Mailing on a Shoestring Budget: With less mail volume and marketing dollars in the mix, it’s time to re-examine direct mail programs

4 Mar

Originally published in Inside Direct Mail
by Britt Brouse
Dec, 1 2008

Nine billion pieces of direct mail just went missing. That’s how many mail pieces the USPS estimates diminished from the mailstream in 2008, and there’s no uptick in sight.

Such a decline has an enormous household impact. “There’s 110 million active households in the United States, but about 50 million of them really get the preponderance of mail. Divide that nine billion into the 50 million households, and that’s pretty significant,” explained Monica Smith, president and CEO for Marketsmith Inc., a Morristown, New Jersey-based multichannel marketing firm. In other words, every mailbox has seen a decrease.

Direct mail budgets also are shrinking, relative to the decrease in mail volume. “Mailers are seeing a decreased response,” said Grant Johnson, founder and CEO of Johnson Direct, a full-service marketing agency in Brookfield, Wis. “They’re seeing their ROI is not as high as it should be; they’re attributing it to increases in postage, production costs, printing, letter-shop work, all that kind of stuff—as well as economic conditions. That’s why people are shying away [from mail]. People are spending less money and are spending more cautiously because of the downturn in the economy.”

Bob Martel, president of JMB Marketing Group, a full-service direct marketing agency in Marlborough, Mass., said that along with budget cuts, he also sees an increased demand for accountability. “[Clients] are saying, ‘We’re willing to spend the money, but we need to see every dollar work,’” he explained.

Smith views direct marketing budget cuts as part of a vicious cycle, potentially leading to net losses. “If you don’t have good cash flow, you have to shrink marketing dollars, and unfortunately, when you shrink your marketing dollars, your cash flow gets worse,” she commented. Martel echoes that sentiment, saying smaller companies, especially those in the $1 million or $2 million range, need to make their marketing dollars work or they might not survive this downturn.

While 2009 will be a struggle for many businesses, tough times force marketers to re-evaluate their programs and become more efficient and accountable for results. “You just have to market smart and efficiently,” Johnson enthused. “Now is the time as direct marketers for us to strut our stuff and show the ROI. If they’ve been doing direct marketing correctly, marketers are going to have a good handle on what’s working and what’s not, and they can really grab market share now.”

For companies feeling the pinch, follow the experts’ advice below for keeping mail strategies healthy in an unhealthy economic environment.

Stick With Past Winners

During tough times, control formats can be a valuable safety net. Falling back on something that has worked in the past allows marketers to better measure the results year after year and saves dollars and time on developing new creative. “I’ll look at what has been done in the past that has worked well, and sometimes it’s a matter of dusting it off,” Martel noted.

As opposed to redesigns, Johnson advised mailers to test copy and offers. “If you have a piece that has stopped working as effectively as it has in the past … instead of redesigning the whole piece or coming up with a new format, why don’t you try some different offers to boost response,” he recommended. “That’s a very smart thing to do, especially if a format or control has been working for a long period of time.”

Simplifying winning campaigns can save extra production dollars. “Take a real hard look at what you’re doing as far as packages, and try to simplify it—a straight letter, or even postcards with effective message positioning and sound offers,” Johnson added. “Now is the time to continue to do those.”

Embrace Your Inner Contrarian

The first rule is stick with what’s worked in the past. The second rule, of course, is to break rule number one. “Statistically, you have to stick to what works, but realistically, the times are changing so rapidly,” Smith said. “It is a scientifically rewarding view to always test against the control and ensure the stability of how that control is doing.”

Moreover, Johnson, who described himself as a contrarian, asked, if your competitors are cutting back and going smaller due to budgetary constraints, why not test an oversized package? “Because of tightened budgets, there is an abandonment of traditional direct mail packages for self-mailers and/or postcards—which is fine if you test them and you can get them to work,” Johnson said. “But if everybody is going smaller or different, I’d like to go larger.” If marketers normally mail a #10 or self-mailer, he advised testing a 9×12” or 10×13” to really stand out in the mailbox.

Don’t Resort to Cutting Lists

One of the first places where marketers tend to mistakenly cut funding is in list acquisition and circulation. “It’s very easy to cut circulation. [But] what’s easy is not necessarily what’s right,” Smith suggested. She said that decreasing circulation is a quick fix that immediately increases your bottom line contribution. However, a year later, with fewer customers, constituents or qualified leads on the mailing list, marketers will need to reinvest in their list programs to maintain bottom line numbers.

“People might review the size of their list … and if they’re truly scientific marketers and they’re testing, maybe they can work with a smaller universe to test before committing to a larger campaign,” stated Martel, who also stressed the importance of list hygiene in making every dollar count.

Put Test Dollars Toward Offers

When managing on a shoestring budget, and in a down economy, be sure to test the offer. “I think in this economy marketers … have to understand the perceived value and give people a compelling reason to part with their hard-earned money because they are competing for shrinking expendable revenue right now,” Martel said.

Johnson believes looking at the copy platform is a smart, inexpensive test. For example, if marketers normally lead with greed, they could test fear or exclusivity as a platform to write around or include a freemium to encourage reciprocity. He also warned that the best price or deepest discount may not always be the winner, because low prices can negatively affect a product’s perceived value, even in a down economy.

“The human mind seems to think that just because the offer is better, it’s going to work more efficiently or more effectively for the prospect or customer—and that’s not always the case,” Johnson stated. “So if you’re normally offering 20 percent off, now might be the time to test 15 percent as opposed to 25 percent,” he explained.

Focus on Best Customers

The 80/20 rule rings even more true during downtimes. Marketers who have had to cut acquisition funds will want to focus on key accounts and recent or frequent customers. Johnson suggested to only approach the first two tiers of prospects, instead of typically going to all three. “This is an excellent time to be shoring up relationships with existing accounts—making sure the CRM data is accurate and complete and using that as an opportunity to educate and cross-sell other products and services,” he said.

Use direct mail to deal with the “I didn’t know you did that” syndrome, Martel advised. If reducing acquisition mailings is necessary, include an open referral channel in mailings sent to best customers. “What I would suggest is doing two reply cards—one for the recipient and one for a friend,” Johnson said. “It makes it real easy. They can just rip it off, and it doesn’t cost you that much.”

Employ a Multichannel Offense

Direct mail should be part of an enterprise-wide marketing program including online channels. For example, Martel strongly recommended making sure everyone involved in an organization “understand[s] how direct mail fits into the whole larger marketing strategy for the company—where you are going to use mail in a cross-channel strategy.”

Smith also suggested using online channels, including prospecting e-mails, in 2009. “We’re not saying to walk away from direct mail, right? We’re talking about creating supplements of opportunity that will bring new blood into the brand faster,” she explained.

Johnson said direct mail is still the best medium to drive people to a website—even moreso than e-mail—and thinks multichannel is a new golden rule for mail marketers. However, he warned that marketers who see e-mail prospecting as a cheaper alternative to mail should be aware of the hazardous combination of higher costs and lower response rates for e-mail lists versus postal lists.

Use Metrics to Monitor Costs

To survive a downturn, Smith recommended focusing on three marketing indices: new customers, existing 12-month customers and 13-month reactivated customers from a month-over-month and year-over-year perspective. A lot of mailers are cutting back by putting some of their tests or rollouts on the back burner for 2009. Smith advised analyzing and potentially cutting any campaign that is not presenting a 35 percent positive contribution after revenue.

Metrics also can curb wasted time and money within an organization. “Stop owing and putting cash into things that are not working for you. Put cash into things that have an opportunity to show a contribution,” asserted Smith, who advised to check that every employee’s output or workload is 20 percent greater than the prior year, and also to encourage each employee to contribute at least 6 percent growth to your business’ bottom line throughout the year.

Finally, Smith recommended “eliminat[ing] all contracts with technology providers and consultants for creative and Web that are not producing at least a return of 2-to-1 for your dollar.”

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