Mailing on a Shoestring Budget
Nine billion pieces of direct mail just went missing. That’s how many mail pieces the USPS estimates diminished from the mailstream in 2008, and there’s no uptick in sight.
A decline of 9 billion pieces of mail has an enormous household impact. “There’s 110 million active households in the United States, but about 50 million of them really get the preponderance of mail. You divide that 9 billion into the 50 million households, and that’s pretty significant,” explains Monica Smith, president and CEO for Marketsmith Inc., a Morristown, N.J.–based multichannel marketing firm. In other words, every mailbox has seen a decrease.
Direct mail budgets also are shrinking, relative to the decrease in mail volume. “Mailers are seeing a decreased response. They’re seeing their ROI is not as high as it should be; they’re attributing it to increases in postage, production costs, printing, letter-shop work, all that kind of stuff—as well as economic conditions. That’s why people are shying away [from mail]. People are spending less money and are spending more cautiously because of the downturn in the economy,” says Grant Johnson, founder and CEO of Johnson Direct, a full-service marketing agency in Brookfield, Wis.
Bob Martel, president of JMB Marketing Group, a full-service direct marketing agency in Marlborough, Mass., says that along with budget cuts, he also sees an increased demand for accountability. “[Clients] are saying, ‘We’re willing to spend the money, but we need to see every dollar work,’” he describes.
Smith sees direct marketing budget cuts as part of a vicious cycle, potentially leading to net losses. “If you don’t have good cash flow, you have to shrink marketing dollars, and unfortunately, when you shrink your marketing dollars, your cash flow gets worse,” she says. Martel echoes that sentiment, saying smaller companies, especially those in the $1 million or $2 million range, need to make their marketing dollars work or they might not survive this downturn.
While 2009 will be a struggle for many businesses, tough times force marketers to re-evaluate their programs and become more efficient and accountable for results. “You just have to market smart and efficiently. Now is the time as direct marketers for us to strut our stuff and show the ROI,” Johnson enthuses. “If they’ve been doing direct marketing correctly, marketers are going to have a good handle on what’s working and what’s not, and they can really grab market share now.” If you are feeling the pinch, follow the experts’ advice below for keeping your mail strategy healthy in an unhealthy economic environment.
Stick With Past Winners
During tough times, control formats can be a valuable safety net. Falling back on something that has worked in the past allows you to better measure the results year over year and saves dollars and time on developing new creative. “I’ll look at what has been done in the past that has worked well, and sometimes it’s a matter of dusting it off,” Martel notes.
As opposed to redesigns, Johnson advises mailers to test copy and offers. “If you have a piece that has stopped working as effectively as it has in the past … instead of redesigning the whole piece or coming up with a new format, why don’t you try some different offers to boost response? That’s a very smart thing to do, especially if a format or control has been working for a long period of time,” he says. Simplifying winning campaigns can save extra production dollars. “Take a real hard look at what you’re doing as far as packages, and try to simplify it—a straight letter, or even postcards with effective message positioning and sound offers. Now is the time to continue to do those,” Johnson adds.
Embrace Your Inner Contrarian
The first rule is stick with what’s worked in the past. The second rule, of course, is to break rule number one. “Statistically, you have to stick to what works, but realistically, the times are changing so rapidly … It is a scientifically rewarding view to always test against the control and ensure the stability of how that control is doing,” Smith says.
Moreover, Johnson, who describes himself as a contrarian, asks, if your competitors are cutting back and going smaller due to budgetary constraints, why not test an oversized package? “Because of tightened budgets, there is an abandonment of traditional direct mail packages for self-mailers and/or postcards—which is fine if you test them and you can get them to work. But if everybody is going smaller or different, I’d like to go larger,” Johnson says. If you normally mail a #10 or self-mailer, he advises testing a 9˝ x 12˝ or 10˝ x 13˝ to really stand out in the mailbox.
Don’t Resort to Cutting Lists
One of the first places where marketers tend to mistakenly cut funding is in list acquisition and circulation. “It’s very easy to cut circulation. [But] what’s easy is not necessarily what’s right,” Smith suggests. She says that decreasing circulation is a quick fix that immediately increases your bottom line contribution. However, a year later, with fewer customers, constituents or qualified leads on the mailing list, marketers will need to reinvest in their list programs in order to maintain bottom line numbers.
“People might review the size of their list … and if they’re truly scientific marketers and they’re testing, maybe they can work with a smaller universe to test before committing to a larger campaign,” states Martel, who also stresses the importance of list hygiene in making every dollar count. “Generally cleaning and deduping your list and making sure you have an accurate database,” he says.
Put Test Dollars Toward Offers
When you are managing on a shoestring budget, and in a down economy, be sure to test your offer. “I think in this economy marketers … have to understand the perceived value and give people a compelling reason to part with their hard-earned money, because you are competing for their shrinking expendable revenue right now,” Martel says.
Johnson says looking at the copy platform is a smart, inexpensive test. For example, if you normally lead with greed, you could test fear or exclusivity as a platform to write around or include a freemium to encourage reciprocity. He also warns that the best price or deepest discount may not always be the winner, because low prices can negatively affect a product’s perceived value, even in a down economy. “The human mind seems to think that just because the offer is better, it’s going to work more efficiently or more effectively for the prospect or customer—and that’s not always the case,” Johnson says. “So if you’re normally offering 20 percent off, now might be the time to test 15 percent as opposed to 25 percent,” he explains.
Focus on Best Customers
The 80/20 rule rings even more true during downtimes. Marketers who have had to cut acquisition funds will want to focus on key accounts and recent or frequent customers. Johnson suggests to only approach the first two tiers of prospects, instead of typically going to all three. “This is an excellent time to be shoring up relationships with existing accounts—making sure the CRM data is accurate and complete and using that as an opportunity to educate and cross-sell other products and services,” he says.
Use direct mail to deal with the “I didn’t know you did that” syndrome, Martel advises. If you need to cut back on acquisition mailings, include an open referral channel in mailings sent to your best customers. “What I would suggest is doing two reply cards—one for the recipient and one for a friend,” Johnson says. “It makes it real easy. They can just rip it off, and it doesn’t cost you that much.”
Employ a Multichannel Offense
Direct mail should be part of an enterprise-wide marketing program including online channels. For example, Martel strongly recommends that you make sure everyone involved in your organization “understand[s] how direct mail fits into the whole larger marketing strategy for the company; where you are going to use mail in a cross-channel strategy.”
Smith also suggests using online channels, including prospecting e-mails, in 2009. “We’re not saying to walk away from direct mail, right? We’re talking about creating supplements of opportunity that will bring new blood into the brand faster,” she explains. Johnson says direct mail is still the best medium to drive people to a website—better than e-mail—and thinks multichannel is a new golden rule for mail marketers. However, he warns that marketers who see e-mail prospecting as a cheaper alternative to mail should be aware of the hazardous combination of higher costs and lower response rates for e-mail lists versus postal lists.
Use Metrics to Monitor Costs
To survive a downturn, Smith recommends focusing on three marketing indices: new customers, existing 12-month customers and 13-month reactivated customers from a month-over-month and year-over-year perspective. A lot of mailers are cutting back by putting some of their tests or rollouts on the back burner for 2009. Smith advises analyzing and potentially cutting any campaign that is not presenting a 35 percent positive contribution after revenue.
Metrics also can curb wasted time and money within your organization. “Stop owing and putting cash into things that are not working for you. Put cash into things that have an opportunity to show a contribution,” asserts Smith, who advises to check that every employee’s output or workload is 20 percent greater than the prior year, and also to encourage each employee to contribute at least 6 percent growth to your business’ bottom line over the year. Finally, Smith recommends that you “eliminate all contracts with technology providers and consultants for creative and web that are not producing at least a return of 2-to-1 for your dollar.”