Higher-cost, Hyper-targeted Efforts Can Win Big (1,164 words)
By Daniel Kelman
You do the math.
Target until it hurts; then target some more. That is the mantra of a successful marketing campaign. But targeting alone isn't enough. To get exceptional response rates—as high as 90 percent—I suggest using what I call the "high connection" approach.
Traditional high-end direct marketing math dictates that while targeting models are crucial, efficiencies are created through production economies: large-volume mailings plus a low cost per unit. High connection marketing turns that logic upside down. For this type of effort, you have to hyper-target down to a micro list. When you do that, you can afford (and justify) a higher cost per unit.
You don't need to be a numbers whiz to recognize that you can spend more per person on 50 people than you can on 1,000. That additional spending allows for exceptionally creative vehicles that generate drama and intrigue for prospects.
Let's say you target a specific group of 200 CEOs, and send each of them a piece with a production cost of $40. If you only get a 5-percent initial response, that means it cost $8,000 to get 10 respondents through the door. Now say you offered each initial respondent an additional $10,000 incentive (e.g., a trip on a private jet to a product demonstration and golf outing) and half the group took you up on it. That means you've spent $58,000 on the campaign, and if the sales team can close the deal with just one person, it's still a great return on investment.
If a new account is worth $1 million in gross profits, it's unlikely you will capture that customer with a 79-cent effort. You should hyper-target your list to the small group you want to reach, and invest heavily to create a unique experience.
Honing Your List
The key to high connection marketing is to use whatever and whoever is at your disposal to narrow your list. The Pareto Principle (the 80/20 rule: 80 percent of the profit comes from 20 percent of the audience) tends to apply to most customer-valuation analysis. We advise you to take it to the extreme: Identify those 5 percent who represent 40 percent of the profit opportunity. That leaves you with a very short list.
Human intelligence can be one of your best resources in finding high-value prospects. Hiring vertical industry experts to identify these individuals within the right companies can be very effective. Often, we employ hands-on triangulation techniques: We use multiple compiled lists, industry associations and trade magazine databases to identify companies and their key decision-makers.
Wow Your Best Targets
Apptimum, a hosted software solution partnership of Qwest and Microsoft, once asked my firm to launch a new product. To succeed, we needed to win over entire vertical suites of software vendors. Low response and conversion rates were not an option.
Rather than relying on traditional list selection tools, we created our lists by hiring software consultants from each vertical industry to determine which companies would make the best prospects. Targeting the CEOs of our focused list, we researched their bios and searched for commonalities.
Our campaign revolved around a "secret agent" theme. Each prospect received a locked metal briefcase. The prospects were directed to a Web site to enter a unique code, which notified the Qwest sales consultant when each CEO had viewed the site. After going through some product and promotional information, each CEO received the combination to the briefcase, which contained a handheld GPS unit. We received such high response and conversion rates that the Apptimum system engineers had to temporarily halt the program because we had overwhelmed their project capacity.
Even with good targeting, traditional direct marketing can be like spam: Blow something out to a huge, targeted audience and then live on tiny response rates. But high connection marketing is marketing only to the targets you want to see. You can't generate a response if you don't get noticed—regardless of how well you target. Many recipients automatically throw regular direct mail in the trash. But nobody trashes an intriguing box without doing some investigation.
I've worked for several companies and ad agencies doing direct marketing. We've all been trained that a good response rate is 1 percent. But with hyper-targeting, I've seen response rates of 93 percent and close rates of 10 percent.
High connection works because it's promotion-oriented. The goal is not to sell the product but to create an experience that initiates a relationship between the prospect and the seller. The focus is on inciting action in prospects by making the connection. When you think of connections, the world shrinks. To find connections, continuously research purchase behavior and the emotional factors that drive it. This provides the underpinning for nearly all the work you do and enables you to hyper-target campaigns. The large response rates make it worth sweating the details.
Another example of a high-impact promotion that was worth the effort—and expense—was a trade show effort Integer Group did for Polk (now Equifax). The client challenged us to create excitement about its new catalog-buyer lists (Response Selector) at the Direct Marketing Association (DMA) annual conference. But trade shows can be a nightmare. With so many booths, how do you attract attention?
Our "No Average Joe" campaign was a highly targeted promotion that hinged on secrecy. We used an interactive multimedia promotion that hit the prospects before the trade show. They were teased by the idea of our famous Joe, but didn't know who it was. When everyone finally met Joe Montana, the consultants and the prospects had a shared experience that formed the base of their relationships. Trials and orders at, and immediately following, the DMA show exceeded our client's expectations by 300 percent.
With the high connection approach, you can invest heavily in the outbound and incentive costs to create highly unusual, memorable and dramatic campaigns that fly in the face of traditional notions about direct marketing. That means you can produce results for some of the most difficult challenges.
For Corporate Express, an office-supply company, we needed to attract senior-level purchasing managers at large companies, possibly the most frequently targeted (and therefore least responsive) prospects out there. Our team hyper-targeted a list of tens of thousands of initial prospects down to about 550. The promotions team then developed a piece and sent it along with a corporate-branded nautical compass. Each prospect that responded to the call to action on the piece was rewarded with the the modern-day compass—a GPS unit—that was hand-delivered by a Corporate Express sales professional. The fully loaded cost per unit was $165, with a secondary incentive cost of $190, for a total campaign cost of $105,000. The program initially generated eight new accounts, amounting to $1.77 million in recurring revenue.
Why do we so seldom see this kind of approach? Perhaps the high cost of targeting a small number of potential customers alarms people. But if they did the math, they just might change their minds.
Daniel Kelman is the director of 1:1 Marketing at The Integer Group, a promotions and marketing agency based in Denver. Reach him at (720) 497-8170 or e-mail firstname.lastname@example.org.