Alan Rosenspan

Direct Marketing
and Mail Order
Association
www.nmoa.org

The Three Little Pigs
By Alan Rosenspan

Most direct marketing packages fail. Why? And what can we do to improve our response rates?

When I won my first Echo award, I could hardly wait to share the news with my wife.

"We got a 9% response" I said, as I proudly showed her my work. "That's three times better than ever before!" My wife, who is much smarter than me, looked puzzled.

"Let me understand this," she said, in the same tone of voice as when I bought my Jeep Wrangler, "Out of every 100 people you mailed to, only 9 responded?" I nodded happily.

"That means you failed with 91 out of 100 people?" I nodded, a bit less happily. "You succeeded only 1 out of every 10 times?"

"And for that -- they gave you an award?"

What would you consider to be a good response rate?

2%? 5%? 10%?

Of course, you want the highest possible response you can get. But it's also true that many of us would happily settle for a solid 2% every time we mailed. And some very profitable businesses have been built that way.

However, what we accept in direct marketing, we would never accept in any other area of our lives.

Imagine if your telephone worked only 1 out of every 20 times. Or your car started only one day out of every three weeks. Well, most direct marketing works even less efficiently.

So maybe my wife was right. And maybe we're setting our sights too low.

I believe that most direct marketing packages fail because of three reasons: poor targeting, dull offers, and lack of creativity.

Let's address them one by one, starting with targeting.

The Amazing Acme Mortar Offer

Just for a moment -- imagine you work for the Acme Mortar Company. Not only do you make the best brick mortar, but you have a lifetime guarantee, and an irresistible offer.

Your offer is "We'll rebuild your house for free, when you use our mortar."

So you create an exceptional direct mail package, and you send it out to every household within 10 miles of your factory. Including the Three Little Pigs.

If you remember the fable, the first little pig's house is made of straw. The second little pig's house is made of sticks. And the third little pig's house is made of brick.

You are probably already ahead of me. The first little pig looked at the mailing, and said, "Not for me. I can't use mortar" The second little pig saw the brick house on the outer envelope, and threw it away without a second glance.

The third little pig looked the mailing over carefully, checked his brick walls, and said, "Very interesting -- particularly if those rumors about the Big Bad Wolf are true."

With two out of three little pigs -- the targeting was way off. There's no way they could have responded, even if they wanted to. But one out of three isn't bad. Many direct marketing packages are far much less successful in reaching their target.

Now poor targeting isn't just a matter of choosing the wrong lists. It is making the assumption that your direct mail must have "something for everyone" instead of being laser-focused on who will most need or benefit from your product.

John Watson wrote a terrific book on "Creativity in Direct Marketing". He believes that the greatest failing in direct marketing is trying to talk to everyone, and not the small percentage of people who actually or will benefit from your product."

Let me give you an example.

The "Instant Winner" Solution

AT&T used to have a savings program called "Reach Out, America." It was designed to provide discounts to people who spent over $25 a month in long distance.

But there was a problem. Many people spent around $25 a month, or $28 one month and $18 the next. These people saved less money than the first group, and sometimes they didn't save at all. And one mailing had to go to both target markets. Understandably, their response rates were pretty dismal.

The first thing we did was to divide the list in half. To the top half -- people who spent $25 or more -- we created what I called the "Instant Winner" package. The theme was, "Congratulations. We know that this plan is going to save you money every month."

To the bottom half, the direct mail package was more tentative. "We think that this plan may save you money."

The result was that the bottom half responded at about the same rate as from the previous mailings. But the top half, the "Instant Winners" responded about twice as well.

Here, we were segmenting our list based on whether or not they would benefit most from our product. And you may not always know that about your prospects. However, there's another way to segment that every company can use -- and that's on value.

When I worked on the AT&T Winback account, we knew some customers were worth more than others. So we began versioning where the value of the offer (the check) was related to the value of the customer. This was easy to do because we knew exactly how much each customer had spent with AT&T before they left.

However, what really increased response was versioning the letter to acknowledge the higher value customers. The letter read, "A very special offer for our most valuable former customers." This quickly became our new control.

Instead of trying to create a "one size fits all" direct mail package, why not try segmenting your list? Why not separate out those people who really need your product, or are worth much more to you if they buy? Why not sell mortar only to pigs in brick houses?

But how can you determine who really needs your product? There's a technique I've developed that might help you answer that question.

Needs-Based Direct Marketing

The problem is that most direct marketing packages use features, the better ones use benefits. But sometimes features and even benefits are not enough -- particularly in business-to-business. You really have to focus on needs.

The reason for this is that most business people have to justify their decisions to others. Their boss will typically have two questions for them; "Do we really need this product?" and "Do we really need it now?"

Your direct marketing package better provide the right answers.

When I am writing out a creative strategy document, the last section is this: "You know you need our product when..." Together, my client and I try to come up with four or five answers to this question.

Many clients feel that all they have to do is announce their product and people will automatically buy it. But the truth is, people have been getting along just fine without your product for many years. They've done their work, solved any problems that came along, and were as productive as they could be.

So unless you can focus on the group of people who actually need your product -- identify them or have them self-select -- you're probably not going to get a great response.

Of course, improving your targeting really is also function of testing. And if you're not continually testing lists, and list segments, you might be missing out on major opportunities to improve your response rates.

The Secrets of Better Offers

We all know that, outside of list, the most important factor in improving response is offers.

But, based on the direct mail I am asked to review, maybe it's something we've forgotten. Maybe we spend too much time on the words and pictures, and not enough time thinking of and developing effective offers.

The role of the offer is two-fold; one to get people to raise their hands; two, to get people to act now, instead of putting it off. And the challenge is to make your offer not good, not great, but irresistible.

Jim Kobs, in his classic Profitable Direct Marketing, offers a list of 99 proven offers. And that's a good source of ideas. But here are three secrets that I've found effective.

1. The offer should be about the prospect, not the product.

2. The offer should be presented in a compelling way

3. The offer should be involving.

Let's take them one by one.

First, the offer should be about the prospect, not the product.

Bill Jayme, one of the great direct marketing writers, said "The subject of any direct mail piece is you." And it doesn't matter if you're selling gourmet coffee or personal faxes or even diamond engagement rings."

One of my favorite offers is from a company called "Dial a Diamond" Their offer, which has been highly successful, reads like this:

"Your engagement ring costs you nothing if she dumps you in 60 days."

How do you come up with offers that are about the prospect? Well, you can start with research, as long as you realize, it's not always right.

When worked on the AT&T Winback account, we did research, and we found that the number one hobby in America was -- far and away -- gardening.

So the first offer we tested was a 75-bulb garden if they switched to AT&T. It didn't work.

Our next bit of research showed that people respond to frequent flyer programs better than anything else. (In fact, the Wall Street Journal called it "America's second currency"). So we offered $50 or $100 off on a USAir ticket.

It made sense. After all, if you're calling someone long distance -- you probably would like to visit them, right? Wrong. It didn't work.

But this next package was truly special. We called it our environmental package, and it said "Your Choices Count."

We offered to plant a tree in your name, if you switched back to AT&T. The headline of the brochure read, "The land was ours before we were the land's. She was our land more than a hundred years before we were her people."

Isn't it touching? Isn't it inspiring? Did it work? I think we planted three trees. So research isn't always right. However, it is probably a good place to start.

Second, the offer must be presented in a compelling way.

The AT&T check package was the perfect example of that. The check we sent you was real, and ready to be cashed or deposited directly into your bank account. It wasn't a masked discount offer. The value of the check was based on your value as a customer, and they ranged from $10. to $100.

Yes, some people switched and then switched right back. Yes, it was quickly imitated by our competitors. Yes, there was some resistance from AT&T to "buying back" customers. In fact, I recently heard that the check campaign is being discontinued.

However, the check package increased response tenfold. 2% response rates became 20% response rates. And, even through we sent out over 100 million check packages, response rarely dipped below double digits.

Now here's the extraordinary part. AT&T had already made more valuable offers than the amount of the check. We offered one month free, special savings certificates, discounts -- all of which represented more money to our prospects. But the check ruled. Because having money in hand was much more compelling than any other offer.

So how you present your offer can be much more important than the offer itself.

Third, the offer should be involving.

There's a great children's poem that I keep taped onto my wall, just above my computer. It says:

"Tell me, and I'll forget
Show me, and I'll remember
Involve me, and I'll understand."

It applies not only to teaching children, but also to direct mail and offers.

One of my software clients has a library of scientific papers and articles about the areas they are involved in. They sometimes select an article, and use it as an offer for their direct mail.

My recommendation was simple: Why should we choose the article? Why can't we let our prospect choose? So the first offer we tested was "Free! Your choice from our library." It lifted response by 700%.

The grandmasters of involvement devices are Publishers Clearing House and their competitors. You may look down on their efforts but they have been very successful for a long time. They are so successful they can afford to give away millions of dollars every year.

Creativity in the Mail

The last area that affects response is "creativity", and it can be a decisive factor when it comes to improving response.

But first, let me ask you a question -- why do they call it junk mail? The truth is that the vast majority of the direct mail we create really is junk, and that's a shame. Because I believe direct mail can -- and should -- be more creative than any TV commercial, radio spot or print ad.

Here's why. First, we work in a tactile medium. Prospects actually pick us up, hold us, open us, and get involved with us. We can use all three dimensions.

There's a great example from the New Zealand RSVP Awards. DHL wanted to announce that they ship big things as well as small. So their agency, Rainger Direct Marketing, created the world's largest direct mail package. Imagine the impact this 3-foot mailing had on the prospects who received it -- far, far more effective than any passing TV commercial.

Second, we can be personal, even intimate with our prospects. Once they open the envelope, we can whisper into their ears, and not have to worry about going over 30 seconds.

The last control I wrote was for an investment newsletter called "The Senmontier Strategy" It ran to 24 pages. Where else do you have the opportunity not only to capture someone's attention, but to lead them, step by step, into your product?

Third, we know who we are talking to. Most mass media efforts are directed against broad targets like "Women. Aged 29-46" In direct mail, we know -- or should know -- exactly who will receive our package. So we have the opportunity to be more relevant and more targeted than any other medium.

Now by creativity, I don't just mean the words and pictures. Because a creative idea can make or break any mailing.

Let me give you an example. I started this article by talking about 2% response rates. But sometimes, even a .004% response will do -- if you're creative.

There was a famous university who wanted to raise $10 million to build a new library. They mailed out an appeal to 10 ,000 alumni.

Now, standard operating procedure is to ask each alumnus to give as much as possible. But the university was more creative than that. Their appeal said, "We're looking for just one person -- one person who truly values learning. "One special individual who gained so much from their years here, that they are in a position to donate the full $10,000,000."

The university got a terrible response -- only four people agreed. But I'm sure they found a use for all that extra money.

Finally, to improve response, we need to assume a different attitude.

The 100% Mentality Versus the 2% Mentality

Athletes visualize themselves as beating everyone else on the field, winning their event, accepting a Gold medal. No successful athlete ever said, "I'm hoping to finish 20th."

Why can't we adopt that attitude to our direct marketing?

Why can't we strive to create direct mail packages that everyone will respond to? Why can't we decide that a 2% response rate just isn't good enough, and that we won't mail unless we feel confident we can do better?

Because I know it can be done.

A great quote reads, "If you think you can, or you think you can't, you will probably be right."

And Leo Burnett put it even better when he said, "Reach for the stars. You'll never catch them, but you won't end up with a hand full of mud either"

Or a 2% response rate.

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