by Stacy Berver
DM360, Inc. (Stacy@DM360Inc.com)
I can’t tell you how many times I sat down, thinking I was ready to plan my next mailing and quickly realized I didn’t have what I needed. Has this ever happened to you?
In direct mail, it’s not nearly as simple as collecting the results from your last campaign and creating a “rollout” based on those results. It could be, if your business simply lives from one mailing to the next – but most businesses are far more complex than this.
Change is an ever-present factor
Most businesses who sell through direct marketing realize that there are peaks and valleys to every product’s appeal - based on seasonality, creative, market penetration and often unknown factors. They also realize that from one campaign to the next - things change. You must be aware of how these changes can affect your results, or your planning might not be as well-prepared as you think.
In my experience there are six considerations to take into account when planning your next campaign.
How much are you really spending?
Have you audited your costs from your previous campaign? It’s always surprising to me how little time marketers spend ensuring that they know what they spent, and that their costs are accurately expressed in their mailing results.
It’s easy to forget about a component that you printed, a royalty that you owe a copywriter or even what seems like a slight increase in postage. Any one of those things could dramatically affect your results – and without knowing you could plan a campaign based on incorrect results.
I once saw a marketer mailing a #11 package with a letter and audiotape who forgot to include the weight of the tape in the postage estimate. We weren’t surprised to see the results of her rollout campaign come in at half the return on investment (ROI) she’d originally anticipated. In international mailings, every tenth of an ounce can add ten cents per piece (or more) to your costs – deadly in a case where you forget about a component that weighs half an ounce…
Don’t underestimate the economies of scale
Don’t overlook the impact of printing far more or less the next time you mail. If you printed for a small test campaign, your costs were probably very high – you should review your results using a rollout cost in place of the inflated cost of the test. You will probably make very different list decisions based on lower costs at higher quantities.
The same is true in reverse – if you mailed a hundred thousand pieces and your response was disappointing, you probably want to scale back to a smaller mailing. Remember that when you scale back, your print costs will increase and you’ll want to plan accordingly.
It worked, you say?!
Did you test something in your last campaign that worked? If you were trying to increase your response or lower your costs, this could mean great things for your next campaign. And not just that you have a new package or offer to mail…
…you have the opportunity to project all of your previous results at the lower cost or higher response rate. Remember, you probably only tested to a small percentage of your overall campaign. Your list results might change dramatically enough that you’ll increase your mail volume in your next campaign.
It’s all about projecting accurately based on solid testing results and accurate cost information.
The POWER of one number
Once you have the results of your previous campaign understood, you have to reach back a bit further in time to calculate your lifetime value (LTV). There are various ways of calculating LTV and various theories on the length of time the value should be calculated for.
Regardless of how you choose to do it, LTV is an incredibly powerful number. It tells you the value of a buyer over their life as your customer. Often it allows you to be forward thinking enough to run your initial marketing campaigns at a loss in anticipation of future revenues.
Take a look at the power of LTV in the chart below:
|
Campaign that’s profitable in the mail |
Campaign that Maximizes LTV |
|
Pieces Mailed: 100,000
Response Rate: 3%
Average Sale: $50
Gross Revenue: $150,000
Total Cost: $100,000
Campaign ROI: 150%
Net Revenue: $50,000
LTV Revenue: $225,000 (addl. $75 per buyer)
Total Value: $275,000 |
Pieces Mailed: 300,000
Response Rate: 1.75%
Average Sale: $50
Gross Revenue: $262,500
Total Cost: $255,000
Campaign ROI: 103%
Net Revenue: $7,500
LTV Revenue: $393,750 (addl. $75 per buyer)
Total Value: $401,250 |
*Remember, as you mail higher quantities your response rate and costs will decrease.
If your business is a forward-thinking one, without cash-flow issues, then you should be maximizing your LTV by mailing deeper into your universe. You’ll forgo initial profits, but reap the rewards as you collect the income on the additional buyers over time.
And you’re almost ready to plan the campaign…
Do you know your goal?
Know your goal – it’s as simple as that. Once you’ve reviewed your costs, projected various scenarios and understand your LTV, you must know your goal for the next campaign. Most marketers that I know make their list decisions based on ROI, although a few I know use cost per acquisition (CPA). In either case they’re using a calculation that combines the effect of the response rate and costs to show them overall profitability.
So, what is your goal? Is it:
-
To breakeven – make back all of your mailing costs?
-
To mail slightly over breakeven and recoup your fulfillment costs too?
-
To be profitable – how profitable – 150% ROI, 200% ROI?
-
To mail as aggressively as possible and acquire as many names as possible? How aggressive – 80% ROI, 50% ROI?
Regardless of your goal, knowing it is half the battle. I can’t tell you how many mailing plans I’ve seen where I’ve asked the marketer about their goal and they’ve looked at me with a blank stare.
If you don't know your goal- you can't make smart decisions on which lists to mail and what quantities and selects of each list!
Let me quickly tell you about one last consideration.
One final thought
While it won’t impact your overall decision making process, I’ve always found it helpful to know what I’m testing in advance of planning my next campaign. It gets me excited about the process and helps me balance my mailing so that I have both internal and external files to mail to the test segment.
It also helps me ensure that I’m choosing files with large enough segments to give me valid, readable results if they’re split out into my test panels.
You’re ready to get started
Armed with all of the information above, you’re ready to sit down and plan your next campaign. And you’re ready to do it as smartly and efficiently as possible.
Hopefully you’re lucky enough to have someone to show your choices – another set of eyes is always the wisest choice when making the decisions that will drive at least 33% of the results – they say it’s lists, creative and offer that make a mailing…
And don’t forget your calculator…
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If you missed Stacy's first article in her three article series please click this link: DM Basics: List Research Strategies (Part 1)
Stacy Berver is the president of DM360° Inc. After thirteen years as an international mailer she recently began DM360° (www.dm360inc.com) , offering worldwide expansion solutions to mailers looking to take their businesses globally. As the president of International Marketing Solutions LLC, a division of Agora Inc., Stacy was responsible for the international marketing and distribution of over fifty newsletters, books and products. During her time at Agora Stacy spoke regularly at industry events as an expert on international direct marketing. She’s an active DMA International Council member and serves on the Council’s Operating Committee. She was previously a member of the Target Marketing Editorial Advisory Board. Stacy holds a BA in Communications with a specialization in Journalism from Loyola College in Baltimore, MD. She currently lives in Elkridge, Maryland with her husband, two sons and two dogs.