Three Steps to Optimize Marketing ROI
By David Lowndes
If you're a regular reader of Target Marketing magazine, you already know that communications aimed at specific audiences deliver better results than undifferentiated marketing campaigns. You also know that adding customization and personalization can boost response rates even higher. For example, the average response rate to a typical, nonpersonalized direct mail campaign is about 2 percent. But, according to a study by David Broudy and Professor Frank Romano on variable printing, the addition of personalization to a campaign can increase response time by 34 percent, the value of the first order by 25 percent, repeat orders by 48 percent and overall revenue by 32 percent.
Impressive as these statistics are, marketing professionals can dive deeper still to improve their overall marketing ROI. To truly maximize the yield from your marketing investments, you need to "reengineer" both your marketing materials and your underlying production and distribution processes, using an approach such as the one described in the remainder of this article--an approach Comac calls Communication Optimization.
Communication Optimization in a Nutshell
Communication optimization is a process to streamline production, distribution and inventory, while making collateral more relevant and cost-effective. It achieves this goal by aligning a company's overall marketing objectives with communication best practices, as outlined here in three steps.
Step 1: Analyze. The first step is to analyze your current communication materials in relation to critical factors such as:
[ ] Specific objectives and desired response for each piece or campaign
[ ] Target markets
[ ] Industry norms, best practices and business environment
[ ] Value of the transaction or sale
[ ] Customization and personalization needs
[ ] Audience demographics
[ ] Competitive programs and offerings
[ ] Your company's overall business and marketing objectives
[ ] Product lifecycles
[ ] Inventory quantities, shelf life and value
[ ] Usage and reorder patterns
[ ] Design requirements or constraints
[ ] Corporate graphic standards
[ ] Production options and costs
[ ] Delivery options and costs
[ ] Privacy and other regulatory compliance requirements
This analysis provides a sound business and cost-benefit rationale to help you create only the materials you need--in the right quantities--using the most cost-effective formats, production processes and delivery methods relative to the value of the transaction.
This last point is an important one--and a logical extension of a segmented marketing program. You can't effectively target markets and audiences with a "one size fits all" approach to marketing materials. You need to know where it pays to spend more money to make more money, by reserving costlier production techniques like customization and personalization for your higher value prospects and customers.
Step 2: Reengineer. Using the analysis performed in step one, the next step is to revise, redesign, combine, eliminate and/or add materials as needed to achieve your company's marketing objectives cost effectively. The goal is to align copy, graphics and production processes to maximize response rates, while managing costs in relation to sales value. You may need to use prototyping, focus groups or other testing methods to ensure the best content, formats, production and delivery options for your materials, all the while staying in line with your marketing objectives, audiences, value, costs and other considerations.
In this phase, you also streamline your underlying production processes. In particular, you need to determine an optimal combination of offset versus digital print to give your organization timely, relevant, yet cost-efficient marketing programs. While digital printing is ideal for customizing materials with variable messaging, as well as for adding personalization, offset printing is less costly for large quantities and better for pieces that require high-quality color matching. Your goal is to determine which processes to use for specific materials and audiences. In some cases, it makes sense to combine offset and digital printing--for example, preprinting a large quantity of color shells that later can be digitally overprinted for personalization and/or different messages.
You also need to look at distribution and storage options in this stage. In some cases, it might be feasible to forego production of a printed piece and replace it with an electronic version. In other cases, you might find it advantageous to add a standing order to print a particular piece digitally, on demand, when physical inventory runs out, thereby avoiding out-of-stock situations and rush reprint charges. Electronic distribution and just-in-time printing also can dramatically reduce your storage and obsolescence costs.
All of these decisions are made with an eye on critical factors like shelf life, usage and reorder patterns, target markets and the value of the transaction, among others.
Step 3: Automate. The third step in communications optimization is to automate production, ordering and fulfillment. Virtually all fulfillment companies now offer Web-based interfaces that allow your marketing, sales and distribution personnel to order and track delivery of the materials they need online. Many vendors provide real-time reporting to enhance inventory management and decision-making. The best suppliers integrate all of these features along with design-on-demand and digital printing capabilities, backed by rules-based logic to ensure that only preapproved copy and graphics can be inserted into customizable fields, and that the selected copy and graphics are appropriate for the intended use and recipients. User access should be defined by department management, to ensure that all staff, field personnel and agents have what they need to do their jobs, while maintaining control at the chief marketing officer level.
It's important to note that communication optimization isn't a "one time and you're done" exercise. Instead, it provides a framework for continuous improvements in your marketing communications as you analyze results of current or ongoing campaigns, add new marketing initiatives, and address new needs and objectives over time.
Getting to "Yes"
If your company is suffering high costs for rush reprints, storage or waste, or getting lower than anticipated response and revenues from its marketing efforts, you may find it relatively easy to get management buy-in for a project of this scope. But less obvious situations may require some "selling" on your part, because of the time (several weeks to six months, depending on the size and complexity of your company's marketing program) and expense involved.
Sales and marketing will want to know how and by how much the process will improve results. Finance will look at the bottom line. Your legal department will worry about regulatory compliance, document retention and records retrieval issues. And your top executives will ask how much attention the process will divert from core business functions. Because your fulfillment company is responsible for the automation portion of the communication optimization process and also captures, tracks and analyzes much of the data critical to completing the first two steps, your account representative should be a valuable resource in presentations to your company's key decision makers. Vendor personnel also should be included in the team that actually carries out the project.
But one key message usually gets everybody's attention: A thorough, top-to-bottom evaluation and reengineering process, like communication optimization, can reduce overall marketing costs by 30 percent or more, while improving your response rates and speeding your time to market.
This all sounds wonderful, you're probably thinking, but does it really work? Yes! Here are two real-life case examples from Comac's files.
CASE STUDY #1: Company A manufactures a unique medical device used in a highly specialized spinal surgery. Currently, one in 5,000 U.S. surgeons are certified to perform the procedure that makes use of this technology.
Marketing Challenge: Cost effectively identify individuals who can potentially benefit from this procedure and get them into the offices of surgeons qualified to perform it.
Analysis: The end-users for the device (individuals with a specific type of back problem) are difficult to identify--especially given privacy regulations, such as HIPAA, which limits personal and health-related information that may be given to third parties for marketing purposes. The "distribution" network (certified surgeons) is limited, and most patients suffering from back problems do not immediately seek a surgical remedy.
Solution: Promote the procedure (and, indirectly, the use of the device) through primary care/general physicians. In most cases, it's the family doctor who first recommends specialized procedures or refers the patient to a specialist.
From that analysis, the company developed a sophisticated geographically-targeted marketing campaign aimed a primary care practitioners. They receive a personalized postcard explaining the procedure and its benefits, along with a list of certified surgeons within an hour's drive of their office. They're also told of a Web site they can visit and a toll-free number they can call for more information. The doctors also receive a point-of-purchase display that holds postcards containing the same information, which patients can take with them. Patients who inquire about the procedure through the company's Web site or call center receive a personalized letter reiterating the information on the point-of-purchase display and, again, listing the names of certified surgeons within a 50-mile radius of their homes.
The fulfillment end of this campaign is critical to its success. It involves creating lists of general physicians within specific geographic areas, then matching those lists against lists of certified surgeons within the specified radius of each general physician's office. To roll out a campaign within a given geographical area, Company A simply enters the ZIP code its targeting to Comac's Web interface. Comac's system creates the list of primary physicians and surgeons, personalizes the materials and ships them within hours. The use of preprinted color shells for the postcards, combined with digital print for personalization, makes this approach highly cost-effective. Comac also personalizes and mails the letters sent in response to patient inquiries, using HIPAA-compliant security measures to protect personal information.
CASE STUDY #2: Company B is a supplier of uniforms and other industry-specific apparel. The company's previous fulfillment vendor frequently failed to deliver requested marketing materials and invoices accurately and on time.
Marketing Challenge: Improve timeliness and accuracy of materials delivery, cut costs and improve cash flow.
Analysis: Company B was using outdated technology (including handwritten documents), which made it difficult to capture and make efficient use of important data for upselling and cross-selling within and among its three apparel divisions. Inaccurate invoicing was hurting its cash flow. Printing, paper and storage costs were escalating, due to inefficient production processes.
Solution: Introduce new technology to capture important data electronically at the point of origin and consolidate ordering, fulfillment and invoicing systems. Reduce printing costs and speed delivery of materials by changing formats and streamlining production and delivery processes. Enhance marketing response by including marketing messages across media and offering tiered pricing based on purchases from all three of the company's divisions.
In some cases, significant improvement resulted from a change as simple as printing on two sides of a sheet of paper instead of one, or having mailings perform double duty (e.g., inserting marketing materials into invoice envelopes). Other changes--primarily technological--were more complicated to implement, but have essentially paid for themselves through the savings generated by increased efficiency. Communication optimization initiatives reduced supply costs alone by $1 million in the first year of implementation. Personalized messages and tiered pricing also gave the company's sales a nice bump up.
If your company is looking for ways to reduce its total marketing costs, increase returns on its marketing investments and free up more working capital, talk to your fulfillment company about implementing a process like communication optimization. Properly done, it will provide your company with a "blueprint" for realizing these and other significant benefits.
David Lowndes is director of product development for Comac, a fulfillment services firm based in Milpitas, Calif. He can be reached at firstname.lastname@example.org or via phone at (512) 663-9358.