This is Part One of a three part series that will look at Direct Mail as a marketing tactic particularly in the retail automotive market. The objective of this series is to take a close look at what works and what no longer works with direct mail as a tactic within an overall marketing strategy. In other words to help advertisers and marketers be smarter and more efficient with direct mail whilst “marketing in a digital world.” Part One of the series will focus on the tactic of direct mail relative to Tactics and Audience. Part Two will take a very close look at audience and list segmentation, and Part Three will look at results and performance of direct mail campaigns.
First the author’s experience in direct mail. It started 20+ years ago with the very first “time & mileage based” automotive direct mail service reminder pieces from NewGen Results Corp. Remember them? Since then my automotive marketing experience included being in sales management and VP positions with some of the largest marketing and advertising companies in the industry. My direct mail experience has encompassed everything from 500 piece to 200 thousand piece mailers. Sales, Service, Conquest, and more. From strictly postcards to every machination of mail, variability, email / purl combinations and more. Suffice to say that this direct mail series won’t be absent real world direct mail experience in the automotive retail market.
Let’s get started. Notice earlier that I used the term tactic versus strategy – it’s an important distinction, there’s a big difference and the reason why is that if your mail vendor uses the terms interchangeably it might be because they themselves do not know the difference and that in and of itself is definitely a recipe for… “Direct Fail.” I won’t get into the difference between strategy and tactics here other than to give you a great quote by Jeffery Owyang to understand the difference. You can read the detail on his blog by clicking on his quote:
With that out of the way let’s get something entirely clear: just because direct mail is a marketing tactic it doesn’t necessarily mean that it’s an effective one for your strategy. For example, shooting a tank’s gun is an effective military tactic albeit a horrible one if your current strategy is taking on submarines in the middle of an ocean. Just because a tactic works in some strategies doesn’t mean that it’ll necessarily work in yours. Define your objectives first. Then craft a strategy toward those objectives, then decide on the tactics to execute that strategy. Then, and perhaps most importantly, decide upon how you’ll determine what success looks like with your strategy.
Part One: Tactics and Audience. If you’re going to deploy direct mail within your strategy then you’re going to have to carefully define your audience – or in direct mail parlance it’s your list. You’ll often hear direct mail vendors say that they have the “best most accurate and clean list strategy.” Just because it’s the cleanest most accurate list (name, address, make, model, etc) doesn’t mean that it’s the right audience or timing. Let’s remember that we’re talking about marketing, the strategy of marketing and for the strategy of marketing there’s an irrefutable list of requirements that has survived for decades:
Audience – Medium – Reach – Message – Relevancy – Frequency
Audience: Are you messaging to the right group of people?
Medium: Where will your audience best receive your message?
Reach: How far and deep into that audience will your budget allow you to drive your message?
Message: What is it specifically that your audience needs to hear to take an action within your strategy?
Relevancy: Is the message being received highly relevant to your audience or to what degree?
Frequency: How often should your audience receive your message over a measurable period of time?
Those are the fundamentals. When looking at your direct mail plan and the creative on those mail pieces you should be able to quickly and with strong certainty answer everyone of those questions. If not, or if you have the slightest bit of uncertainty… you should expect Direct Fail as a very likely outcome.
Failing to implement the most effective tactics and reach the best audience in a direct mail campaign comes in many variations … not simply a low return on investment. Below are a few other poor campaign performance indicators that are often overlooked, or even worse, hidden from dealers when direct mail vendors report on campaign performance. Because when your objective is retaining customers, or growing market share, or expanding “share of wallet” from your existing customers a strong ROI isn’t necessarily the sole indicator of a successful direct mail campaign.
Assume that you recently ran a direct mail campaign that produced a strong return on your investment – according to your vendors reports you made a lot of dollars considering your investment. Naturally you can expect that your vendor (you know the one that makes their money based on how much paper they print and mail they send, NOT on how much marketshare, retention, or profitability they drive toward your campaign objectives) would take all the credit and boast of campaign performances with 400% ROI and better. With the strong ROI in hand it’s vital to consider the following questions on each campaign to avoid the smoke and mirrors effect of strong reporting but yet… Direct Fail.
False/Unclear Attribution:
Look closely at the actual sales and service transactions from your campaign and engage your management team to ask one simple question: What was the likelihood that this transaction/customer would have come in anyway without the mail piece? If their answer is “50/50” or higher you should strongly consider removing that segment from the expensive direct mail tactic. For example, the segment that has the highest statistical probability of buying or servicing from you in the next 90 days will very likely do just that and there are much lower cost mediums than direct mail to help ensure that they’re going to do what they’re most likely to do anyway. And don’t let “branding” be your argument for direct mail as the tactic. Remember the tank vs submarine analogy? If branding is your objective then that segment can be branded much more efficiently, effectively, and inexpensively with other mediums. You could even argue in favor of taking that direct mail spend and investing it into your employees and processes that affect customer service significantly.
“…the segment that has the highest statistical probability of buying or servicing from you in the next 90 days will very likely do just that.”
Audience Irritation:
Are the non-respondents (and remember, non-respondents are usually more then 95% of your list) not responding because your medium – direct mail – is an irritant? Perceived to be an outdated communication form? For many people it is. Is your messaging not in line with millennial and Gen-y segments – the largest growing segments of your market who prefer digital communication? Often the mail piece your targets receive aren’t relevant enough, it’s typically a sales event or service specials that are expiring too soon or reaching targets that aren’t ready to buy, again nearly 90-95% of your direct mail list. Direct mail is becoming highly irrelevant even to the people who actually view it. They don’t consume direct mail like they used to in the past. If reputation and brand is important to you then you also need to consider how many “intrusive” tactics you want to deploy month after month. You should save “intrusive” marketing for those time sensitive messages like lease returns, recalls, over mileage, etc. You certainly don’t need to send direct mail, (especially sales themed) to active customers every month because the overkill will most likely irritate them.
“Here’s a tip… if there is a DO NOT (fill in the blank) list for a medium then it’s intrusive!”
Excessive List/Audience:
Is your list too large? A recent close study of several 10,000 piece auto mailers proved that the very same ROI would have been achieved with 3,000 pieces. That means typically direct mail campaigns are three times as expensive as they should be. And an argument for “conquest” is a weak one too when it comes to direct mail. In case after case, study after study, using direct mail for conquest retail is found to be the least efficient and most costly medium in terms of Cost Per Unit Retail, ROI, Retention Growth, and Customer Satisfaction. It’s only natural to expect that your mail vendor would disagree because their priority is in volume of direct mail.
Insufficient List, Wrong Audience:
The same holds true with audiences in different segments of your database. Again is the segment of customers who have defected or might soon defect too small relative to the segment that has a high probability of buying or servicing from you in the next 90-days? Again, are you winning fewer deals with this campaign versus those that are becoming unretained during the campaign on the backend? Here again you could re-allocate mail budget toward people, process, and retention training and win even bigger overall and spend less on direct mail campaigns in the future.
Excessive Cost:
With any marketing vendor, relationships are important – but those relationships must be built on trust and accountability. Your marketing vendor chooses to do business with you and wants you to spend as much as you can with them – there’s nothing wrong with that, it’s called business. You too should want to get the most for your money. I’ve found that a simple way to do this is to share your ROI and strategy with other direct mail vendors on a regular basis – at least twice a year. Get their opinion on results versus price. Then ask a couple of their customers the same questions. Also shop other mediums not just other mail providers. It’s a simple email exchange between you and another vendor. This sort of accountability builds trust in your vendor relationship and keeps your direct mail campaign costs in check. You should also do A/B tests on the segments that you’re mailing to. Use other mediums and definitely use control groups too. Remember, the reality today is that direct mail is a commodity and the performance of that commodity generally comes down to the list quality, and that list more often then not comes from your own database (DMS). Picking the cheapest mail vendor and dictating to them simple list criteria (record selection) often proves to have the same results (and better ROI) than the full service turnkey direct mail vendors. Remember, it’s your customer that needs to be wowed, not you. Not to be too heavy handed but as Dealer once told a General Manager: “if you’re not capable of holding our vendors accountable and rigorously inspecting their results then you’re not fit for the job.”
Remember when your objective is retaining customers, or growing market share, or expanding “share of wallet” from your existing customers a strong ROI isn’t necessarily the sole indicator of a successful campaign toward those objectives.
In summary for Part One it’s critical that you heavily consider all of the elements and tactics that influence the audience that your direct mail tactic is directed toward. You want the best return in transactions and marketshare, not simply dollar amount ROI and much of that has to do with your message to your target audience. With audience in mind, now it’s time to review in detail the various segments of your database (DMS) and how best to influence those segments (medium, frequency, message, etc) to achieve the best campaign performance for each segment. We’ll cover that in the next post of this three part series.
If this post makes sense to you, or you have specific questions about it and you want to have a real world discussion about how your dealership can begin to more efficiently market to your customers shoot us an email or give us a call and we’ll walk you through it. You can reach me directly at ronmorrison@pureinfluencer.net or give me a call directly at (408) 218-6407. You can also visit us and learn more at www.pureinfluencer.com.