Rethinking Direct Marketing

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Rented lists, batch-and-blasts, response rates measured in the low single digits-direct marketing is a customer strategy relic by the relevancy and ROI marketing standards among today's market leaders. But don't be too fast to bury it. There's life in direct marketing; in fact, there's new life in direct marketing.

Through multichannel customer touchpoints and sharp new integrated strategies, direct marketing has been recast as an effective retention, acquisition, and growth strategy. It's a renaissance time for the age-old discipline, with new approaches and measurement methods. As direct mail declines, and direct digital tactics grow, companies need to adopt a direct marketing approach that increases ROI by targeting most valuable customers, integrating multichannel touchpoints, and incorporating the promising world of social media.

The new direct marketing
The challenge, and the opportunity, lies in its definition. According to more than a dozen experts, direct marketing today is a communication or offer sent physically or digitally to one person who has opted in for that communication, and whose results can be measured on many levels. Although some organizations still prefer to blast out broad communications, others are finding that direct marketing should be just that: direct.

"The urgency in targeting comes from the simple fact that direct mail costs are rising, and digital messaging is fighting more clutter," says Media Horizons CEO Jim Kabakow. "That digital saturation means it's more important to be relevant and have the data necessary to retain and acquire the most valuable customers."

Serenata Flowers and L'Occitane are two companies using data to target best customers. Both rely heavily on email marketing for their highly targeted direct marketing strategies.

Serenata, the fourth biggest online florist in the UK, was looking to increase total customer value by reengaging current customers. It also wanted those valuable customers to recommend the brand to friends. Working with Responsys it set out to transform transactional emails into direct marketing engines. For example, its delivery confirmation email also asks customers how likely they are, on a scale of 1to 10, to recommend Serenata to a friend. Open rates on transactional emails run as high as 80 percent; about 10 percent of customers who receive those emails participate in the survey.

Customers who rate Serenata Flowers at least a 9 automatically receive a follow-up email asking them to provide the email address of a friend; the same email message also offers both the customer and the friend a discount on a future purchase. Recipients of these emails are far more likely to make a purchase than recipients of other email marketing messages. In fact, conversion rates are five times higher than past direct marketing campaigns.

Upscale skin care brand L'Occitane, on the other hand, has capitalized on the relevance and personalization aspects of its direct marketing approach. According to e-commerce director Matt Kritzer, L'Occitane is an experiential brand. So, L'Occitane's direct marketing campaigns, more than 90 percent of which are executed via email, are based on new ingredients. If a new type of shea butter is introduced into face creams and shampoos, for example, it will trigger a series of emails to a broad range of customers. The series may go in this order: 1) Introducing our new shea butter skin cream; 2) Thanks for your interest in our new skin cream. Here's a 10 percent off coupon on a 24-oz. purchase; 3) Did you know that shea butter is also an essential ingredient in our hair products? 4) Here's a new offer that can be redeemed at one of our retail locations.

"Not every customer receives every update," Kritzer says. "We change the offer based on how active the customer is and whether they're an online or retail customer."

L'Occitane's ability to target customer segments based on behavior and deliver targeted messages based on product affinities has delivered conversion rates 17 times higher and revenue per email 25 times higher for the group receiving targeted email than a control group.

Working the channels
Today's direct marketing is more targeted, but it's also more integrated across channels. In fact, nearly 80 percent of respondents to 1to1 Media's 2009 Direct Marketing Survey use multichannel direct marketing; 70 percent see an increase in results from each individual channel when they market across multiple channels in tandem.

"I see direct marketing moving away from a campaign-based, short-term customer strategy, and more toward all-encompassing strategies," says Tim Campbell, chief development officer of L.A.-based Universal Rescue Mission, which is using multichannel direct marketing. "The overall marketing campaign should be all direct and all exciting, whether it's mobile, social, printed, email, or even radio."

Universal Rescue Mission (URM) assists more than 1.5 million people a year. When Campbell joined the organization last year his mission was to meld traditional fundraising efforts with cutting-edge ones.

The organization's approach is based on a concept called direct branding, developed by direct marketing veteran Grant Johnson, CEO of Johnson Direct. Direct branding requires an "invitation" or a "set-up" that can be as broad as mass market advertising. But within the direct branding model the standard PR or ad campaign has the goal of driving customers to some kind of direct response mechanism that offers additional messaging and tracks responses. In URM's case, responses and reactions following a PR campaign were fed into a direct marketing engine to build lists, generate leads, and increase the value of key segments.

Campbell began with that PR effort, but he wanted to better understand potential donor hot buttons. Working with Grizzard Group, URM used several data collection methods, such as email surveys, focus groups, and in-depth one-on-one interviews, to engage with its donors, as well as donors of other nonprofits.Based on Grizzard's analysis of those responses, URM changed its messaging from focusing on what the organization does to trumpeting the cause (homelessness) that people would want to support, with URM being at the heart of that cause.

Campbell is using leads that come in as a result of the PR and donor engagement efforts to build a list of highly qualified prospects among corporate, civic, church, and private donors. URM will then send those prospects personalized emails and other e-marketing campaigns, as well as send a limited amount of direct mail.

"We know who gives to homeless charities, how much, and what we need to appeal to them," he says. "We need to know where we stand versus the Red Cross, Salvation Army, and Food Bank. We need data on how our potential donors, as well as our current donors, perceive us. That positioning has a lot to do with how we raise funds through direct efforts."

So far this year, Universal Rescue has opened a long-term housing facility, and despite a 20 percent spike in homeless people coming in, its donor retention is up 20 percent.

Social media: the new possibility
The latest addition to direct marketing is social media. Currently, according to 1to1's Direct Marketing Survey, only 27 percent of respondents have integrated direct marketing with social media or online communities in any way. Respondents cited such activities as blog posts, emails with links to social media sites, and special interest communities as ways they're integrating direct marketing and social media efforts.

Additionally, StrongMail Systems released a survey in July that points to the emergence of social media as a direct marketing channel itself. Of 500 marketers surveyed, 36 percent say that the direct marketing department owns social media. Of the marketers who plan to increase marketing budgets in 2010, 62 percent will do so to try and meld direct marketing and social media.

One company already doing so is Open Kernal Labs, which combined direct branding and social networking to drive leads through a campaign started in February 2009. "We had a very blatant pain point," says Marti Konstant, vice president of marketing for OK. "We're in a business where hardware companies are trying to get the attention of a finite set of software developers. We needed to initiate a direct relationship with that audience, and we needed to attract them first."

OK Labs provides the software platforms on which developers create mobile phone applications. A home run happens when a developer uses OK Labs' software, which is then adopted by a large handset manufacturer like Nokia or Samsung. The total developer community available to OK numbers about 1,000. To engage those developers OK hosts an online community, a developer wiki, a blog, and GeekTV, which includes video tutorials, how-to webinars, and more. Additionally, OK launched two opt-in email update lists: One offers company news, events, white papers, and the like; the other includes exclusive information for OK's open-source community of researchers and developers about its OKL4 product.

"You could think of it as a very small but targeted social network," Konstant says. "We nurtured relationships we had and allowed these relationships to grow virally."

As the number of customers signing up to receive the updates has increased, OK Labs has compiled a solid list of engaged customers that it uses for direct marketing. In addition, its developer leads have grown by more than 120 percent.

Ultimately, successful direct marketing is about reaching the right customers. "Companies need to invest proportionally by customer value," says Tim Supher, Acxiom SVP of multichannel marketing services. "If a customer is worth 10 times more because he is active as an influencer, then companies should spend 10 times more against that customer. Direct marketing is about finding the right customers, recognizing their value, and engaging customers who will show the same increased value."

EXPERT OPINION
EXPERT OPINION