In this multichannel age, direct mail is still the largest single power in direct marketing. The U.S. Postal Service handled 102.5 billion pieces of standard mail (direct mail advertising) in fiscal 2006, nearly half the year’s total mail volume.

Direct mail is a great medium. Measurable, scalable, highly targetable, quickly adaptable to changing environments and opportunities, it’s hard to beat for marketing success.

But that success hinges on how well we mailers practice our craft, especially the basics. Here are three rules of data handling that will improve your chances:

• Use data hygiene and prep procedures to eliminate sheer waste.

• Use house data to help segment customer files and focus marketing dollars on the best customers.

• Couple house data with external data sources to profile and model, and drive prospect targeting.

MINIMIZING WASTE

List hygiene and solid data prep are the foundation of success. They aren’t sexy, but get them wrong and you’ll pay. For example, the latest U.S. census figures indicate there are more than 301 million Americans. A recent relocation study by Mayflower Transit projects that 43 million of us move every year. That’s one in every seven people, or 14% of the population.

If you fail to update those addresses regularly, some 14% of your house file will become undeliverable every year. By the end of three years a file of 100,000 customers diminishes functionally to just shy of 64,000. If your mail package costs 46 cents to print, process and mail, your oversight made it $16,560 harder for the campaign to be effective.

Compound that with other issues: a small percentage of your customers die every year (usually between 1% and 3%); apartment numbers aren’t correct; you send mail to people who don’t want mail solicitations. These can add up to pack a negative wallop.

Here are some simple things you should be doing:

• Standardize data and consolidate it in a master file. Keep this file as current as you can

WITH THE AVAILABILITY of more advanced technologies for database marketing in recent years, it’s become easy to lose sight of the basics. What do you do with all that computing power? How do you get an immediate payoff on your investment in a marketing database, a data warehouse or CRM technologies?

Here are 20 ways companies can make database marketing pay, listed in reverse order of importance. Some of these strategies and tactics will seem obvious, but you’d be surprised how often they’re overlooked or simply ignored.

20: Monitor Vital Signs

Marketing technologies, by definition, are good at measurement. Smart marketers will devise a management “report pack” that describes the overall state of the business as succinctly as possible. The trick is to determine the metrics that matter most, using them to produce a one- or two-page report that presents those metrics in a graphical, easy-to-understand fashion. Produce the report regularly, at least monthly, and be sure to build in comparisons from one report to the next so managers can quickly spot trends. This kind of information can add real value to a marketing technology investment.

19: Exploit a Nugget

There is at least one surprise when building any marketing database, some piece of information that no one quite expected to find. Quite often, these non-intuitive “nuggets” can be turned into important news, sales or relationship-building opportunities that your competition doesn’t know about. Look for them.

18: Survey Customers

People like to be asked for their opinion, and nothing communicates concern for your customer quite as strongly as a survey asking them to grade your service. Studies show that simply asking actually elevates the perception of service quality — if you ask, it must be because you care. That truism, coupled with the fact that surveys historically generate better response than most other forms of direct response, makes customer surveys an important part of any relationship-building and brand-awareness communications program.

Just one caution: service surveys will sometimes turn up problems you didn’t know you had. You’ll need to be prepared to address those immediately and aggressively before you begin using this technique.

17: Orphans Are People, Too

In businesses that go to market through a field organization — salespeople, agents, dealers or brokers — there are always some customers who at least temporarily have no representation. A salesperson might quit, an agent or broker might start representing a different company, or a dealer might close. Customers may move to a location where there is no company representative available. When that happens, you should proactively contact those customers and make sure they know how to interact with the company if they have needs.

In insurance, for example, policyholders whose agent is no longer with the company are called “orphans.” Whenever I hear insurance marketers talk about orphan policyholder marketing, I am always struck by the fact that for some reason, they seem to think that orphan policyholder status somehow makes the customer different. It doesn’t. Orphans are regular people. Most of the time, they don’t even know — or care — that they’ve become orphans. Why treat them any different? They’re premium-paying customers who deserve the same excellent service that other customers get.

16: Connect to Your CSRs

People enjoy doing business where they’re recognized. For example, most people will return again and again to a store where they are called by name, where their likes and dislikes are known, and where they’re treated with respect. When you have access to a marketing database that consolidates all customer and household information into a single universe, you have an opportunity to replicate that familiarity in your interactions with customers. Link aggregated customer records to the data displays that drive your customer service center. That way, when a customer calls for any reason, the CSR will know about all the relationships the customer or household has with you, and be able to address the customer’s needs more quickly and completely.

15: Surprise and Delight

The key to this strategy is to do something your customer doesn’t expect. A “thank-you” call that really is just a thank-you rather than a sales pitch is almost unheard of in today’s competitive market. Ask your customer for input on how to serve his needs better. Give him a gift or product/service upgrade he’s not expecting. Whether you do it on the phone, via the Internet or in the mail, be prepared to respond immediately if the customer uses the communications opportunity to ask a question or request additional service. The caller or sender should be positioned as an ombudsman whose sole purpose is to make the customer happy.

14: Recognize Relationship Phases

Customers bond with a company for the same reasons they develop affiliations with other people — because the relationship makes them feel good. What many marketers fail to realize is that quite often the first interaction with a new customer is, in the customer’s mind, just a test. The company may have multiple products or services to sell to the customer over an extended period of time, but the first-time buyer has not necessarily made a lifetime decision. It is a temporary and conditional relationship, a fragile bond that must be carefully nurtured before it can take root.

In reality, there are three distinct phases to a long-term customer relationship, and your communications strategies need to reflect each customer’s place along that relationship continuum.

Phase 1 is that time period — usually one to six months after an initial purchase — in which the customer is rethinking his decision, deciding whether or not he did the right thing. During this relationship formation phase, your strategy should be to reinforce the emotional reasons for buying in order to help him feel good about the decision.

Phase 2 is relationship cultivation, which can extend into the second year of the relationship. Your task during this phase is to personalize the relationship, to build the customer’s trust, and to quantify the potential of the relationship for both you and the customer.

Phase 3 is relationship management, which gives you an opportunity to build on the trust you have established by cross-selling and otherwise fitting your value proposition to the customer’s needs.

13: Resell Former Customers

Just because a customer is no longer buying from you doesn’t mean he never will again. Chances are there will be other opportunities to serve his needs.

Think of it this way: Your former customers are known buyers of your product or service who have demonstrated a willingness to buy from you, and that’s a lot more than you can say about “cold” prospects from any other source. Get the timing right, then treat your former customers as “A” prospects. “Win back” strategies can work.

12: Buy the Right Technology

I call this theory “Tooker’s Law:” The more you spend on the technology that manages the data, the less money you will have to spend on the parts of the database marketing process that actually create sales. On countless occasions, I have seen companies buy cutting-edge, very expensive technologies that were way beyond their actual needs. Try to strike the right balance between your present and future needs, always keeping in mind that the technology you buy today will be cheaper and easier to use tomorrow.

11: Give Customers Channel Choice

A customer or prospect defines the communications medium that is appropriate for him through his behavior. Given the choice of writing, calling or clicking, he’ll pick the one that feels right to him. If he initiates a dialogue by sending an e-mail or filling out a form on your Web site, he is telling you that he prefers to hear from you via the Internet. If his first question is “How can I contact a salesman or find a store?” you can rightly assume he prefers face-to-face contact. Listen to him, and design your communications strategies accordingly.

10: “Clone” Best Customers

This is Database Marketing 101, but it is often overlooked by marketers who focus on projects and product silos. There are ways to define the attributes that are common to your best customers, demographically, psychographically and behaviorally. Use that information to find second-tier customers and prospects who look like your best customers. Then concentrate on offering them products appropriate to their needs, even if they’re not the products you’re presently promoting.

9: Create a Control Group

Most people use A/B splits and control groups as standard testing methodology when they implement direct mail or e-mail projects. But you should consider creating and maintaining a permanent control group across your entire customer file. The purpose is to measure the cumulative, long-term effect of your database marketing programs in the aggregate, an important metric for determining how much of your marketing resources to direct to database marketing vs. broad-based media. The control group doesn’t need to be large, because you’re going to use it for relatively gross measurements. Depending on the size of the database, an enterprisewide control group of this nature can usually be set at somewhere between 2% and 5% of the universe, and it needs to be constantly refreshed so that it accurately reflects the changing nature of the database as a whole on a continuing basis.

8: Differentiate Yourself

Back in the good old days, direct mail marketers could pretty well count on the fact that the best response-producing format was a letter and a business reply card with a brochure in a #10 envelope. Today, something like 70% of the mail the average American homeowner receives is direct mail, and the “tried and true” formats just don’t cut through the clutter anymore. The competition for the consumer’s attention in the mailbox is intense, and even if you’re mailing to customers you (hopefully) have the benefit of a relationship with, you still need to get the customer’s attention to get your mail opened and read. Use package formats that are out of the ordinary. Use color and graphics to attract the eye. Use a compelling outside message to draw the reader inside. Creative matters greatly when you have to get the message delivered.

This is particularly important in business-to-business direct mail, where the clutter can be even worse, and if you’re trying to reach the C-suite (CEOs, COOs, CFOs, CIOs, etc.), you’re faced with the added challenge of getting past the gatekeepers surrounding the suite. In that case, the right approach is often dimensional mail — messages that arrive in boxes, bags or tubes, and look as if they have intrinsic value.

7: Rank Contacts

We wish it weren’t true, but it’s a fact that salespeople usually won’t aggressively follow up on all the leads that we generate for them. Given the truth of that behavior and the inability to change it, prospects given to a salesperson for personal contact should be rank-ordered by value or likelihood to buy. The best prospect should be at the top of the list so if the salesperson only makes one call, it will be to the prospect most likely to buy.

6: Fish Where the Fish Are

The business landscape is littered with the bones of unsuccessful marketers who tried to change human behavior. People do what they do for reasons that we often cannot discern, define or model. When you see customer segments behaving in a way that’s counterintuitive, don’t spend too much time trying to figure out why. Instead, just offer them what they want, rather than what you think they should want.

5: Segment by Market

People in New York really are different from people in Jackson, Mississippi or Peoria, Illinois. So are people in Los Angeles. They live differently, make decisions differently and buy differently. If that’s true, then why do so many companies attempt to market the same way everywhere? There are real differences in regional markets, and your marketing strategies and tactics should reflect that.

4: Manage the Response Process

For companies who go to market through a sales force, there are two kinds of responses to database marketing activities: the customer or prospect response to the marketing communications, and the salesperson’s response to the lead. Marketers usually concentrate on the former and ignore the latter. But the fact is, the sales force response is where sales happen, and it should be a key component of your database marketing strategy.

Success or failure lies in getting feedback. If your company has not yet deployed some kind of sales force automation system and enforced its use, you’ll have to resort to lead listings and follow-up requests to sales managers for lead disposition. While you can easily tell how many leads resulted in sales by matching responders to new purchases in successive generations of your marketing database, without field feedback on lead disposition you’ll never understand why unconverted leads weren’t closed.

Finally, if you are able to get that information, you’ll need to champion the idea that salespeople who do not aggressively work leads should not receive future leads. This can be a political hot potato, but it’s a battle worth fighting if you want to make your database marketing programs work to maximum advantage.

3: Differentiate Top-Tier Customers

Database marketing is one place where it’s OK to discriminate. Better, more profitable customers deserve better treatment simply because they’ve earned it.

I once made a presentation to a bank client to describe what we had found when we completed building the first stage of the bank’s marketing database. When I showed the client that fully 10% of the bank’s retail deposits were held by only 250 top-tier customers, the president asked me what his marketing strategy should be toward those customers. Since the bank had 25 vice presidents, I recommended that he assign 10 of those customers to each vice president and make it the VP’s job to see that his 10 customers stayed happy.

It sounds simplistic, but it’s true. Sometimes the best marketing strategy is to buy lunch. There are database marketing equivalents to that strategy (see #15), and you should use them.

2: Measure ROI

In a recent study conducted by the management and technology consulting firm Accenture, nearly 75% of executives in the United States and the United Kingdom said that their companies are unable to measure a marketing campaign’s return on investment. Nothing in database marketing matters more, and if you haven’t bothered to create the conditions needed for tracking your efforts (tracking codes, response window definitions, statistically valid test cells, etc.) you’re doing yourself and your organization a disservice.

In #9, the need for a universe-wide control group to measure the incremental effect of database marketing in the aggregate was described. Assuming you are marketing to customers and your objectives are to retain them and sell them again, here’s another approach — a relatively simple formula you can use to measure return on investment.

First, calculate your number of customers; projected percent improvement in retention rate expected from your database marketing communications; annualized average revenue per customer; percentage of customers who will buy again as a result of your database activities; average per-customer revenue from those additional purchases; annualized cost of your database marketing communications; and the fully weighted new customer acquisition cost.

Next, calculate the:

• Total retained revenue.

• Number of customers times the projected improvement in retention rate times the annualized average revenue per customer.

• Total new revenue.

• Number of customers times the percentage who will buy from you again times the average per-customer revenue from additional purchases.

• Replacement customer acquisition cost saved.

• Number of customers times projected improvement in retention rate times customer acquisition cost.

Then consolidate the numbers for total retained, new and saved revenue; and total retained revenue plus total new revenue and replacement customer acquisition cost saved. Your final calculation is to determine the one-year return per $1 invested, and the total retained, new and saved revenue divided by the annualized cost of your database marketing communications.

1: Sense and Respond

I like to call this strategy “CRM on the cheap,” because it can easily be implemented with any full-featured campaign manager and doesn’t require the use of expensive CRM engines to integrate multiple touch points. Yet it represents a high-order CRM tactic, one that unequivocally demonstrates a commitment to meeting customer needs. Consistently executed, it can have a significant effect on customer retention.

Along with your proactive marketing communications — those in which you are “pushing” your selling and/or relationship-building messages to the customer file — create a series of reactive communications designed to respond to “event triggers” that can be identified by your marketing database.

A classic example, of course, is a customer birthday, which in many businesses can trigger selling opportunities that need to be communicated. Another often overlooked example is a customer move. When a customer changes addresses, that event telegraphs the likelihood that the household is going to require all sorts of new goods and services.

Every update of a marketing database contains dozens of behavioral or milestone triggers that can create sales opportunities, the need for customer care, and/or chances to enhance and extend the customer relationship. This is the most important strategy of all.

There’s an old saying, “The more things change, the more they stay the same.” These tested and proven database marketing strategies and tactics were working well before technology advanced to its present state, and many of them should work for you today. The good news is today’s technologies make them easier than ever to implement.

Richard N. Tooker is senior vice president, database/interactive marketing for DMW, Wayne, PA.

Nearly six out of 10 companies turned maintenance responsibilities over to their marketing departments, 10% put IS/IT departments in charge, and just over a fourth gave joint custody to the two departments

More than 28% of all respondents maintained mega-databases with at least 1 million records, while just under half said their databases topped out at fewer than 100,000 records

About 69% of firms with Web sites personalize offers, as opposed to 30% of firms without them

Database marketers focus less on analysis and more on selling

PANICKED ABOUT your bottom line? If so, speak up: According to DIRECT’s survey of reader database activity, marketers are turning away from highfalutin analytic and support staff functions in favor of activities that will drive revenue to their bottom lines.

In 2000, fewer respondents said they were using analytics such as profiling and regression analysis than those that did in 1999. In fact, only consumer firms indicated that modeling was among the top five uses of their databases.

In their stead, marketers are relying more on top-line driven activities, such as cross-selling, customized mail offers and upselling.

Does this spell the death of database marketing? Not by a long shot. It may mean that companies are concerned about a drop in annual revenue levels. It may also reflect the growing presence of retailers – who generally have less sophisticated skills – among our survey respondents.

That’s the theory espoused by Ron Jacobs, president of direct marketing firm Jacobs & Clevenger, Chicago. Companies in growth mode would use their database for functions with a direct impact on revenue: cross-selling activities, promotional efforts and customized mail offers, all of which were among the top five uses cited. “They are less willing to do investment spending without seeing a revenue stream or profit from it,” he says. “And by spending, I mean prospecting and acquisition. Even with spending on the back end, people were not sure what return on investment was going to be.”

Additionally, the increased response by retailers may explain the tendency toward prospecting. “For a retailer to apply customer relationship management, it needs an integrated point-of-sale system. Many retailers view the capture of customer information as a) a needless delay at checkout; b) something they can’t get their employees to do; or c) adding significant amounts of data they are not sure how to use.

“They’re wannabes,” Jacobs adds. “The marketing people recognize the need for this, but the operations people and the traditional retailers are much harder to convince.”

Steve Isaac, CEO of DMW Worldwide, a direct response agency based in Wayne, PA, says his clients have not turned away from analytics to the extent reported in the survey. But DMW’s client base may be more mature than those companies represented in the DIRECT survey response base. Isaac offers two rationales for the 15% drop in profiling from 1999 to 2000:

1. Mature companies that have done it and are customizing their clusters based on the results may not feel the need to do so again.

2. Newer firms may not be ready to use profiling techniques.

“You have to get to a critical mass before you do a profile,” says Isaac, who adds his own experience tells him many companies are ready for it.

Nor has he seen any drop in database use to feed sales forces, which was reflected in the survey. “With our clients, the information is being provided,” he says. “People are tying it in with a contact management program like SalesLogix.” Isaac acknowledges that if firms are doing more upselling, it stands to reason they are doing less profiling. “If I took the trouble to profile last year, I would be using it in a cross-selling fashion this year.”

One thing’s for sure: The makeup of survey respondents has changed. There were more consultants and fewer manufacturers. Industry consolidation has taken its toll among the midlevel marketers, and the smaller ones were gearing up. To Jacobs, this is additional proof of a shift between so-called “new economy” firms and “old-line” companies.

What hasn’t changed since last year is the quantity and size of marketing databases. As was the case last year, around four out of five firms maintained them. The consumer and mixed-focus firms (those that offer their wares to both consumers and business clients) had files more than five times the size of business-to-business firms.

The mixed-focus firms, which deal with a variety of customers and have to be more sensitive to a host of communication concerns, were more likely to coordinate information among all departments in their marketing databases than the pure-play consumer and B-to-B companies.

Isaac cites telecoms, which focus on small businesses, as an example. In the small business arena, the consumer and business owner are the same person. Armed with data intermarried between business and consumer records, a mixed-focus firm would be able to approach a prospect with more than one package.

Consumer companies also led the pack when it came to integrating input from all customer touch points, with half indicating they did so, compared with one-third of the mixed-focus firms and a rather lackluster one-in-five showing among the B-to-B companies.

Once they have it, what are they doing with it? Seven out of 10 mixed-focus and consumer firms use information within their databases to provide customized offers, products or services, as opposed to 56% of the B-to-B companies.

Here Jacobs and Isaac disagree. “Most B-to-B companies don’t have the quantities [of clients or offerings] that consumer companies have,” says Jacobs, “so you would imagine that they would be able to personalize without a major promotional penalty.”

But more B-to-B firms are sales-force driven, argues Isaac. “You’ve got a live salesperson involved,” he says, “so a lot of the management of the relationship falls into that person’s world.”

In consumer companies, Isaac adds, the customer touches the company in a variety of different places, and there are fewer opportunities for a live person to be involved. “If the technology learns as people interact [with the company], it takes that human piece out of it,” he says. “This is much more likely to be in a consumer environment due to the sheer numbers.”

But even machines need upkeep. Two out of every five respondents said they planned an investment or upgrade to their databases, and anticipated spending an average of $119,000 on these enhancements. One in five were moving to bring it in-house, with the consumer and mixed-focus firms wanting to take advantage of the drop in hardware costs and the increased ability of programs to handle larger files.

For these sectors, with the premium they place on customized offers, the control bringing the system in-house would offer is very tempting. But Isaac would put the brakes on these figures as well. True, he says, there is movement toward bringing databases in-house, but he estimates that more than 25% of them likely won’t. “What stops them,” he says, “is the complexity of doing it and whether they have the resources to manage it.”