Management summary of a research report from Lloyd James Group plc.  As reported CRM Community:

Over the last decade the direct mail industry has more than doubled in size and value, with expenditure up by over £1.5billion and volumes climbing by over 3 billion items. Economic instability has forced marketers to demonstrate stronger return on investment and greater measurability, and this has had a knock-on effect on the proportion of marketing spend being channelled into responsive marketing. However pressure is mounting on DM practitioners to reduce mailing volumes and refine their targeting. The stigma attached to direct mail (or, as many see unfortunately see it, junk mail) was highlighted most publicly in the BBC’s recent Brassed Off Britain series. The government has also implemented legislation designed to protect individual privacy, and has set strict environmental standards for DM printers to reduce wastage.

Despite the continuing poor practices of the few, the vast majority of direct mailers are becoming more scrupulous in their attention to data quality and more targeted in their communications. In a bid to obtain a single customer view, UK plc has invested heavily in customer relationship management and database marketing systems. Yet, recent research points to a gulf between the sophisticated customer segmentation activity carried out by database marketers and the physical delivery of personalised messages. Recent advancements in digital printing technology are starting to close this gap, and the direct marketer’s vision of one-to-one marketing is finally achievable. Now, refined segmentation can be reflected in the finished mail-pack, with the text and accompanying images matching the information held about the recipient. In view of the greater emphasis being placed on linking customer and prospect data with the creative and printing processes, Lloyd James Group commissioned opinion research in order to understand the impact that variable creative has on campaign success.

Key Findings

• On average, a 33.4% uplift in direct marketing campaign response is achieved when the mail-pack incorporates variable creative
• Industry sectors benefiting most from targeted creative imagery are those which have a strong emotional and/or aspirational element
• Sectors that have a rich, solid data basis are also those most able to extract bottom-line value from targeted variable imagery
• Companies offering distress, commodity purchases are least able to obtain value from linking sophisticated database segmentation in with the creative print production process
• These sectors tend also to suffer from a legacy of inattention to data management routines and strategic customer development

Methodology

• Field work: Marketing UK
• Research base: Senior marketers amongst top 1000 companies in the Banking, Charity, Credit card, Hotel, Insurance, Retail, Telecoms, Travel and Utility sectors
• Research period: September/October 2004
• Research method: Telephone and email questionnaire

Marketers were asked to quantify

• The percentage uplift that inserting variable creative based on database segmentation has on response to direct mail campaigns
• How much benefit each of the following sectors sees from using the variable creative: Banking, Charity, Credit card, Hotel, Insurance, Retail, Telecoms, Travel and Utility sectors

Research findings
Our respondents believed that inserting images based on knowledge about the recipients would boost campaign response rates by 33.4% – a massive increase in what has traditionally been a very high wastage medium. Figures from the Direct Mail Information Service (DMIS) put response rates (rather than conversion) to consumer mailings at 7.1% and just 6.4% for business mailings. When you consider that the current average mailing pack price is 43p for consumer and 66p for business[1], the impact of a response rate increase of a third is sizeable.

The extent to which response is affected will vary, naturally, according to the type and depth of information feeding the output. The creative possibilities are endless, limited only by the data available and the marketer’s imagination. The range of data held on prospects might include lifestyle and preference data, geo-demographic, transactional (through a data sharing initiative), psychographic profile information, and more. Customer data could incorporate all of the above, but could also incorporate detailed information about buying behaviour and service history.

The travel industry has most to gain from using variable creative. Hotels also rank highly. These are both industries that have the advantage of having desirable products. People look forward to booking a holiday, travel inspires positive emotions and recipients of clever, well targeted travel marketing messages tend consequently to be more receptive and responsive. Travel companies and hotels are under intense pressure to encourage repeat business from past customers. It is likely, therefore, that the majority of the benefit that travel and hotel companies are seeing is accounted for by using variable creative in campaigns to win repeat business from existing and past customers. Some travel companies are now sending new customers highly personalised mail-packs featuring a photograph of the hotel/resort they are staying at accompanied by a detailed map of the location in order to imbue an image of professionalism and quality, personal service This information is then stored and used to mail the same people the following season, with images to remind them of the holiday, and hopefully nudge them towards a repeat booking!

Similarly retailers often sell aspirational products. They, more than any other sector, know exactly who their customers are and what makes them tick. Retailers are the kings of loyalty and they use the rich transactional data they hold on their customer base to great effect.

These three sectors, all well above average in the benefit they see from variable creative, share two characteristics: desirable, emotional products, and a rich data basis.

Charities, below average but still with the fourth most to gain, again inspire emotion. A year-on-year decline in the number of households making charitable gifts has pushed the third sector to up the ante in the sophistication of their marketing activity. Charities have been working tirelessly to move away from the ’spare change’ culture of giving that traditionally characterised them towards organised giving, and long-term relationship building with existing donors, while establishing a new base of younger donors. In fact, the not-for-profit sector was quick to get involved in data sharing initiatives with other charities in order to spot highly responsive individuals. Similarly, charities have embraced the idea of conducting campaigns using information on the psychographic profile of recipients, in order to vary the tone of the message, or indeed the creative, in order to appeal to the psychological make-up of different target segments.

At the other end of the scale lies the utility sector, seeing very little uplift from using variable imagery to boost campaign response. The core energy product is just about as commoditised as they come, so it is highly questionable whether variable imagery would be enough to sway the consumer’s choice of supplier in such a price sensitive market. And, with the regulator actively encouraging consumers to switch supplier to obtain the most competitive deal, this sector has significant data management issues arising from difficulty tracking serial switchers and bad debtors, compounded by a legacy of general inattention to data quality. If utilities do realise their ambitions to stretch the brand from energy out towards the bundled home services market, variable creative could play an important role in effective cross-selling campaigns. For the meantime at least, utilities do not yet appear to be ready to take advantage of the possibilities of variable creative.

Insurance, telecoms and credit card companies offer distress, commodity purchases; consumer purchase is driven by need rather than desire, and consequently tend to be viewed as a necessary evil. Credit cards are highly price-driven, and the switching phenomenon that utilities are struggling to shake off is hitting the credit card sector, as consumers chase low introductory APR offers. As a highly intermediated industry, insurers are neither making enough use of marketing communications directly with the consumer, nor are the providing their intermediaries with sufficient support. They are attempting to differentiate on the basis of service in an essentially price-driven market, and so, with their attention focused on getting the fundamentals right, and are possibly not yet at the stage of using digital print to mirror the database segmentation activity. Nevertheless, the possibility exists for insurers to make use of variable creative, for instance by using psychographic profiling segmentation to inform variable creative to target the risk-averse.

Conclusion
Our research findings clearly demonstrate that by incorporating different images for different target segments direct mailers can produce outstanding uplift in direct marketing campaign response, provided that this is underpinned by a robust and rich a data basis.

As digital printing enters the mainstream, it is likely that multi-service printers will establish themselves as the ‘hosts’ of client electronic print documents. In maintaining a database of images, the printer would be able to update or amend creative, merge customer or prospect data with a creative library to quickly create personalised full-colour mailings on-demand, and variably insert collateral according to the customer or prospect’s profile.

Direct mail is becoming inexorably more targeted, and as we move away from the blanket culture towards the one-to-one marketing ideal, it will be imperative to find innovative means of increasing responsiveness. Variable creative will play a pivotal role in ensuring that mail-shots stand out from the crowd and elicit maximise response by appealing directly to the sensibilities of the recipient.

Source:  Direct Mail Information Service (DMIS), Response Rates Survey 2003

For a large business-to-business marketer—say $500 million in sales—a field sales visit costs about five times more than a telemarketing call and 100 times more than a direct mail piece. But while catalogs, e-mail, and telemarketing are cheaper ways of gaining sales, they’re not always as effective as sales reps. Salespeople can build relationships with prospects and customers who wouldn’t respond to less-personal communications. For b-to-b marketers, then, the challenge is determining when the expense of sales calls is warranted.

For most marketers, the potential value of a customer determines how they’ll be contacted. “The companies spending the greatest amount of money represent the greatest opportunity,” says Stevan Roberts, president/CEO of Pearl River, NY-based list firm Edith Roman Associates. But size shouldn’t be the only determining factor. Says Roberts, “You don’t want to have your field salespeople tied up making calls to companies that may or may not pan out.”

To assess which prospects should receive a catalog rather than a visit from a sales rep, many mailers model prospect names against their best customers. New England Business Service (NEBS), for instance, maintains an inhouse prospecting database using information from Dun & Bradstreet, InfoUSA, and other compilers. NEBS puts the prospects through a predictive model, which “tells us these X amount of names fit our profile and who is most likely to buy checks from us,” says Bob Saarimaki, group director for marketing services for the Groton, MA-based business forms supplier. The company also puts prospects through another database, which predicts lifetime value based on variables such as the sales and rate of growth.

Catalog Age April 1 2004

“The best days to reach businesspeople are Tuesdays through Thursdays, 11 a.m through 3 p.m.,” Ira Dolin, e-mail strategist for UAL Loyalty Services, said at a session at Chicago Direct Marketing Days & Expo last week. “For consumers, aim for Friday through Sunday, between 5 p.m. and 8 p.m.”

Dolin added: “A b-to-b message should be considered for a 1 p.m. [Eastern”> launch. You miss the chaos out West but get people returning from lunch on the East Coast. Watch the time zones and delivery process, and make sure that the ISPs and firewalls aren’t holding things up. If you send it at 1 and your mail ends up there at 5 p.m., you need to accommodate.”

And don’t start sending in the evening or at 3 p.m. the day before. Everyone will be sending it at that time. “The routers get jammed, images break, and customers get ticked off,” Dolin said.

DIRECT April 21, 2004

There are two distinct approaches.

Test Market
Here we use geodemographic criteria to select matched pairs of Metropolitan Service Areas (MSAs). One of the MSAs in the pair is randomly assigned to serve as the control. The other MSA serves as the test bed.

It is often difficult to read the results of these tests due to a myriad of factors:

• Media spill in and spill out As a result, end users in the control group end up getting exposed to your advertsing and/or end users in the test group do not receive the media weights you expected.
• Human factors Sales personnel in the field know they are in either the test or the control group and act accordingly.
• Changes in geodemographics Two MSAs may start out as matched pairs but can diverge in certain important ways by the end of the test. For example, suppose you are fielding a test in Seattle and have matched that MSA to another market. During your test, Boeing closes its plants in Seattle. This is obviously bad for the people in Seattle, as Boeing was one of the largest employers in the area. A major change like this can have negative implications for your test as well.
• Competitive activity The competitive realizes you are fielding a test and decided to do what it can to muddy up the works.

Due to these factors, often the test you set up as a controlled test ends up being more akin to a natural experiment.

Advertising Spend Optimization
The second approach is much more cutting edge and uses marketing science and complex econometric models to optimize your advertising spend.

If you are interested in learning more about our work in either of these areas, contact us.

1. Outer envelope: front (address) side
Benefit-oriented copy and visuals that entice me to open the package. Make sure this is a “quick read.”

2. Outer envelope: back (flap) side
People have to turn over your mailing in order to open it. Keep the copy and visuals on the flap side simple and be repetitive on purpose. The point is not to do anything that makes the prospect stop and think. By the time the prospect gets to the flip-side of the envelope, they’re in the process of opening your piece. Keep the momentum going, so you get the behavior you want, an open envelope.

3. The letter: top right … the so-called “Johnson Box”
Back in the day, this piece of real-estate was named after its inventor – Mr. Johnson – who liked to use the space to the right of the prospect’s address to showcase the offer. Often the description of the offer would appear in a box. Testing has since shown that the box is a distraction. Instead, use this space to draw attention to your offer, ideally using a combination of words and pictures. The Johnson box works because your name is an icon for you, which means that anything you put directly adjacent to the salutation will get noticed.

4. The letter: body
We live in a post-literate age, which means you should format your letter so that it can be skimmed very quickly. Use bullets and sentence fragments and keep the writing at the 3rd-grade level.

5. The letter – P.S.
Readers have been trained to quickly scan the letter from top to bottom and to look for a P.S. The P.S. is the place where you should quickly restate the benefits of the offer and the call-to-action.

6. Buck Slip | Order Card | Lift Note
No matter what you call it, this is a small piece that is separate and distinct from the letter. Use this piece to romance the offer.

7. Brochure
Of all the elements of your DM package, this is the least important. Most of the time, including a brochure in your package will not lift response in any appreciable way.

Great offers are:

1. Simple to Communicate – in both Words and Pictures
We live in a post-literate age. Show the offer in pictures and use icons to illustrate the call to action (e.g. a mouse next to the website URL, a phone to draw attention to the 800#). Tell the prospects about how the product or service you are selling will benefit them.

2. Engaging
There are lots of different ways to be engaging, even when your offer involves a highly intellectual technology-based products which will be purchased by a corporate decision maker. People are people first and titles second. The best creative is persuasive on multiple levels, using a combination of rational arguments and words and images designed to evoke an emotional response.

3. Involving
Get the hand and eye moving and you are much more likely to evoke a response, which is why many people continue to use stickers and other forms of involvement devices in their mailings. This may seem “old school” – a la Publishers Clearinghouse – but it works surprisingly well, even with the most sophisticated of audiences.

4. Easy to Understand
The best offers are specific, clear, with benefits that are “writ large”. Don’t make your prospect do any work when it comes to understanding what you are selling and how that product or service will benefit them. Underline the value of what they are getting in dollars and cents.

5. Easy to Respond To.
The call to action is where you tell the prospect what you want them to do in order to take advantage of the offer. Make your directions here specific and clear. Generally speaking, you’ll want to provide at least 3 and possible 4 ways to respond to any given offer: through the web, by calling an 800#, by going in store, and possibly by ordering through regular (snail) mail.

6. Redundant on Purpose
Frequency is your friend. Don’t be afraid to repeat the offer multiple times and also the call-to-action.

7. Too Good to Pass Up
Your offer should be time-sensitive with an expiration date designed to drive urgency. Make it clear what the prospect is giving up if they don’t respond in a timely fashion.

8. Not Deceptive or Disturbing
Don’t attempt to deceive or otherwise dupe people into responding to your offer. This will only build bad will. Likewise avoid associating your offer with something that your prospect may find disturbing e.g. disembodied body parts.

9. Available through Multiple Channels
Your prospect should be able to respond to the offer using the channel they prefer, be it through the mail, a call center, or using your website.

10. Personal
Your name is an icon for you. Personalization done well can lift response. Personalization done badly can feel like a violation.