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The Direct Mail Solution — Chapter-08: Expanding Your Mailing Universe
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Expanding
Your Mailing
Universe
T’S TIME TO REVISIT YOUR FACE CREAM BUSINESS.
Suppose you’ve been using direct mail to sell your face
cream, and it’s been going pretty well. You found a list you like
that’s updated regularly, and it allows you to mail 10,000 names at a
time. Out of those you usually get a 2 percent response rate (which
is very good for direct mail). As a result, each time you mail you get
about 200 orders. Thanks to those orders your business is growing—
but it’s growing a little too slowly for your liking.
What if you could expand your mailing universe so you could
mail to 100,000 names at a time? That would mean you could get
1,000 orders even if you just got a 1 percent response with each
mailing. Your business could grow five times faster!
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And that is exactly the way it works. The more you mail—to the
right prospects—the more orders you get. It’s simple mathematics—and
a very easy way to find new customers and grow your business.
But you don’t want to mail to just any 100,000 names. The key is to
find your most likely customers and mail to them.
Especially in today’s economy, most businesses are struggling to
find qualified customers, and many are foolishly looking for them
through the wrong medium. With direct mail, you can easily expand
your pool of prospects/customers. And if you design your mailings
correctly, you can do it without compromising your marketing budget.
There are a number of very effective ways to expand your mailing
universe. I’ve outlined my top four suggestions here. I’ve used each to
significantly increase the mailing universe for countless clients.
List Research
I helped one client go from a mailing universe of 20,000 prospects to
850,000 prospects just by analyzing its mailing list. Here’s how I did it:
I took a deeper look at exactly what type of list was giving the company
the best response rate and which lists were a waste of its marketing
dollars. Then I found other lists that were similar to those that had
already worked for them. I was able to get it a list of names that was
both larger and more highly targeted at the same time.
Tens of thousands of lists are available to rent. Knowing the
characteristics of your ideal customer will help you do targeted research
so you can find the best lists to take. The more you know about your
current buyers, the better job you can do at list research and selection.
Then you just need to line up your current customers with prospect lists
and find the ones that are very similar.
Researching lists is one great way to expand your mailing universe.
Price Test
The second way to expand your mailing universe is to change or modify
your price point.
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Let’s say you’re selling something for $97 through the mail. You
could change the pricing offer to three payments of $39.95. That may
open the door to a new universe of prospects who have not shown
a willingness to spend $97 all at once in the past, but who might be
willing to make three payments of $39.95.
New Sales Piece Format or Copy
The third way you can expand your universe is by trying to mail a
different format/sales package or by revising the sales copy you’re
currently using. If you are mailing an eight-page letter, try increasing
the page count to 16. You may find that you get a higher response rate
with a longer sales letter (or a different sales package), allowing you to
budget more money to mail to more prospects.
Increase Your Customer Lifetime Value
The fourth way I encourage companies to expand their universe is to
try growing the lifetime value of their customers. If each new customer
is worth more money to you, you may be willing to spend more money
to acquire customers. That means you will be sending out more
mailers to a larger mailing universe. This is a very important concept
to understand. Using increased lifetime value of the customer to help
expand your mailing universe is key to becoming a very successful
direct-mail marketer.
For example, let’s say that your customer lifetime value is $300 on
average—they’ll end up spending $300 on your products. Now suppose
that through your direct-mail campaign, you spend $175 to acquire
each new customer. If your customer lifetime value is $300 and it costs
you $175 to get each customer, then you are making $125 for each new
customer you acquire. This is a good return on your investment—but
let’s see how we can improve that.
By paying an acquisition cost of $175, you may be limiting yourself
to a smaller mailing universe—but with a lifetime value of $300, that
may be all you can afford. But, if you increase the lifetime value of your
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customer, then you may be willing to spend more to acquire a new
customer—which would increase your mailing universe.
So, let’s say that you can increase your customer lifetime value to
$500. If you can do that, then you may be willing to spend as much as
$225 to acquire a customer. How will this impact mail campaigns?
It means that your response rates don’t have to be as high because
you are willing to pay more for each customer, so maybe you’ll be
willing to cast a wider net and maybe send a more elaborate package.
You can do that because you know you’re going to make more off each
customer you do get. You know that because your lifetime value is
much higher. Let’s see how the math works out:
You spend $225 to acquire a customer.
Your lifetime value is $500.
You end up making $275 off of each new customer—more than
double what you were making before.
Not only are you making more, but because you are mailing to
more prospects, you are also bringing in more customers. This means
your overall profits will skyrocket!
I worked with a publisher who thought he had a mailing universe of
only 450,000 people. I told him I could help him significantly increase
his mailing universe and profits within a few months. He didn’t think it
was possible. I was able to help him increase his customer lifetime value
from $550 to just over $990. I then convinced him that on the basis of
that, it would now be worthwhile to increase his cost per acquisition
from $220 to $350. Just by increasing the cost per acquisition by $130,
we were able to expand the mailing universe by five times! This led to
many more orders, and with the increased lifetime value per customer,
the company grew quickly.
Increasing your customer’s lifetime value can have a huge impact on
how much you can expand your mailing universe. One way to increase
lifetime value is to get a better calculation of what each customer is
actually worth to you. Another way to build lifetime value is to offer
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additional products or services to customers after their initial purchase.
We’ll look at how to do that in greater detail later in this chapter.
Increase Lifetime Value by Building an
Ongoing Relationship with Your Customers
Let’s say you were in the insurance business. If you sold an insurance
policy one time for one fee and never saw another dime again from any
client, you’d have to sell far too many insurance policies each month to
generate a profit.
The reason why insurance companies and agents are so successful is
that once clients sign up, they make an insurance payment every month.
It’s residual income (kind of sounds like multilevel marketing, doesn’t
it?). The insurance business has a very high customer lifetime value.
Each customer pays a monthly fee and often will stay with the same
insurance company for years. We can learn a valuable lesson from this.
Lifetime value is a vital part of direct marketing. It’s what you
can use to calculate profits, determine what your cost per acquisition
should be, and analyze what marketing methods work best for you.
Calculating lifetime value is essential for all direct-response
companies. However, there are many different views about the best ways
to use and calculate lifetime value. I’ll give you the basics and then you
can modify them to fit your marketing model.
Lifetime value (LTV) can also be referred as customer lifetime value
(CLV) or lifetime customer value (LCV). The most commonly used term
is just “lifetime value.” Lifetime value is the dollar amount the average
customer will spend during his or her relationship with your business.
This metric is critical in planning future direct-mail campaigns
and projecting profit/losses for current campaigns. Because lifetime
value tells you what each customer is worth to your business, you can
use this information to better project the outcome of a marketing
campaign. You’ll know in advance if the campaign is most likely going
to generate a profit or a loss. Unfortunately, many companies overlook
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the significance of determining lifetime value when designing an
advertising program.
Let’s look at two examples of how lifetime value can greatly impact
your outlook for planning a direct-mail campaign.
A Tale of Two Health Clubs
Do you have a membership in a gym or health club? If you do, you
know that most of these establish ments don’t let you pay on a per-
visit basis. As soon as you walk through the doors, they get you set
up with a contract where you pay an initial membership fee, and then
you pay month-by-month dues. This is very sound business sense on
their part.
From the club’s standpoint, just getting a one-time payment from
you isn’t enough to keep the busi ness growing. How many people would
have to make that one-time payment, and how many new custom ers
would they have to attract, to make any kind of profit?
No, what they want to do is get each customer in a program in
which he or she is contracted to pay money month after month after
month. Each customer then represents tremendous lifetime value.
But how much is that lifetime value? If the health club calculates
lifetime value correctly, it will know how much it can spend to acquire
each new customer and run a robust campaign. But if it doesn’t, it may
underestimate how much each customer is actually worth to them, and
this may derail its efforts from the very start. Here are two examples that
show how the way a health club calculates lifetime value can make or
break its direct-mail campaign.
The Short-Sighted Health Club
A health club wants to promote a new location. It’s planning to mail to
10,000 people, offering a one-month trial membership for $39.95 and
no commitment, and it wants to estimate the campaign’s pro jected
profit/loss. Unfortunately, the marketing person is really just one of the
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trainers, with no marketing background, and he doesn’t understand the
concept of lifetime value. Here are the figures he’s working with:
Number of pieces mailed: 10,000
Cost of one-month trial membership: $39.95
No lifetime value has been calculated
Cost of mailing (printing, postage, list rental, computer process-
ing, mail processing): $6,000
Estimated response rate: 1 percent, or 100 cus tomers
The estimated profit/loss without calculating the lifetime value
would be:
[FOR]100 customers
x $39.95 one-month trial membership
$3,995 gross
– $6,000 mail cost
($2,005) loss
Without lifetime value calcu lated into the campaign, this health
club wouldn’t want to proceed with the mailing. The projections show
it would be a huge loss. So they send a teen ager around town putting
flyers on car windshields in the rain. And the results are miserable.
The Veteran Marketer Has the Big Picture
This same health club is promoting a new loca tion, but this time the
manager has some marketing experience and knows how to use lifetime
value to help project the campaign’s outcome. The manager knows
that people who take the trial, on average, will pay for six months of
membership. So let’s look at the figures now:
Number of pieces mailed: 10,000
Cost of one-month trial membership: $39.95
Average dues paid over six months: $239.70
Cost of mailing (printing, postage, list rental, computer process-
ing, mail process ing): $6,000
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Estimated response rate: 1 percent, or 100 cus tomers
The estimated profit/loss with calculating the lifetime value
would be:
[FOR]100 customers
$39.95 one-month trial membership
x $239.70 LTV
$23,970 gross
– $6,000 mail cost
$17,970 profit
Adding lifetime value into the equation makes it clear that this can
be a highly profitable campaign. If the health club had followed the first
example, it probably wouldn’t have run the mail campaign and would
have missed out on $17,970 in profits!
As you can see, using the lifetime value to calculate an estimated
profit/loss for a campaign is critical. If you are not doing this, you are
probably missing the boat on a great many marketing opportunities.
Drilling Down to Determine Lifetime Value
A captain of a large ocean liner will often travel with the ocean currents
to save time and fuel. In order to find the right path, the captain will
use charts and maps to guide him to the most efficient route across the
ocean. When we market our businesses, we need to do the same thing.
Taking a close look at lifetime value will help guide us in this arena of
direct marketing. Using the direct-marketing “charts” and “maps,” we’ll
be able to determine which path is most efficient and profitable.
For example, at first glance $300 may seem like a lot of money to
acquire a customer. If you know that your lifetime value is $750, it may
look more reasonable. But if your lifetime value is $650, then you may
be willing to spend only $250 per new customer. Knowing your lifetime
value can be a huge help with planning your direct-mail campaigns.
You’ll know exactly how much you are willing (and able) to spend to
bring in a new customer.
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Let’s look at an example of how you can calculate your lifetime
value. Keep in mind, when you calculate lifetime value, most of the time
it is a relative number. It’s not an exact figure per customer, but just an
average across customers.
Let’s say you sell a financial newsletter at $97 per quarter. You know
that your average renewal rate per quarter is 80 percent. You also have
a seminar you recorded and made into a DVD workshop package that
you sell to your subscribers for $295. Through your marketing efforts,
you’ve found that 3 percent of those who sign up for your newsletter
will buy the DVD package. Here’s how you could quickly calculate your
lifetime value:
10 subscribers each pay $97 for a three-month subscription =
$970
Eight of the 10 subscribers continue for a second quarter = an
additional $776
Six of the 10 subscribers continue for a third quarter = an addi-
tional $582
Four of the 10 subscribers continue for a fourth quarter = an
additional $388
Three of the 10 also purchase the $295 DVD seminar package =
$885
The total return from the original 10 subscribers would be:
$970 for first quarter
$776 for second quarter
$582 for third quarter
$388 for fourth quarter
$885 for DVD package
$3,601 total return
The average would be $360.10 LTV per person for this particular
business model. The formula is easy, but tracking each subscriber
is much more complicated. This is also figured on just the gross
amount.
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Now we’ll take it one step further to calculate the lifetime value,
this time finding the net amount.
First, we need to take out the costs associated with each product/
service.
$97 three-month newsletter subscription:
[FOR] $3.25 credit card and bank processing fees
$3.20 order and renewal processing
$7.35 newsletter fulfillment cost for three months
$13.80 product cost
$97 newsletter subscription sale price:
[FOR]–$13.80 product cost
$83.20 net profit per order/renewal
$295 DVD seminar package:
[FOR] $9.90 credit card and bank processing fees
$3.20 order processing
$7.80 shipping cost
$13.50 package fulfillment cost (DVD duplication,
packaging, printing, etc.)
$34.40 product cost
$295 DVD seminar package sale price:
[FOR]–$34.40 product cost
$260.60 net profit per order
Next, we do the same calculation as before, using the net amounts.
10 subscribers each pay $97 for a three-month subscription (cal-
culate using net profit number of $83.20) = $832
Eight of the 10 subscribers continue for a second quarter (calcu-
late using net profit number of $83.20) = an additional $665.60
Six of the 10 subscribers continue for a third quarter (calculate
using net profit number of $83.20) = an additional $499.20
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Four of the 10 subscribers continue for a fourth quarter (calcu-
late using net profit number of $83.20) = an additional $332.80
Three of the 10 also purchase the $295 DVD seminar package
(calculate using net profit number of $260.60) = $781.80
The total return from the original 10 subscribers would be:
$3.20 order processing
[FOR] $832 for first quarter
$665.60 for second quarter
$499.20 for third quarter
$332.80 for fourth quarter
$781.80 for DVD package
$3,111.40 total return
The lifetime value average would be $311.14 net per person for this
particular business model.
This calculation is simplified. Your specific business model,
customer lifecycle, and the length of time you want to track the lifetime
value will change how it’s calculated. You need to determine which
costs are critical for estimating the success of your campaign.
Issues Concerning Lifetime Value
Some marketers have very strong opinions about how lifetime value
should be calculated. There are two main areas of disagreement:
- Do you calculate lifetime value for the full life of the customer— five or more years—or for a specific time—one, two, or three years?
- When figuring the lifetime value of a customer, what costs do you take out: just marketing costs and product costs, or com- pany overhead as well—rent, electricity, insurance? While there are many good arguments that can be made for each approach, I fall in the middle; when companies ask me how long I think
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they should track lifetime value, I tell them they should at least track
it two ways.
Long Term
I suggest tracking the lifetime value for two to three years if it’s a
product-based business, or three to five years if it’s a subscription-based
business, like a newsletter or magazine. This long-term calculation will
give you good idea of a customer’s true lifetime value, but I wouldn’t
recommend using this number for projecting profitability from a
marketing campaign.
Short Term
I also suggest calculating the lifetime value on a much shorter term—
nine months to a year. I’d use this number to project profitability for
direct-mail campaigns. When planning your marketing campaigns, you
don’t want to wait two to three years to recoup your marketing costs
and make a profit. Most companies would like to recoup their cost and
generate a profit within six months to a year. Using short-term lifetime
value to evaluate a campaign will help accomplish this.
When deciding whether to use the long- or short-term lifetime
value figure, ask yourself, “How long do I want to wait to recoup my
costs and start making a profit?”
When it comes to calculating what costs should be taken out
of your lifetime value figure, I normally stick with the costs directly
associated with the products/services you are selling. Everything that
goes into the product or service should be taken out. This may include
bank fees, product duplication/printing costs, assembly wages, phone
charges, shipping, and so on. If your product requires assembly, like a
handmade toy, figure out how much it costs to assemble one toy. If you
can assemble 20 toys in an hour, take your hourly wage divided by the
number of toys assembled—this will give you your unit cost. Do this
with all the items related to the product/service.
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I also take out refunds. If you have a refund rate of 10 percent for
each product, make sure you account for that when calculating your
lifetime value.
How Lifetime Value Can Directly Impact
the Size of Your Mail Campaigns
The examples below show that the higher your lifetime value is, the
more names you’ll be able to mail.
Example 1
In Example 1, with a $100 lifetime value, mailing 500,000 pieces incurs
a substantial loss.
Net product price: $56
12-month LTV net: $100
Mail
Cost
Number
Mailed
Response
Rate
Number
of Orders
Net Profit
/Loss
LTV Profit
/Loss
$30,000
50,000
1.%
500
($2,000)
$20,000
$90,000
150,000
0.70%
1,050
($31,200)
$15,000
$300,000
500,000
0.55%
2,750 ($146,000) ($25,000)
Example 2
In Example 2, where the lifetime value was $200, the 500,000-piece
mailing brought a very substantial profit.
Net product price: $56
12-month LTV net: $200
Mail
Cost
Number
Mailed
Response
Rate
Number
of Orders
Net Profit
/Loss
LTV Profit
/Loss
$30,000
50,000
1.%
500
($2,000)
$70,000
$90,000
150,000
0.70%
1,050
($31,200)
$120,000
$300,000
500,000
0.55%
2,750 ($146,000)
$250,000
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Normally in direct mail, the more names you send to, the lower
your response rate will be. This is because most mailers always select
the best names to mail first, and then as they expand their universe to a
wide range of lists, they have to take names that are not in the top tier.
Obviously, the names that aren’t in the top tier won’t perform as well.
You can see in Example 1 that the most profitable mailing is the
one with the highest response rate. As the response rate drops, so does
the profit.
In Example 2, the lifetime value is high enough that you can mail more
names and bring in more revenue, even with the lower response rate.
Increasing your lifetime value by just $100 can allow you to mail
hundreds of thousands of more names and bring in hundreds of
thousands in extra profits!
It’s a good idea to be conservative when planning your mail
campaigns. I encourage you to use a slightly lower lifetime value than
the actual amount in your calculations. If your lifetime value is $495,
use $475 only when calculating your projections. And keep in mind that
most of the time lifetime value is a relative number.
Expanding Your Lifetime Value
Every new customer you get represents a lot of work and money. But
it’s well worth it because not only does your customer make that first
purchase but he or she is also self-selected to be most likely to make
additional purchases.
So once you’ve made all that effort to find that customer, you want
to do everything you can to make the most of this asset. Businesses
grow by building on their customer base. Your aim should be to keep
adding new customers to a solid base of existing custom ers who are
continually buying more of what you are selling.
So how do you increase lifetime value? How do you get your
customers to boost their buying from an average of $100 to an average
of $200?
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It’s really quite easy. Once you bring in new customers, you’ll want
to do everything you can to keep them a part of your business family.
The more products and services you can sell them, the higher their
lifetime value will be. The key is to keep offering things that will keep
the customer buying.
Here are four things you can do to increase what you offer to
customers and reach a higher customer lifetime value.
- Offer a Continuity/Auto-Bill Renewal Service In my experience, businesses such as pest-control services with an auto- billing cycle will generate at least an 80 percent renewal rate. This will quickly build lifetime value. And because there is a high renewal rate, it’s not necessary to sell as many other products or services to get a higher value from each customer. For example, let’s say 100 people buy your service, and 80 of them renew their subscription for a second round. Out of the 80 second- round renewals, 65 to 70 will usually renew for a third time. You can see how easy it is to build a high LTV with an auto-renewal system. I’m on an auto-payment plan with my local pest control company. It sprays my house/office six times a year on a regular schedule, and it auto-bills me every other month. It makes more money off of me, and I get better service.
- Offer a Premium Service A business may offer a standard service and supplement it with a premium service that some customers may be willing to spring for now and then. For example, a car wash may regularly offer a standard wash, inside and out, for $15 or $20. It can also offer a deluxe treatment that includes full detailing, interior shampoo, and exterior hand wash, buff, and wax for $150 or $195. If it’s marketed right, 7 percent to 15 percent of customers will take advantage of this option. The premium brings in enough revenue so that it isn’t necessary to sell as many to build the company’s back-end profit base.
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3. Offer Additional Products or Services That
Complement Your Core Business
If you don’t have a continuity program or a premium service package,
you can offer additional products or services to build a great lifetime
value.
For example, a dry cleaning business might expand to clean
draperies, leather coats, furniture, and even carpets. Or it might rent
out carpet-cleaning equipment and sell related supplies. Use your
imagination to come up with ideas for back-end products or services
that will appeal to your customers.
4. Put Your Customers on a Customer Retention Path
We want each customer to follow a customer retention path as their
relationship with the company develops. This is often referred to as a
sales funnel. We tell customers what to buy and when by making special
offers at specific times after they’ve purchased something from us.
For example, let’s say you have a leather clothing store. A customer
walks in and purchases a new leather coat. You offer the leather cleaner
and conditioner kit at the time of sale, but the customer declines. You
put this type of customer on a retention path and follow up with a
series of mailings. This will be a regular reminder of your business,
which may keep these people returning to your store and buying.
Here’s an example of what such a program might look like:
Week 1: Mail customers a thank-you card for buying and offer
two or three tips on making their new leather coat look great for
years to come. Keeping it clean and conditioned would be one
key tip.
Week 2: Send them a postcard offering 10 percent off your
cleaning and conditioning treatment. Notice that the prior
week, we gave them information on how to keep their leather
coat looking good . . . now we are offering the supplies to make
it easy.
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Week 3: Mail out a brochure with a short letter telling about
matching accessories that would go well with their new coat:
purse, backpack, wallet, shoes, belt, etc.
Week 4: Send them an invitation-style mailing that invites the
customer back into the store for a free cleaning and inspection
of their coat. Getting the customer back in the store gives you
another opportunity to sell them other products and/or services.
The customer retention path will help keep your customers
engaged and coming back for more. It will take some time to test and
find the right retention path for your niche, but once you do, it will be
very profitable for you.
The longer you keep customers connected to your business, the
more money they bring in. Forgetting to keep your current customers
a part of the “family” is one of the biggest mistakes made by many
businesses. Often, businesses have tunnel vision that focuses on just
the first sale, but I find it more profitable to spend time focusing on
creating more back-end products.
The efficiency of your back-end campaigns and products/services
is the key to increasing the lifetime value of the customers you already
have. The more products/services you can offer, the easier it becomes to
generate a larger profit with each new customer. Building that customer
loyalty is extremely important.
Cost Per Order/Cost Per Acquisition
Chances are that if you are using lifetime value to project profitability
for specific marketing campaigns, then you have most likely figured out
what you are willing to spend to generate an order. The amount you are
willing to spend, or the amount you do spend to generate an order, is
called your cost per order (CPO) or cost per acquisition (CPA).
Let’s say you sell a health supplement, and each month your
customers receive a new 30-day supply. All your subscribers are on an
auto-bill system where they are charged $39.95 per month. You want to
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evaluate whether you should do a direct-mail campaign with a target
cost per acquisition of $95. The calculation is simple.
First, you estimate your mail cost. Let’s say you want to mail
100,000 pieces, and your mail cost is about $0.60 per piece. This mail
cost includes: printing, postage, list rental, computer processing, and
mail processing.
You are expecting a response rate of .75 percent—just under 1
percent. This means you’ll bring in 750 orders.
To figure out if this campaign is viable using a $95 cost per
acquisition, you simply divide the total mail cost by the estimated
number of orders.
$60,000 mail cost/750 estimated orders
= $80 cost per acquisition.
Because your target cost per acquisition is $95, at $80 cost per
acquisition this campaign would be a huge success if you reach your
estimated number of orders (750).
But let’s say you had calculated your target cost per acquisition at
only $60 rather than $95. Given an actual campaign cost of $80 cost per
acquisition, you wouldn’t want to proceed with the campaign.
Building a Customer Model
Building a customer model is another great way to expand your
universe of customers. This works best if you are a larger business.
If you have a database of 10,000 or more customers, you should
consider building a customer model. I’ve worked with dozens of large
companies to build many sophisticated models, but here I’ll explain
some of the basic steps in building a model. Each model you build will
be different because, for example, one model may be based primarily
on financial information while another model may be based on
demographics. It all depends on the characteristics of the data being
used to create the model.
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What does it mean to “model” your customers? Simply, it involves
finding out everything you can about your existing customers—age,
income, hobbies, interests, etc.—and then searching for new customers
who look just like them. You can apply the model to new lists and reach
customers who are very similar to your existing customers.
In order to build a successful model you need to have a good
customer base to start with and to work with a modeling company that
has access to a huge number of records. One of my favorite modeling
companies with a great database is the Epsilon Total Source file, which
has millions of names. Many of the people in the file have responded
to a survey or filled out a product registration card (this is called “self-
reported data”). There are other good companies out there, including
Experian, I-Behavior, and Acxiom.
Do you remember the last time you purchased a refrigerator from
Lowe’s or Sears? Your package included a product registration card
that asked questions about your age, income, and maybe some hobbies
or interests. This is the type of data Epsilon collects and adds to its
database. The self-reported data has many advantages over the typical
compiled data used in modeling.
Your first step is to send your customer file to the company that
is building the model. That company will then attempt to find your
customers in its file. If you send 10,000 names, there may be 4,000 exact
matches. Those names are then researched in the Epsilon database, and
you receive a report showing all the demographics and psychographics
of those 4,000 customers.
You’ll find out what percentage of them like to read books, and how
many are into sailing small boats or like to hike. You’ll also see their
income levels, age ranges, if they have kids and how many, what type of
structure they live in, etc.
This data is extremely valuable and will allow you to more
effectively market to your customers. Let’s say a high percentage said
they like to drink fine wine. You could mail a special sales piece that
showed a picture of a nice bottle of wine and then comment on fine
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wines in your sales copy, which will help you better connect to your
customers.
Even more important, you could use this information to expand
the universe you mail in a campaign to find new customers.
I did a model for a large client who sold books, CDs, and
DVDs. I found out that a portion of its customers were interested in
photography and developing their own photos. I never knew this about
these customers and would have never considered targeting a group
of prospects interested in photography. But I used this great data to
my advantage when looking for mailing lists to reach new customers.
I selected a list of people who had spent money through the mail
purchasing do-it-yourself photo-developing kits.
How did this list perform? Excellent! I was able to reach a new
universe of prospects by learning more about current customers
through modeling.
The most common way to use a model is to apply the characteristics
that you learned about your customer to a large file. For example, after
doing your model with Epsilon, you could rent other names from
their list that match the same characteristics as those of your current
customers.
I have mailed millions and millions of modeled names for more
than one client—with outstanding success. Modeling your customers
can be extremely effective for you as well if you have a large enough
customer file.
OK, now we’ve looked at ways to expand the universe to which
you’re able to mail—and you’re sending out hundreds of thousands of
pieces!
The next thing you want to know is whether what you’re doing is
working. It’s time to learn how to track your results so you know if your
direct-mail program is on target or needs some tweaking to make the
best use of your advertising dollar.
That will be the topic of our next chapter.
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The Wise Client
I love working with people who understand direct
marketing and lifetime value.
One of my clients is the vice president of business develop-
ment for a construction company that builds all types of
commercial buildings. It has a division that specializes in
building and remodeling dental offices in Iowa. This is a rare
niche, and you’d have a hard time finding other contractors in
Iowa that offer the same level of expertise and service as my
client.
This client asked me to help find Iowan dentists who would
want his company to build or remodel their offices—a tall
order. But I was willing to take on the project because I knew
he was a very sharp marketer who understands direct mar-
keting and the value of a customer.
I worked with the copywriter to create a two-step campaign
that went to 2,313 dentists. The goal was to get the dentist
to call for a free report and CD. Those who called would also
start receiving this contractor’s monthly newsletter.
The campaign brought in seven responses. Now, you may be
thinking, “That’s a terrible response rate. Only 0.30 percent of
the prospects called in for a free report.”
I should also add that we spent months preparing for this
campaign. Coming up with the right strategy. Creating the
free report and audio CD. And writing the sales copy. A lot
was put into this campaign—all for seven responses.
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The Wise Client, continued
On the surface this may look like a complete failure.
So, was this campaign really worth it?
Here’s an email I received from the client . . .
“I thought you’d like to know I signed a design agree-
ment last week with one of the doctors that responded
to the mailing we did. He’s working with us to design
and build a new ground-up orthodontic office and plans
to include additional space in the same building to add
a pediatric dentist within the next year. Gross revenue
will likely be $1.4M for this project!” (that “M” stands for
“million”).
This came within about three months of the mailing. I would
have anticipated they would have had to wait at least a year
before the first deal came through. I’d say that three months
is outstanding! I’m confident that at least two of the other
seven responders will sign a deal within the next 24 months.
If my client had gone into this campaign and wanted to get
a 1 percent or 2 percent response rate and have 15 percent
of those immediately sign up for a remodel or new build-
ing, then I would never have agreed to work with him. But,
because he’s a savvy marketer, he knew that we just needed
to get people in the door, and that in time, the prospects
would convert—especially since he uses a newsletter to keep
in touch with each lead he gets.
How can you apply this to your business? Have a clear under-
standing of lifetime value. And keep in mind that sometimes
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The Wise Client, continued
it takes time to convert your leads into customers. Don’t just
look at your initial campaign results, but make sure to evalu-
ate the results based on the long-term picture. You may be
surprised at how you’ll start looking at each lead differently
than you did before. Hopefully you’ll see dollar signs and hear
a cash register ring every time you get a new lead.
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