Response Rates Are Down!” proclaimed a recent full-page ad by one of the largest mailing list companies in the United States. Its bold tag line confronts the current state of direct mail while the ad's creative thrust — you get what you pay for — is brought home with the unwritten subtext: If you pay for a better list, your response rates will go up.
That solution is great — if you don't have to market to modern American consumers, or have an unlimited budget. Today's direct mail industry must stop and pay attention to the fact that there is a clear signal from consumers: The marketing messages they receive every day are becoming more and more irrelevant. This trend in American consumer behavior must be understood, and made actionable, if marketers hope to maintain a return on investment from direct mail. Today's consumer is following a measurable path, one of opt out, screen out and throw out.
If the New York fashion industry looks to cutting-edge innovators in Paris and Milan for trends coming down the runway, the direct mail industry should follow suit and be looking at its trendy cousins, e-mail marketing and telemarketing, for guidance.
Coming down the e-mail runways this year? Opt-out. In 2002, the DMA reported that consumers opted out of e-mail marketing at a rate 175% higher than in 2001. MSN and AOL, the country's largest Internet service providers, tout the ability to block unwanted marketing messages. And if that's not enough, according to a Harris Poll, 75% of Americans would make unsolicited e-mail messages illegal!
In telemarketing, things aren't any more encouraging. In the same period, the number of consumers who registered on telemarketing suppression lists skyrocketed to 65%, says the DMA. Additionally, consumers' flight to call-blocking technology and legislative action point to typical behavior trends in phone-based marketing.
Consumers' response to direct mail is following a similar, measurable path. From 2001 to 2002, the DMA reported a 10% increase in its mail suppression files. Compared with the trend in e-mail and phone marketing, a 10% increase may not seem that disastrous. However, direct mail marketers that say they're doing fine might want to take another look at how they're spending their allotted budget, and analyze their own metrics.
Measurement of the opt-out process really reflects the ease with which a consumer is able to unsubscribe from marketing communications. The noted opt-out rates among the three mediums (175%, 65% and 10%) are better indicators of overall consumer thought and behavior, not a measure of success. If consumers find it easy to stop marketing messages, these days they're more than willing to take that step.
The easiest medium to opt out of is e-mail: Hit a button and you're gone. And consumers have been educated to tell telemarketers to register their names on do-not-call lists. But in direct mail, getting your name on a suppression list is far more difficult. Few consumers will take the necessary steps to stop from getting a mail piece. If consumers could just write a note on an unopened envelope, direct mail opt-out rates would rival e-mail's.
Why are consumers following this clear and measurable pattern of “opt out, screen out, throw out?” It comes down to relevancy.
Consumers have a desire to reduce the number of marketing messages they're exposed to, largely because of the sheer volume they face in their mailboxes, inboxes and on the phone. As noted in a 2002 study by Direct, consumer-focused marketers began an average of 42 marketing campaigns for their customer base per year. For the average consumer, this means thousands of attempts to vie for attention. It's hard to believe that an increased volume of communication will solve a growing lack of response rates, yet the strategy of most marketers is more of the same. This strategy is doomed to fail.
Why do leading brands like Gap, CitiMortgage, Chase and Lands' End have successful e-mail programs? The highly measurable quality of e-mail means we are able to discern that the relevancy of a message will determine the likelihood of a favorable consumer response. This is where it's important to recognize the position of the consumer in the buying cycle.
For example, CitiMortgage has been able to make a relevant offer to its customer base by differentiating early on if the individual is interested in a purchase loan or a refinance loan. From that point on, CitiMortgage tailors its communication to its customer based on self-identified behavior. As a result, CitiMortgage's e-mails maintain inherent relevancy. The customer has spoken — the company's primary responsibility is to listen and provide timely information throughout the buying cycle.
Another example is Gap, which has done a tremendous job by segmenting outbound e-mail based on the preferences of its customer file. The company asks what you want to hear about, empowering the consumer and preserving relevancy.
E-mail marketing allows for quick strategic adjustments. If a firm sends an irrelevant e-mail to its customer base, it's able to rapidly gather the metrics of the message's poor performance. The same goes for the telemarketing industry. Everyone has heard the standard phrase, “This call may be recorded for quality purposes.” This is a way for marketers to monitor a telephone representative's sales pitch and to make alterations to the script.
Unfortunately, the direct mail industry does not have a similar feedback loop that is as quick, measurable or interactive. Furthermore, if dropping response rates in the direct mail industry is the trend, there is little time to build and analyze new measurements to figure out the problem. Learn from what's happening in other media. Direct marketers that call for more of the same — greater message volume, expensive offers or flashier creative — are missing an opportunity. With an overall industry response rate of 1%, it's time to change some rules and approaches.
Marketers need to be relevant. Here are some ways to improve consumer response rates.
- Hit the right spot
All too often, customers receive mailing pieces late in the buying cycle. In any product sale, consumers take four steps: awareness, intention, consideration and purchase decision. Too many marketing efforts assume that the consumer has approached the purchase decision phase. An offer is put on the table immediately. The early offer is a tenet of direct mail, but the time has come to question this approach, if not throw it out entirely. The concept of “offer first” reduces the relevancy of the marketing communication by pressuring the consumer to skip the first three steps of the buying cycle.
Consider how improvements could be made in the financial services sector: Say a lender is trying to sell a loan. Consumers are most receptive to listening (or opening an envelope) during the intention and consideration phase of the buying cycle, and mailing pieces need to take this into account. Instead of typical approaches such as selling the rate, pre-approval or a specified amount, the thrust should be to tell the consumer immediately why an equity loan might be a good decision or how the product's use could increase the worth of a home.
A recent e-mail sent by HomeValues focused on the advantages of adding a deck and tips on making the deck an outdoor living space. The e-mail supported the brand, and it appealed to a consumer's earlier stages of intention and consideration.
Adding relevance is particularly important when a company is selling products that are commodity-based and have a largely fixed price. No marketer can win the hearts and minds of its customers by engaging in a price war in a commodity market.
- Maximize the database
Most large companies already have invested in a data mart. But not enough of them have taken the next step: to really use their data to make highly relevant offers.
For instance, companies that market to homeowners build instant relevancy when their marketing speaks to the value of the home. Fleet does an outstanding job of using its database to identify homeowners for targeted direct mail efforts.
- Personalize the offer
A pair of jeans is easily available to consumers and is largely a commodity product, yet Lands' End has differentiated itself through its embrace of relevant content. The cataloger invites consumers to visit the company's Web site, where they can create their own customized designer jeans.
Ben Joslin is vice president of marketing for Domania, a Watertown, MA-based provider of customer acquisition and retention services.
