Age Old Couple - Direct Marketing and 2% Response Rates
When one speaks to any marketer that is engaged in Direct Marketing programmes, hearing 2% or a single-digit response rate is an unaviodable part of the conversation. Infact, many marketers believe such a conversation rate is a moment to celebrate. Things have changed in today’s world, Single Digit and Direct Marketing duo is not a great couple anymore. And, it is imperative Marketers wash off such mythical stories and get in touch with reality soon or watch the competitor doing it.
If you get under the hoods of such success stories, determining the logic behind arriving at single-digit converstion rate is a no-brainer. Due to the indequacies in choosing right customers, marketers invariably decide on a larger carpet size and attack them with offer bombs. This results in substantially lower conversion rates (the genesis of 2%) and the number seem to never grow beyond single digit. A corollary to such stories is invariably, if I do not leverage the allocated marketing budget, the impact it has on subsequent year or quarter is quite high on budget allocation.
In many occasions, I have spoken with marketers to increase the number of campaigns or the offers and ensure the budget spend remains intact without compromising on the quality of work or aim towards higher conversation rates, importantly real business value. Not only the marketers are reluctant to such proposals, they are a bit cynical as any such changes to them is equivalent to moving out of a one’s religion.
I sincerly recommend and hope marketers (at least those that use some automation techniques in Direct Marketing) read and consider embracing the value of Mathematical Optimization techniques in Marketing. Marketing Optimization (AKA MO) translates business and marketing constraints to mathematical equations and by using statistical algorithms maps customers with campaigns and offers scientifically. Some of the end results of an such endeavor are the following,
A) Substantial Reduction of Carpet Bombing thus reduced marketing cost
B) The saved funds are available for other targeted marketing programmes, which can yield higher results
C) Highly Targeted and important Relevant Campaigns and Offers to Customers
D) Balanced and meaningful utilization of Communication Channels
E) Direct Contributor towards reducing the size of DND Database growth
F) Last but not the least, upholding Customer Communication Governance Policies
The recent buzz word in marketing, i.e., Customer Governance can be meticulously dealt with marketing programmes that embraces optimization techqniques and results are undoubtedly substantial.
There are real-life cases from Retailers, Banks and Telecom Operators where Optimization Techniques have aided in improving Campaign response rates by over 20%. In addition, targeted selection of customers, effective Channel Utilization and importantly Customer Satisfaction have proven to be highly profitable. So, its upto the Marketer to decide to stay with the old proverb of 2% conversation rates or decide to move on in life with new paradigm of 20%.
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Well, if company’s were to follow Maslows hierarchy of needs and pay more attention to that , they would do well ( atleast better than the 2 % )
If companies can innovate , the products will be able to PULL customers. Guess what was Apple’s marketing effort on IPODS ?
Ever thought why Sony would keep off from capitalizing on their runway success with the Walkman and Diskman and miss out the digital music player market altogether . You would think they would have taken the lead into that market , imagine the uphill task the company has in order to break into that market .
Comes down to common sens to attract customers
Hi Alwyn,
Good to have another regular reader!
I agree with your points, mostly. Just a point I would like to mention, the area that this blog focuses on is predominantely under B2C environment. Banks, Telecom and Retailers marketing to their customers directly. In other words, Situation where marketers are often handicapped to know their customrs well as the base is usually substantially large.
Knowing this, such retail organizations know understanding their customer well at individual level is a herculean (rather impossible) task. And, are trying to figure ways out by which they understand their hundreds of thousands of customers, like the way you do know your handful of business customers. To make such things happen, Statistical Analytics is a very powerful tool and these marketers are making best use of it.
Your point on Job’s marketing approach towards winning marketshare that was traditionally held by a Japanese giant is simply superb. I shall think over it, read a bit more and author a note on the same - Please do read and comment.
Now, I am off to plan my evening to visit a cathedral and a castle. Importantly, learn a bit of Italian
In the US , most of the super markets , give you a membership card , which is free. Personally , I think this segment has got its act right. About 95% of the super market customers have cards, since this card helps them to save an average of 40% each time they shop ( which in most cases is 2 times a week )
When the customer checks out, they first swipe the card and then scan their purchases, this knocks off the applicable discounts . The customer is happy because they just have to pay $ 1.44 per pound of Cherries ,rather that $ 2.49 without the card .
Now if you were to figure out what the shopkeeper gets out of this deals, it is a lot . When they scan my card, they know exactly who I am , how many times a week , I shop at the store , how much I buy , what vegetables , brand of shaving cream and everything else, it also tells them the ZIP code that I live in , don’t you think this is valuable data that any manufacturer will kill for ? I think .. if a company chooses to understand their customers, they can do that at any level . Ever heard of any Ikea customer complaining ?
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About Three Sixty
As far as the audience for this Blog is concerned, it is essentially for folks associated with CMO' Office in large Retail B2C Businesses - This includes Marketing Managers, Product Managers, Marketing Consultants, Campaign Managers, Marketing Business Analysts, Segment/Channel Managers. The Second-level include CIO office members, Process Managers and technology consultants that are into providing or maintaining marketing solution.
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