By Steve Trollinger
Most multichannel marketers, particularly those with catalogs at the heart of their business, understand the importance of direct mail and its role in generating retail traffic. But not all brick and mortar retailers have embraced direct mail's potential as a way to drum up more in-store business.
This month's column focuses on distance as an important factor in the improved success of retail-focused direct mail campaigns. Certainly the creative used, the merchandise offered and the company's overall brand promise and in-store experience are tremendously important to the success of any campaign, but I'm speaking here about how to understand and use distance to make your mailings more efficient and more productive.
Most retail mailers that either aren't big enough or sophisticated enough for a customer file model will employ some form of recency, frequency and monetary (RFM) segmentation when setting up their file for mailings. Using RFM segmentation allows mailers to target audiences for campaigns based on the most important transactional attributes—when they last made a purchase, how much they typically spend, and how many times they have ever purchased. For retailers, segmenting and mailing based on a customer's distance from a retail location often will enhance performance and may even be a greater predictor of response than frequency or monetary value, particularly if the retailer experiences peak and non-peak seasons.
The ability to segment by these variables is predicated on the retailer's ability to capture good data in the first place. This brings up an issue that underlies the entire topic of retail-based direct mail: Even the most sophisticated campaign management software and most skillfully executed mailings will fail to produce actionable results if the people at the registers don't buy into and understand what you're trying to accomplish with direct mail. I can't remember how many times I've been asked for my phone number or ZIP code at a retail register—or how many times I haven't been asked when I know I should have. If the systems and personnel aren't in place to track the campaigns you put together, don't bother adding distance to your segmentation criteria because you probably won't know if it worked anyway. If you can track though, read on.
Should I Even Bother?
A map and/or a measurement of the recipient's distance from the store can be effective for virtually any mailer with a retail presence. Catalogers such as Pottery Barn and Williams-Sonoma create versions of their catalogs to tell mail-order customers where to find the nearest store location. Specialty food mailers such as The HoneyBaked Ham Co. target campaigns to drive holiday business. Big box retailers such as Bed, Bath & Beyond use postcards to increase business in their neighborhood stores. Virtually any retailer with the ability to evaluate and apply its data can use distance from store to:
How Far Is Too Far?
Unless you're mailing based on the scoring of a customer file model, the best way to determine how far from your store you profitably can mail is to set up a simple testing grid, such as the table shown below, and mail a variety of RFM segments at various distances from the store.
Based on this type of setup, you should be able to evaluate performance of one segment versus the next using your existing RFM protocol and determine what effect distance from store has on the overall response. In peak seasons you may very well see 20.01+ mile Segment 1 names perform just as strong as the 0-5 mile Segment 5 names. In non-peak seasons though, it's just as likely you'll find 0-5 mile Segment 5 names outperforming 10.01-15 mile Segment 1 or Segment 2 names. The test will highlight findings for a retest and, if executed and applied correctly, rollout should yield improved response.
Distance from the store plays an undeniable role for multichannel marketers that make attempts to drive retail traffic. Being able to capture, analyze and apply accurate data is the key to finding out just how far your marketing dollars can go.
Steve Trollinger is vice president of client marketing, J. Schmid & Associates. He can be reached at (913) 236-8988 or via e-mail at firstname.lastname@example.org.