Archive for July 30, 2010

Spray and Pray??

BNET posted an article titled “Spray and Pray: Why Does Anyone Still Buy Advertising?”

This stirs many controversial thoughts. While we agree with the line of thinking about the problems with many traditional forms of advertising that offer no accountability. We don’t want direct mail to get lumped into being called “spray and pray”, spraying money around and praying it works. Direct mail and direct marketing offer targeting and accountability.

We profoundly disagree with the author’s total, complete faith in online advertising. The author also stated “Advertisers love to claim that the decline in advertising is due to the recession.” What about the thought that the recovery is taking longer than it should because we are relying on new media to generate new business? Which came first the recession or the absolute dependence on a media that can so easily be deleted, ignored or closed with a click? There is a lot of science that supports the effectiveness of things that can be touched and felt.

We agree that much of the investment made in email and some other forms of electronic and Internet marketing feel so affordable. The costs are so negligible. Can you build or rebuild your business with such a small receptive audience to your offer?

How Much Should You Spend?

Business Week published an article titled, “What Should You Spend on Advertising?” Instead of seeking a rational answer to the question, many just ignore it and hope it will go away.

Most emerging companies focus most of their time and talents on meeting the needs of customers, which is a great strategy. If they don’t take care of the customers they already have, everything else will go away. However, many neglect the function of winning customers in the first place. Others naively assume that if they simply provide excellent products or services, their reputation will precede them. Call it the “build a better mousetrap” syndrome. But the world has too many other things to do with its time than beat a path to your door. That means you need to structure your profit-and-loss statement in such a way that you can profitably allocate a reasonable percentage of your revenue to marketing.

The Big Question: How Much?

While there is no definitive answer as to how much any business should spend on marketing, there are general guidelines any company can use to develop a formula that works for them.

Your first step should be to try to find out what the advertising-to-sales ratio typically is in your field. Public companies in your industry may give a figure for their marketing spending in their financial statements (found in their annual reports). With a simple calculation, you can figure out what percentage of their overall revenue that represents. If you can’t find any public companies that seem similar enough to yours, you might want to start at 5% and then adjust your projected spending up or down based on the size of your market, the cost of media, what you can learn about how much your competitors are spending, and the speed at which you’d like to grow.

You’ll also need to ask yourself if your business is built to leverage volume or to leverage margin. Even within industries, there are differences in the marketing spend of volume-driven companies compared with margin-driven ones. Volume-driven companies tend to spend a tiny percentage of sales on marketing, in part because their large revenues enable small contributions to add up fast, and in part because of the margin pressures they face in having to compete with other high volume companies. By contrast, margin-driven companies tend to spend a larger percentage of sales on marketing: They have room in their margins to afford it, and they’re often working from a smaller revenue base.

The retail industry provides some good examples. While Wal-Mart might spend a meager 0.4% of sales on advertising, the sheer size of the company turns that tiny percentage into a significant budget. Wal-Mart’s nominally higher-margin competitor, Target, spends closer to 2% of its sales on advertising, while Best Buy, as a specialty retailer, spends upwards of 3%. Finally, more upscale stores like Macy’s typically spend close to 5%.

The same kind of ratios can be seen in the car industry (automakers’ generally spend 2.5% to 3.5% of revenue on marketing), liquor (5.5% to 7.5%), and packaged goods (4% to 10%).

If you’re in a services business, you might want to bump your starting point higher than 5%.

Marketing, Not Just Advertising

It’s important to make a qualification here. Giant consumer corporations such as automakers, packaged food manufacturers, and retail chains spend a huge percentage of their marketing dollars on paid media advertising, the most visible (and expensive) tool in the marketing toolbox. Depending on the size of your company and the business you’re in, advertising might not be the right (and certainly not the only) tool for you.

For a variety of reasons, media advertising might not be right for your company either, but direct mail, events, vehicle wraps, point-of-sale displays, or other tactics certainly could be.

The important thing is intentionally and deliberately to set aside some rational percentage of your sales to get out there. That way, the question you have to answer isn’t “How much should we spend?” but rather, “How do we spend most effectively?”

Happiness Depends on Age

The New York Times reported on a Gallup Poll that found that people start out at age 18 feeling pretty good about themselves, and then, apparently, life begins to get challenging. They feel worse and worse until they hit 50. At that point, there is a sharp reversal, and people keep getting happier as they age. By the time they are 85, they are even more satisfied with themselves than they were at 18.

We hope you see opportunities and optimism with this information. Not only do you know that life will continue to get better, but you now have great information as you craft your marketing messages. Understanding some of the emotions of your target audience will help you as you write compelling appeals. This is a great complement to marketing to people during life changing events.

Interruption Response Depends on Age

Chart of interruption preferences

Interruption Preferences

Retrovo, a seller of consumer electronics, publishes a report titled, “The Retrevo Gadgetology Report”. They found that almost half (49%) of those under 25 years old did not mind being interrupted during a meal with a text or electronic message, but only 27% of those over 25 felt that way. That means that 73% of those over 25 don’t want to be interrupted during a meal. In general only 33% of those under 25 agree with the statement “I don’t like interruptions” while 62% of those over 25 do.

Clearly, we need to really think about who we are trying to reach as we craft marketing messages and choose communication channels. Direct mail is desired communication, even among younger adults.

Creating More Value in the Mail

DMNews published a story about trends in marketing campaigns that stress customers’ ideas of “value”.

US consumer spending grew at the fastest rate in three years during the first quarter of 2010, according to figures from the Commerce Department. Overall spending grew 3.6%, with spending on durable goods increasing 11.3%. For nondurable goods, the increase was 3.9% and for services, 2.4%. These figures suggest the worst of the recession may be over, but it doesn’t paint a clear picture of what the consumer will do next.

The power of putting money back in consumers’ wallets explains the growing popularity of coupons. NCH Marketing Services reports that coupon distribution rose 11% in 2009, while redemption rates have increased consistently over the past six quarters. According to a recent Nielsen report, direct mail is the second-fastest growing redemption method for coupons, posting a 69% jump in 2009.

Price promotions aren’t the only way to a consumer’s heart. Sprint does a good job providing value and relevance to consumers in its communications, including direct mail. Over the past year, the company has shifted its focus away from acquisition toward more loyalty- and customer retention-oriented efforts. There is so much more information about your customer base, so it is a lot easier to get relevant and meaningful. In February 2009, Sprint introduced a complimentary loyalty program for wireless customers and is promoting it through direct mail and e-mail. A mailed welcome package details the benefits of the program.

Determining your customer base’s definition of “value” will drive the right direct mail strategy.

The economy has made things tough for everyone but, in the end, mailing successfully means being able to tap into what’s going on in consumers’ minds. As marketers, we are responsible for giving customers what they want, and at this particular time, that means value.

The “WOW!” Number

A recent Harvard Business Review Blog asked, “What Surprising Number Will Change Your Business?”

Numbers are the universal language of business. We use them to win approval for product introductions, to attract investors for our startup ideas, to make the case for expanding into new markets or entering new categories. In other words, numbers, when used well, tell a compelling story.

Marketing and advertising is about big ideas. But it is also very much about numbers: budgets, ratings, impressions, ROI. Which brings us to the search for the “Wow!” Number, and why one piece of data may be worth a thousand words.

Here are a few such numbers.

  • 70% of teens who abuse prescription drugs get them from home.
  • 80% of women plan to exclusively breastfeed; only 20% actually do.
  • Many are in front of whiteboards 4 hours a day, but only use them for 4 minutes.
  • 80% of people age 45+ consider changing careers; only 6% actually do.

Why do these numbers tell a story? Because they’re simple and easy to understand. Because they’re human and easily relatable. Because they surprise us, and/or capture the gap between intentions and actions.

And how do you get to such numbers? Juxtapose: “Put related numbers together to create new information.” Try different contexts: “What’s the social angle? The green angle? Put it in terms of time, or length, or volume.” Turn them over: “2% one way might not be as interesting as 98% the other way.”

However you choose to rethink your approach to numbers, it’s an important way to address a huge missed opportunity. Business isn’t just a battle of products and services. It’s a battle of ideas about priorities, opportunities, values, and value. Ultimately, those competing ideas get reduced to competing numbers. So, if you can arrive at numbers that matter, you’ve got a better chance at winning the battle of ideas.

We have told you some surprising numbers about mail in the last few months:

More than 70% of Gen Yers (born 1977-1994) and Gen Xers (born 1965-1976) sort their mail immediately

76% of internet users were directly influenced to buy an item or service thanks to direct mail

78% of email recipients do not open the message, so that means that 94.1% of email recipients are not clicking through to landing page

What about Doodling

In a blog post titled “Does doodling make you smarter?” the author presented some facts from: “What does doodling do?” from Applied Cognitive Psychology, Volume 24 Issue 1, Pages 100 – 106

Doodling is a way of passing the time when bored by a lecture or telephone call. Does it improve or hinder attention to the primary task? To answer this question, 40 participants monitored a monotonous mock telephone message for the names of people coming to a party. Half of the group was randomly assigned to a doodling condition where they shaded printed shapes while listening to the telephone call. The doodling group performed better on the monitoring task and recalled 29% more information on a surprise memory test.

The act of touching and feeling something could be a factor in this doodling study. We shared about the power of touch and how that helps response rates. Is it time for you to use mail to put something that can be touched and felt in your customers’ hands?

Scott Berkun’s 10 Innovation Myths

BNET recently summarized a book on innovation, ‘The Myths of Innovation’ by Scott Berkun. Berkun is a writer and speaker and former manager at Microsoft:

  1. The myth of the epiphany: If many innovations are described as magical moments, the truth is often more complex: hard work is required and the Eureka moment often comes at the end of that process.
  2. We understand the history of innovation: Most of the stories we read about innovation aren’t real. Google wasn’t a search engine to start with, nor was Flickr a photo sharing platform. Most innovations are the results of errors, changes and corrections.
  3. There is a method for innovation: Despite our attraction to recipes, innovation is essentially a leap into the unknown, method for innovation is an oxymoron.
  4. People love new ideas: Changing one’s habits is always a challenge, and that is true of customers too, so says Geoffrey Moore’s ‘Crossing the Chasm‘. There is no end to the list of rejections and outright hostility from the critics that innovators have to face.
  5. The lone inventor: We like stories in which a genius single-handedly changed the world: Edison invented the electric light; Ford invented the automobile — neither is quite the case. More usually, successful companies are often started by a group of people, or by developing others’ innovations.
  6. Good ideas are hard to find: Ideas are everywhere, not just found in a brainstorm session.  Most come through trial and error. Picking other people’s brains and making notes of the ideas they have had but have never had the pluck to implement. “It would be so nice if we could…” is often my starting point for innovation.
  7. Your boss knows more about innovation than you: Berkun argues that managers can make decisions that others can’t but this doesn’t mean that they always know what to do. Managers can be afraid of innovation because it undermines their own position of authority.
  8. The best ideas win: There is a common assumption that the inventions for the job are the most successful. There are so many counter-examples such as the QWERTY keyboard , HTML and JavaScript and the M-16 rifle. There are seven factors that drive product success: culture, dominant design, inheritance and tradition, politics, economics, subjectivity and short-term orientation.
  9. Innovations happen by chance: You can’t produce great innovations unless you are able to spell out clearly the specific problems that the innovation is meant to solve and how it does it. Believing that serendipity plays a major role in innovation is a product of the myth of the epiphany.
  10. Innovation is always good: Rudolf diesel is said to have committed suicide when he realised that his invention would only be bought by the military. His innovation was being used to do harm and kill people, not to do good and improve people’s lives. Other examples abound quoted by Berkun in his book are DDT and personal computers which has created a digital divide in global society.

We hope you will be encouraged as you seek new innovative ways to reach and talk to your customers.

People Still Want Mail

In a recent LinkedIn discussion a member of the group overheard a conversation at a table in a restaurant between two couples…

… One couple recently bought a home, and they were excited about it. Although they had the new address for a couple of months, they were disappointed that they haven’t gotten any mail yet. They weren’t talking about personal mail or bills – they were talking specifically about retail offers, coupons, and personalized direct mail pieces. They mentioned that the couple in the house next to them had received offers – and the couple without mail was actually jealous of them…

Direct mail is desired! Especially to new homeowners. We offer lists of new homeowners and are happy to talk to you about ways we can help you reach them.

Use Envelopes To Drive Response

The DMNews told a story of how several companies have had success with envelope customization. Marketers are making use of recent developments in printing and production technology to enhance the outer envelope with customized messages, four-color printing and other embellishments.

“The more information we can put on the outside of the envelope without it looking funky, the more apt recipients are to open it,” says Kelli Adkins, VP of integrated services at Prime, a commercial printer.

The printer found in its own mailings that the second-best response mechanism is a No. 10 envelope printed “with enough pertinent information on it,” Adkins notes. Some of that information includes a general URL address that enables Prime to track how many people responded.

A telecommunications company decided it wanted its mailing “to stand out.” It asked for a coated stock, closed-faced envelope with a six-word tagline and the customer’s first name printed in black on the front. More than 2 million pieces were dropped and the effort produced “a high lift” in response. The additional cost for printing the tagline “was minimal”.

For many marketers the primary concern is keeping costs to a minimum, which is why more aren’t currently taking advantage of the prime real estate on the outside of the envelope, industry sources say.

Four-color printing, which has come down in price, is another strategy mailers can use to create an envelope with impact. “With all of us trying to make our dollars work harder for us, the envelope is a good place to start your dialogue with your target audience”.

Talk to us about how we can help you lift your response with the right hot spots.