Kate Outhwaite
Business Development Manager
Direct marketing has received bad press in the past. The common myth is that the cost is high and the responses are too low to make it worth carrying out, yet the truth is far different.
Direct mail can be an extremely effective method of delivering a marketing message and generating new customers if done accurately.
In fact, DMS Response Rates Survey 2003 showed financial services achieved response rates between 3.9 per cent to 7 per cent on their direct mail campaigns.
Targeting your audience
A massive 60 per cent of consumer direct mail is actually opened and 40 per cent of it read which means a massive audience can be targeted. If the profile of your target audience is analysed and determined effectively then responses can be impressive.
Products and services have never been so ‘specific’ with many companies targeting smaller, niche markets which account for their most profitable business. The same strategy has to be used for direct marketing in order to make it effective. Sending mailers to hundreds of thousands of consumers with little or no profile may result in the company only actually reaching 10 per cent of their responsive audience. However, if a company profiles its data from the outset the chance of a positive response is massively increased.
In most businesses a relatively small number of customers account for a disproportionately large volume of profits. Often you will find that 80 per cent of your profits come from just 20 per cent of your customers. This means if you can just find another 20 per cent of the right sort of customers, you can increase your profits by 80 per cent
Year-on-year television advertising expenditure outweighs direct mail, however a 30-second television slot allows nothing more than a glimpse of a product or service on offer whereas with direct mail you can send a more informative and detailed sales message to your potential customers that can be referred to again and again if necessary.
Embracing direct mail
The financial services industry should now, more than ever be embracing direct mail as the introduction of Financial Services Authority (FSA) regulation has restricted direct marketing in certain sectors, meaning insurance and mortgage brokers can no longer cold-call potential consumers as many did so previously. The financial services industry should be looking at ways to improve its direct marketing strategy through better use of profiled data.
I believe direct mail marketing is misunderstood and used effectively is imperative to a company’s successful marketing strategy. It is hugely undervalued within companies marketing strategies at present. Direct mail can be costly, so unless it is carried out effectively to a specifically profiled database companies are wasting money on mail shots.
We use a direct mail system of 52 million consumer records, known as ‘Scarlet Orange’ which we allow clients unlimited access for 12 months, allowing them to find more of their best customers. ‘Scarlet Orange’ is an effective direct marketing tool as it not only gives access to millions of consumers but it also allows companies to change the profile of the database to suit their needs. For example, a financial services company could create three different profiles, such as non-conforming, prime and debt management, and they can do so for no additional charge and with the click of a button – it saves a lot of money and gives the client full control.
To increase the response rate to their direct mailings and marketing, financial services companies should consider contacting each prospect more than once – and at least quarterly. Increasing the frequency normally increases the response rate and many direct marketers now prefer to contact prospects monthly.
According to ‘The Royal Mail Guide to Direct Mail for Small Businesses’, a follow-up mailing arriving 10-14 days after the initial mailing will normally increase response by 25-40 per cent so a system allowing 12 month access is hugely cost-effective.
