If you’re running a direct marketing campaign, you’re likely to feel the pressure to focus on ROI. However, direct marketers know there are many variables to consider when measuring performance, and they’re all dependent on what you want to achieve and how the selection of media channels fits into the mix.
Imagine this… the CEO calls you for a meeting without notice. The company is looking to save some money, and they have noticed your mail acquisition program costs a lot of money. They’ve told you that they are cancelling the mail program and have asked you to replace it with digital instead because it’s cheaper, right?
Dropping direct mail: The cost of reducing expenses
You know your program inside out and you’re convinced that a multichannel approach works. Mail is an essential part of that success. Your mail program acquires quality leads and will bring millions of dollars to your organization in subsequent years. You feel strongly that ditching direct mail is a bad business decision, but you don’t have the numbers to prove the effectiveness of your acquisition program.
You know the response rates, conversion rates, cost per acquisition, revenue per order and, of course, the ROI. None of these KPIs will help you in this instance. To defend your marketing program, your reputation as a marketer and to future-proof the company, you need to prove the opportunity cost of replacing mail with a digital-only program. What you need to know is your customer lifetime value (LTV).
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Framing the conversation: Value first, costs second
Now you’re kicking yourself. You’re smarter than this. You should have made the time to track customer LTV. You’ve been over-worked, you lack the resources and your data team can’t find the time to help you out either. And, let’s face it, measurement has a reputation for being complicated. Come to think of it, is your program even set up to measure customer LTV? It’s time to call for help.
Presenting the price of ‘savings’
Knowing how important this is to the overall business, your agency works with you to figure this out. The numbers come back and tell the exact story you knew they would. But it’s a story you weren’t able to stand behind without validated metrics.
Cancelling your mail acquisition program would decrease revenue by 8 per cent next fiscal and 50 per cent within the next five years.
You now have the confidence and the stats to defend the value of direct mail within the marketing mix. You know too that a focus on efficiency metrics shouldn’t dictate the company’s decision making. Customer lifetime value will most accurately measure the success of your direct marketing program. We cannot lose sight of this.
- Refocus on key performance indicators that ladder up to commercial objectives and prepare your business case to steer the conversation towards value and away from costs.
- Don’t get put on the spot. Bring your finance, data and agency teams together to ensure alignment around the analytics and tracking that will support important measures during marketing and communications planning.
- When you concentrate campaign efforts on ROI and CPA, you run the risk of creating a fragmented and less effective marketing campaign. If you add effectiveness metrics into the mix, you’re setting everyone up for success.
- Direct mail can generate higher-quality leads and more valuable customers cost effectively, in a way that CPA can’t.
- Marketers work hard to grow and retain their customer lists. If you don’t feed your customer base with direct mail and digital outreach, your customer numbers and your revenue will inevitably be diminished.
If we keep looking at direct mail from a cost perspective, we’ll never be able to see its real value.
This is an excerpt from Direct Mail, True Story! published in INCITE magazine.