearly 90%.
38. How can I use the names I already have?
If you want to see how it’s done, buy from Amazon – and see how they try to sell you extra.
When people have bought from you, they are usually in a good mood. There will never be a better moment to start a strong relationship with them. Many years ago I conducted some tests which proved this to be so for a firm I had taken over which was going broke. Changing the timing of an offer lifted it into profitability.
The quicker you sell an extra product to somebody who has just become a customer, the better you will do long term. Yet most firms never do anything with their guarantee form, though there are usually obvious opportunities for cross-selling.
It is vital when making the sale to record the name and address of your customer – and do it accurately. After that it hardly requires genius to keep in touch. Yet how many people bother?
Years ago, I took my young children to a restaurant in Covent Garden. The waitress asked them the dates of their birthdays and where they lived. The next year they all got a birthday card, with an invitation to a free meal. How do you think that made me feel about Lord Newport? I was amused at the commercial shrewdness, as well as being impressed.
How many firms do you know that take this kind of trouble?
39. How can DM solve retail problems?
There are many obvious ways in which tactical offers of discounts, special gifts, or staging special events, can bring people into your stores.
Such approaches can help overcome common problems like outlets that are empty on some days of the week; badly situated stores which won’t attract passing trade; and, of course, stores with high rentals. Also, if a store is selling products that people buy at particular points in their lives, or consider for long periods of time before making a final decision, direct marketing techniques are often ideal for keeping in touch.
For instance, when I moved into a new house a few years ago, I was struck by the fact that one retailer – Wickes – used to mail me a booklet every month with do-it-yourself offers. In fact I was a peculiarly poor target for such offers: I can’t change a plug without a map. But if I had been interested in DIY, I probably would have responded.
Yet what they do is not particularly remarkable. They just communicate directly with likely prospects. At the time I am speaking of, not one of their competitors did.
40. How can I attack my competitors’ customers?
Some time ago in the UK, Imperial Tobacco decided to cut the number of their pipe tobacco brands by 60 %.
Rothmans then ran an ad informing pipe smokers that if they thought they might be missing their favourite brand, all they had to do was write in to receive details of the Rothmans brand closest to it. A neat approach to database building.
This kind of thinking also worked extremely effectively in a programme devised by Ogilvy & Mather Direct in Atlanta, acting for Compaq in America.
They mailed potential customers asking them to give details of the computer they were currently using, and what they used it for. They followed up with any one of six different mailings, each incorporating information based upon what the prospect had said.
In each case the prospect was sent a portfolio comparing the computer they were currently using with the new Compaq and it was very successful.
Another way you can attack competitors’ customers extremely effectively is through lifestyle databases. You just have to find people who have the same characteristics as the ones you wish to attract.
41. Isn’t mass advertising more economical than DM?
But where you are not appealing to everybody direct marketing makes sense. For instance, where you have patchy distribution. Why waste a fortune in national press or TV? Try direct mail or the telephone.
This is so obvious, yet so frequently neglected, as to be quite remarkable. How many times have you seen enormously expensive national campaigns when what is being said could only be of interest to a limited number of people? Surely, direct approaches to these people would be infinitely more cost-effective than general advertising?
One calculation well worth making is very simple: what percentage of the mass market is interested in your product? Does it, for instance, make any kind of sense to spend millions on TV or on posters when making a share offering, which is what the British government did repeatedly in the 1980s? Even products with a traditional mass appeal – cigarettes, for example – only appeal to a minority.
However, the fact that you are not trying to sell to everybody does not mean you do not necessarily wish to speak to people who are not your immediate targets. If that sounds contradictory, let’s explain.
A direct marketing programme by a car firm in the United States, although it seemed to make eminent sense, proved relatively unsuccessful. The reason was that the client decided to do virtually no general advertising at all. Consequently, apart from the people who were being approached directly, nobody knew anything whatsoever about the car. It had no reputation. As a result of this, if anybody bought it they would not benefit from one of the great pleasures of buying cars: having other people admire your choice.
However much sense direct marketing may make, it is not necessarily always going to be able to do the job on its own.
42. Can DM help me recruit better people?
Well, of course, unless you operate without employees at all then you have to recruit staff; and you certainly realise how important it is to get the very best available.
Some businesses depend entirely upon a constant stream of new recruits – for instance firms with large sales forces working on commission only. Yet surprisingly little recruitment advertising is any good: in fact most is abysmal, usually consisting of a heading describing the nature of the position to be filled and some extremely dull copy.
No intelligent marketer would permit such a dreary approach in ordinary advertising, yet they regularly squander enormous sums on it when recruiting people. Indeed, it may be argued that staff recruitment agencies only get their exorbitant fees because their clients don’t know how to recruit people with effective advertising.
To a good direct marketing copywriter recruiting people should come as second nature. What you are doing is basic direct response advertising, except you are selling a job, rather than a product or service. In fact one of the biggest areas in direct response advertising is the recruitment of agents for mail order catalogues. When I ran Ogilvy & Mather Direct in London I made a point of writing all the recruitment advertising myself. I proved (to my own satisfaction, anyhow) that I was better than the average recruitment agency, because I sold the jobs rather than describing them.
43. Can DM help me make better use of my catalogues or brochures?
There are few firms that do not have at least some sort of literature. Often, large sums are paid for this sort of thing, yet most are left lying in showrooms or sent out in a half-hearted fashion, usually without a persuasive covering letter, to enquirers.
Many firms, too, have catalogues (although they may be called something else, such as a range brochure). But planning a catalogue that works effectively is a specialised task. (In fact, even many direct marketers don’t understand the subtler points all that well.) So it will pay you to find one who does, and listen carefully to the advice given.
Try offering a catalogue or brochure in your advertisement. Apart from getting valuable leads you will also discover which advertisements work best and which media.
44. Who are neglected prospects for my DM?
People think too much of the obvious targets – the customers.
But unless your employees are motivated to work hard, you will go broke. If your shareholders do not believe your firm is being properly run, you will prove an easy mark for the first takeover merchant to arrive on the scene. Intelligent direct marketing can do a lot for you in both cases.
For instance some years ago, union left-wingers had more or less gained complete control of the British Leyland Motor Firm. The solution adopted by the firm was quite simply to use direct mail to the mass of employees and point out how their future was being threatened. In this way, the firm was able to get employees to agree to policies which for years they had steadfastly rebuffed.
British Leyland were lucky. They only tried this direct approach because they were desperate. Wise management would have a regular series of communications to their workers and shareholders explaining what the firm was doing and why – and enlisting their support. Many firms seem to imagine that regular newsletters to the employees, full of firm puffery, and a near incomprehensible firm report sent to shareholders once a year will do the trick. Recent history has shown that they will not.
In short, don’t simply think of your customers as the only prospects you should write to. Not only do regular communications with employees pay off in a big way. A regular communication with opinion formers – particularly in the financial community – makes an awful lot of sense. Many a firm has been taken over unwillingly because it didn’t bother to communicate with the financial community about what it was doing and why.
45. Can DM help in handling complaints?
Many firms don’t like to think too much about complaints. This is not true of the really outstanding marketers, amongst whom one would have to number Procter & Gamble.
Some years ago in the US P&G started addressing the subject of complaints. They discovered that when customers were unhappy, only around 40 percent of them could be bothered to write to the firm and complain about a particular product. This is not really surprising when you think about it: nobody gets into a lather of excitement over a laundry detergent (forgive the pun).
Procter & Gamble, on the other hand, are always excited about detergents and similar products – they are their livelihood. So they wondered how they could make it easier for their customers to complain, because they had also discovered that of those who did bother to write, 90 % were satisfied with the firm’s explanation, and continued to be customers.
P&G decided to put an 0800 number on all their packs so that anybody who had a query could ring up free. Result? 90 % of potential complainants did ring up. And 90 %, once again, were satisfied. (Other research, incidentally, shows that a customer who has complained and been satisfied is more loyal than if they had never complained in the first place.)
Apart from retaining customers, P&G also said they learned a great deal of value from this activity. They learned which customers were using which brands. They received lots of helpful suggestions about packaging, advertising and even new product ideas. Quality control was improved and recalls avoided.
Clairol heard about this activity and formed a completely separate division – a profit centre in itself – to deal with complaints. This is a wonderful variation on the old salesman’s saying that the sale only starts when the customer says ‘No’.
46. What mistakes should I look out for when starting DM?
Here are the most common crimes committed by amateurs:
- They rush it. It takes longer than you think – maybe three months to carry out a mailing from briefing to “drop”; longer to plan a complete campaign.
- They try to do it on the cheap. This is not a cheap alternative; it’s a different discipline.
- They don’t pay enough attention to detail. There are over 100 steps in carrying out a direct mai campaign; i.e. over 100 chances to screw it up.
- They ignore brand values. It’s stupid to say one thing in ads and another in direct; or to have one look in one and a different one in another.
- They are inconsistent. Don’t have one style for the first campaign, then another for the next.
- That’s why, unless you have the time and resources to supervise this yourself, it may pay to stick to one agency.
- They stop and start. They don’t think in terms of continuing campaigns that build loyalty.
- They ignore the “back-end”. For example, sending out inadequate material, or delaying responses to enquiries will ruin your efforts.
- They don’t understand how vital testing is. So they don’t test enough. And they read results wrongly.
- They don’t deal with specialists. People with sales promotion or advertising backgrounds rarely understand the discipline.
47. What else can DM help me sell to my customers?
- Can you sell a better version of what you have already – an upgrade?
- Cross sell another product you make to existing customers.
- Sell something that appeals to the customers you already have, but is different. For instance home insurance to people who have bought security devices.
- Sell something overpriced – i.e. with a ludicrously high margin – which you can offer a good deal on. It is one of the reasons why insurance sold directly has done well. Cosmetics are another natural
- Sell something people find hard to understand which is more easily sold in written form so that people can study it. Again, financial services fit into this category.
- Sell things people are embarrassed about buying. Treatments for baldness, incontinence, sexy underwear and the like fit into this category.
- Sell something that only appeals to a very limited group. Factoring services, for instance, are a good example. Another, totally different, is racehorses. Few people can afford them. Our client, Horseracing Board, relies almost exclusively on direct marketing to reach these people.
48. Does DM success always depend on bargains and low price?
On the contrary. Do not think of direct marketing as a cheaper way of selling; it is just a different way of selling. It certainly doesn’t depend for its success on bargains.
The difficulty of comparison is often an important factor. For example, it is very difficult to compare one insurance product with another unless you are an expert.
Nobody could describe the products sold by some of the specialist catalogue firms like Hammacher-Schlemmer in the U.S. as particularly good value. They are, like a lot of other successful direct marketing products, very hard to put any value on. Each product is unique and therefore hard to compare.
A great many mail order merchandise products are certainly not cheap. One characteristic which makes them good products is that you can say a lot about them. The more interest you can attach to a product, the more likely it is to sell.
Something which can certainly add a great deal of value is prestige, as American Express discovered when attempting to recruit new customers for their bank in Hong Kong some years ago. By law, they were not allowed to offer anything that their competitors did not. In fact the only thing they had was the reputation of American Express, which has high status in Hong Kong – sufficient to persuade large numbers of people to open checking accounts with the bank.
49. How can I learn if my products are likely to sell?
People cannot tell you what they will buy until you ask them to part with money. One firm used to get their customers into halls in groups, then show them potential products and get their opinions. They would then rank the possible products in order of appeal. After the session, the products were displayed at the end of the hall, and customers were allowed to take away the sample of their choice.
The first interesting thing the firm discovered was that the customers never chose the products to take away that they said they preferred in the discussion. And the second interesting thing was that an infallible guide to what would sell (this was a rather downmarket audience being appealed to) was to leave samples out on the table until the firm cleaners arrived. The ones which were stolen most generally turned out to be best sellers.
The truth is that people will tell you they like the product they think they ought to like. But when they have to buy or even get a free gift, they choose what they really like.
For that reason, the right way to start establishing how products are likely to do is to go through a simple sequence. First, write to people asking them which of a list of products, briefly described, they find most appealing. Then choose the products that come out best, and write sample mailings for each one. Test these mailings on your list, making it clear that customers will be able to buy the product later if and when it comes out, and giving a price, so that the offer is a real one. Then you choose the one or two products that do best, and start selling them seriously to your customers.
That’s a very simplified description of a subject that deserves a lot of consideration. But one thing I would like to emphasise – and I make no apologies for saying this more than once, in different ways, because it is a mistake people persist in making – don’t ask your customers (or anyone else, for that matter) what they ‘think’ of an ad or mailing. They are not critics. They are buyers. Even experts usually guess wrong. The ads people like are rarely (in fact almost never) the ones that do best.
50. How much should I charge for my product?
The answer, obviously, is as little as possible, but consistent with getting a decent quality. This means that you can negotiate carefully. There is the world of difference between someone who just buys, and somebody who negotiates to buy a product.
Some years ago we had to look at the figures of two of our clients. In both cases, their advertising results were well above what we knew the market average to be. But neither was doing well. The reason was quite clear when we saw the figures. Neither firm had enough margin to make a profit on many lines. This was not through a deliberate policy of low pricing to get names. It was just lousy negotiating. So haggle. It can mean the difference between profit and loss. You may not like talking about money but when you go broke, you’ll find yourself talking about it all night. In your sleep.
Linked to this last point is the need to make sure you have enough margin. How much is enough? The answer will come through testing, but there is a rule in lower-priced products (i.e. up to £20) you need at least 200% gross margin on the cost to you – and possibly a lot more. As it is, if you go below the £10 mark the margin should be even higher – 5:1 would be the sort of thing that I would look for, assuming of course, that you are hoping to make a profit, and not simply ‘buying’ names.
In higher-priced products, you need less percentage margin. But don’t imagine that simply by halving your price, you’ll always increase your orders sufficiently to cover that loss of margin. You rarely will.
Interesting research by Ehrenberg and associates suggests that the stronger the brand, the less you have to worry about price. People are not only prepared to pay more money for a brand they like, sales will not go down as much when price goes up as they would with a brand which is not so popular.
51. How often should I mail or e-mail people?
The Marketing Director of L L Bean, the famous US outdoor wear firm, was asked why his results improved so dramatically. He replied that he was mailing people 6 times as frequently as before.
How often should you mail a customer? To answer that, concentrate on the objective of business: to find a prospect, turn them into a customer and then turn that customer into a friend. How often would you write to a friend? Well, certainly more than once or twice a year. You would write as often as you could think of something that would interest them. And that depends on how many worthwhile offers you can make.
So, talk to your prospects and customers:
- When you have anything to say of interest
- New product, price, offer, news.
- When they’re about to decide
- When your competitors are cooking up something.
- When something big is happening in the market
- Don’t worry about communicating too often.
- Those who communicate most do better than those who do it least.
- Talk whenever you have something you think will interest prospects.
- Think constantly of what they might be interested in
- But don’t mail or phone just for the sake of it.
52. How do I sell to customers who haven’t bought for a while?
A great deal of money can be made – but rarely is – from people who have written or phoned you to express interest – but not bought.
They might have forgotten they were interested in the first place – after all, you spend all your time thinking how to sell your product, but your prospects have other matters on their minds. Why should they even think about it? This might have been just one thing they thought of buying. They might have had the money but decided they wanted to spend it on something else.
Maybe they were thinking of buying in the future. They might not have had the money when they enquired. Maybe a sudden emergency took away the cash that they planned to use. Maybe one of your competitors has come along and managed to sell them before you – which is the assumption many make; but it is only one possibility.
One reason for not buying which is given surprisingly often by otherwise intelligent people is the one I almost always dismiss first – they enquired frivolously.
Who on earth has nothing better to do with their time than that?
The only people who enquire despite no real interest are children, out of curiosity, or people who are lured by an exceedingly attractive incentive or gift. The former category is small indeed and only applies to products kids find interesting. The latter is also not as large as you might imagine: particularly if the offer you are making relates to your product.
In fact even something which attracts a lot of freeloaders generally more than pays off. It attracts more attention and response overall.
53. What kind of results do reminders get?
You may be sitting on a file of names and addresses that is almost bound to contain some people who are still interested and haven’t bought or haven’t acted.
So what sort of results can you expect from reminder letters. The answer is about half the number of replies you got from your first letter – as long as you don’t leave the reminder for too long: two weeks to a month after the first letter is about right.
If you have not written to people for a long time – say six months – then you will need to completely ‘resell’ them on your proposition.
The answer to the important question of how often you keep reminding people is: ‘As long as it pays.’ Remember, you have paid for those enquiries. You want to get the best possible return on your investment. So, as long as your gross profit exceeds the cost of sending out the mail and all the associated expenses, you should keep on mailing.
Sometimes you should keep on mailing even if you’re not making money, but just covering your costs, because you are gaining new customers who can later be sold something additional.
54. When is it best to sell in one stage – and when in two?
Clearly, if you can make a complete sale in one step, it saves money.
But if it’s a tough sale – an expensive product, an unfamiliar idea, a complex proposition – one step may not be possible.
So as a rule, simple inexpensive sales are appropriate for one step; more expensive and more complex products will call for two steps.
55. What sort of response rates can I expect?
The figures below were supplied by the Direct Mail Information Service, an organisation that was backed by the Royal Mail. They no longer do so – which is a great shame.
If these are the sort of response rates you are getting, you could probably do better in many if not most cases.
Response rates by sector and medium
|Medium (No of campaigns)||Response Rate %||Cost per Item (pence)||Cost per Response (£)||Average Campaign Size (000s)|
|Direct mail (613)||7||43||6||184|
|Direct mail (628)||4||64||16||215|
Direct mail was the most expensive medium, working out at 43p each, compared with door-drops 12p and inserts 6p.
But there is little to choose between them when it comes to cost per response – nearly £7 each. The question is: ‘What’s the quality of the response?’ I used to expect it to be better from direct mail, but one of our clients finds door-drops gets just as good a quality; another found that press ads and inserts produced a better quality.
Essentially anything you do to make it harder for people to respond will clearly improve the quality of response. If you have no telephone number, that will reduce the number of replies to those people prepared to make the effort of writing. So, in a press ad, people have to give you their details, whilst they can be pre-filled in in a piece of addressed direct mail.
56. How do I get more replies?
You will generally get more replies by:
- Offering an incentive
- Offering a valuable incentive
- Offering more than one incentive – one for replying and one for replying quickly for instance
- Offering the incentive boldly, saying more about it than you do about the product (a good example is any Reader’s Digest mailing – they’re all about the sweepstake, with hardly anything about the magazine)
- Mentioning all the advantages of what you offer without covering any of the disadvantages (though this can be a dangerous tactic)
- Say: ‘No salesman will call’
- Make sure there is an address both inside and outside the coupon
- Tell people how to order often – for instance, in a catalogue, on every page; in a TV commercial, feature the phone number as heavily as possible
- Increase the size and boldness of the order form and/or the coupon.
- Offer a free phone number
- Have telephones answered 24 hours a day
- Have enough people answering the phone
DRTV has often been unprofitable because of the last two things.
57. How do I get better quality replies?
You will get a better quality of reply by:
- Writing longer copy which includes some of the negatives – for instance, high price
- Asking people to pay for a booklet rather than giving it away free
- “Burying” the incentive in the copy rather than making it prominent
- If appropriate making it clear that a salesman will call
- Don’t offer a reply paid envelope – make people supply stamps
- Offer a telephone number that people have to pay for to respond or even give your own straightforward phone number with no easy response method on the phone
- If you have no telephone number, that will reduce the number of replies to those people prepared to make the effort of writing.
58. How much direct mail do customers read?
Probably more than you think.
UK direct mail facts:
The average British household receives 7.3 items of direct mail per month. An average of 77% of customer direct mail is opened and 63% is read
59. How much direct mail do business people read?
More than domestic customers.