The Beauty of Continuity Marketing
Automatic shipments and the shameful “dirty load-up”November 27, 2012 By Denny Hatch
An ideal direct marketing business model is one where the advertiser receives an order and has permission to ship products on a continuing basis automatically and automatically charge a credit card each time.
For example, I recently had a client whose catalog business is dietary supplements and vitamins. The main object was to sell pills, capsules and beauty products.
The next—and very important—step was to persuade buyers to sign up for an automatic shipment service.
Benefit to the customer: If you've bought a month's supply of pills and they are starting to work, it's foolish to stop taking them. You are back to square one. Under the automatic shipment plan, you never have to remember to reorder and you never run out.
Benefit to the pill peddler: continual shipments with an automatic charge to the customer's credit card mean automatic sales and automatic profits.
My client told me that 20 percent of his buyers were on the automatic shipment plan and these were the most profitable customers in his database.
To my way of thinking, one primary object of the business would be to raise the percentage of auto-ship takers from 20 percent to 40 percent and ultimately to 80 percent.
This is efficient continuity marketing.
I was fascinated to come across two stories in one week describing new businesses based on the continuity business model:
Consult with a stylist, enter your sizes and choose the brand name casual wear you want (tee shirts, shirts, jackets, slacks, shoes, etc.). Each month subscribers receive a handsome box that looks like a trunk containing "10 or so" brand new items to try on at home. Return any items you do not wish to keep. Pay only for what you want. Shipping is free both ways. A great time-saver for busy men, who prefer not to shop at the mall or a retail store. One promise: guys that use TRUNK CLUB will have more and better sex.
For $39.99/month, we ship new kids clothing items right to your door. Each box has a retail value of about $100. Our service is meant to supplement your child's existing clothing supply with new, fun items. As your child grows so can the sizes of clothes you receive each month. Shipping is free and you can pause or cancel your order any time.
The Era of Continuities
In the 1960s—when I got into direct marketing—continuity series were hot. My first employer was Grolier Enterprises, marketers of the Dr. Seuss books as a one-a-month continuity series.
The offer: Take the first book FREE! (or for $1) and automatically receive one or two books a month for $2.95 each on a "til forbid" basis. (The books will keep coming until you forbid the publisher to send any more.)
Pioneers of Continuity Marketing: Greystone Press
Just after World War Two, it was John Stevenson and his designer/copywriter Fred Breismeister of Greystone Press that put book continuity series on the front burner of direct marketing and made scads of money.
The Arithmetic: Generally speaking, if the customer received 2.5 shipments (the first book is free and the next 1.5 shipments were paid for) it was a breakeven proposition. As the customer pays for more shipments, profits go up exponentially.
(A breakeven sale was profitable, because the customer's name would be added to the database of "actives" and list rental income was significant.)
There were two kinds of continuities:
1) Open ended—with no finite number of books. Books were shipped and billed monthly ad infinitum à la Dr. Seuss or the Weekly Reader children's book clubs.
Back in those days nobody had invented the idea of giving a credit card number and telling the publisher to automatically charge the Visa or MasterCard with each shipment. As a result, every book shipped became a new buying decision, which meant cancellations.
2) Closed end, such as Greystone's Illustrated Encyclopedia of Gardening, 1960, (20 volumes), the Illustrated Library of the World and Its Peoples, 1963-67 (42 volumes) and the Practical Handyman's Encyclopedia, 1965 (22 volumes).
The Load-Up vs. the Dirty Load-up
With a 20-volume set of books being sent at the rate of one- or two a month, the process is tediously long. Many buyers got discouraged and quit early in the series. For that reason, the Greystone folks invented the ingenious "load-up" scheme.
Here's how it worked:
- The customer would send for the FREE first volume. It would arrive with a welcome letter saying that this first book was indeed FREE—a keeper no matter what was decided about future volumes.
- Volume 2 would be shipped three weeks later with a bill.
- Volume 3 would be shipped three weeks after that.
- When the payments for volumes 2 and 3 were sent in, this proved that the reader was not only serious about the purchase, but also paid the bills.
- At this point the following letter would go that said, in effect:
Good news! All your remaining volumes have been printed and ready to ship, which is a terrific deal for you. You have the use of all the books, yet you pay for them at the rate of one volume a month. Since all 17 volumes will be shipped together, you save a lot of money on postage. And if you wish to return any volume, you may do so for a prompt and full refund, no questions asked.
If you do not wish to receive all the books now-but prefer to get them at the rate of one book a month-contact us right away.
- This was the load-up, and the remaining volumes would be sent with an effusive transmittal letter that resold the proposition and a payment booklet. Suddenly the customer's shelf would be full and would awe friends and family with this fine set of bound books.
- One unsavory trick continuity publishers used was to send the big box of the remaining volumes with no advance notice. This ton of books would suddenly show up on the reader's doorstep—along with the effusive transmittal letter and payment booklet. Since it would be a monumental pain in the ass to repack the books, lug the box down to the Post Office and pay return postage, a huge percentage of buyers simply kept the books and paid for them at the rate of one a month. This was known as the "dirty load-up."
NOTE: The dirty load-up could not be used today. The Federal Trade Commission has since issued a policy on unordered merchandise specifically aimed at these tactics:
Q. Am I obligated to return or pay for merchandise I never ordered?
A. No. If you receive merchandise that you didn't order, you have a legal right to keep it as a free gift.
Takeaways to Consider
- A good business model is one whereby the marketer has permission to automatically ship products on a predetermined schedule and automatically charge a credit card for payment for each shipment.
- If you have signed a customer up for an automatic shipment (or auto-renewal in the case of a publication) plan, always send a note of congratulations for the wisdom of the decision and issuing a pre-alert that the credit card would be debited.
- You do not want a shocked and pissed-off customer to discover a surprise charge on a credit card statement. Even though the auto-ship arrangement was agreed to at the outset, it may well have been forgotten.
- When you accept credit card payments, make sure it is absolutely clear on the statement who you are. For me it is distressing (and time consuming) when Peggy looks across the desk and says, "What's this $327.88 charge from XYZ company?" I am suddenly interrupted and sent on a wild goose chase to figure out who the hell XYZ is and what I bought, or whether this is scam charge.
- If the charge on customer's credit card statement is not going to be immediately obvious, then it is incumbent on the marketer to say under the area where the customer fills in the credit card number: "Please Note: This charge will appear on your statement as XYZ Inc. Thank you."