B-to-B Special Report: Put the Direct Back Into Direct Mail With Credit Scores
By segmenting a direct mail list with commercial credit scores, marketers can spot the Ford Mustangs among companies while avoiding the Edsels. The most obvious advantage of using commercial credit scores on the front end of a marketing effort is to weed out bad risks.
Say a direct mail campaign targeted to 100,000 flower shops costs 75 cents per piece, or $75,000 total. Assuming a 4-percent response rate, the marketing company’s credit department will need to pull 4,000 full credit reports at roughly $20 each, or $80,000 altogether. Additionally, it costs $10 to process the 4,000 applications for another $40,000. All told, the total campaign cost is $195,000.
Using the same model, let’s apply automated credit scores, which take into account hundreds of factors, including signs of distress such as late payments, liens or bankruptcy proceedings.
First, a credit risk score is applied to the same starting list of 100,000 at, say, 12 cents per record, for a cost of $12,000. Based on the score, high-risk prospects are cut from the list, and only 80,000 pieces go out for a total of $60,000—a savings of $15,000.
But there’s more. By reducing the higher-risk businesses up front in the marketing campaign, it also will save money on the back end by reducing the number of responses that need to be processed.
All told, using credit scores will save $27,000. The project’s total cost is now $168,000: $12,000 for credit scores, $60,000 for mailing and $64,000 to run full credit reports on 3,200 responders (4 percent of 80,000), and $32,000 to process the applications.
More Ways to Reduce Risk
Here’s another way to leverage commercial credit scores. An ever-present challenge for marketers is identifying small-business owners in their existing consumer customer base. Say a retail bank has a customer with a personal checking account. This person comes into the bank, goes to his ATM or logs on to the online banking site. A B-to-B marketing list might reveal that this customer happens to be a small-business owner, allowing the bank to cross-sell to him B-to-B products such as small-business loans, business checking or business credit cards.