THE ROLE OF DIRECT MAIL IN 2018: USING THE BUYER
LIFECYCLE AND MARKETING AUTOMATION (PART 2)
- Marketing automation is vital today to help retailers and marketers respond to market changes and customer changes.
- Customer databases are predominately one-time buyers
- The benefits of direct mail are clear: much less clutter than the average e-mail inbox has or the average Facebook browsing session has, and a lot more durability.
- Traditional mail, whether it’s postcards or letters or catalogs, having a tangible reminder in your hand to drive you to the Web for fulfillment seems to be very effective for marketers.
- Direct mail needs to be synchronized with the communications online that customers are receiving.
What follows is a lightly edited transcript of Episode 16 of the Inevitable Success Podcast with special guest host Mike Ferranti and his guest Gary Beck.(Listen Here)
Mike: Welcome back for part two of our podcast and our interview with Gary Beck on direct mail in 2018. If you’ve not listened to part 1, do yourself a favor and give it a listen. You can find it in the Inevitable Success content hub on BuyerGenomics.com and on iTunes, Google Play, and Spotify.
In Part 2 Gary provides a great example and wraps up the discussion on affinity or lifecycle marketing, and the two biggest requirements to deploy a successful direct mail campaign. The first of course is creating the intelligence and knowing the discrete stages in each individual buyers’ lifecycle. And second is aligning those buyer lifecycle stages and the changes from one stage to the next with marketing automation, so that you can act on them in real time. Both are critical components to your success in buyer lifecycle management. Now with that context, let’s go back to this thought-provoking discussion that can help you make a better performing direct mail campaign and be a better direct marketer.
There’s a phenomenon that is referred to as “cocooning” that comes probably not far after children where the focus goes from that early life-stage where the focus is on going out into the world, traveling, working, spending time with friends to tending to the nest. There’s this nesting phenomenon where you’ve purchased the first home in expectation of children, or shortly after children, and spending more time at home and really feathering the nest because that’s really the focal point of their life now.
And for a marketer, that as well as other stages that they go into are marketing bonanzas, really, because they have more needs and a greater appetite to fill them. But probably most importantly is that at each of those stages, they’re different. And if you have the intelligence to know what those differences are, well then you could use that perhaps to market to the right person, but do so at the right time as well.
Gary: And that is true. One of the things that we have known for quite a long time is that new movers, people who have changed residents, are likely to spend significantly more in the upcoming year than they have in previous years just because of that nesting phenomenon- that when they change their residence, they have lots of new needs whether it’s needs for new furniture or different furniture. Usually, there’s some catalyst that has caused the move such as perhaps the need for more room due to the potential arrival of a new child in the family. So there are many pieces of data that can help us piece together that change in life-stage. And as a result of that change in life-stage, it should, for those companies that have a relationship with the customer, it should provide important clues as to what’s the next most likely set of products that this customer is likely to purchase or likely to need.
“…New movers, people who have changed residents, are likely to spend significantly more in the upcoming year than they have in previous years…”
One of the great examples of life-stage and affinity working together is USAA. USAA caters primarily to our service members: our Army, Navy, Air Force- heroes who have served our country. And as they enter the civilian world, they have a set of unique needs. -Needs that may not be all that unique, but having been in the military for a long time, frequently, they are looking for somebody who understands their culture. So USAA has done a marvelous job providing car insurance, home insurance, life insurance, home equity loans, a whole range of products, and because they have such great information about their customers, they are able to understand: what their age is, where they served before, and what their needs are moving forward.
And of course they have tremendous trust amongst prior military members, and the end result is that they just have a fantastic relationship with customers and really successfully manage their needs from the time they leave the military until they retire many years later from their professions.
Mike: Well I could say for sure, and even from some experience in my own family, the transition from military life especially if you’re far far away to the civilian life is a huge life-stage change which usually has other life-stage changes not far behind it some of which are fairly predictable, and I think USAA does a good job with that too. But that gets me to another thought. I think a lot about our listeners on Inevitable Success. And I’ve met with lots of organizations that, from a strategic standpoint, they sort of get it. It all makes sense. It feels right, but they can’t really put their finger on, “well how do I execute on all that? How can I get there?”
And one of the things that I think we could simplify a lot of this down to, it’s about change, or as we like to say internally when we’re in meetings and brainstorming and creating solutions for omni-channel marketers, we like to say what’s the delta? Where is there a change that there’s an opportunity or a problem to solve in real database or statistical marketing science, we might say, we’re looking for the heterogeneity? Where are things different such that there is some opportunity? And a life-stage change is a big difference. That’s a change that we can really zone in on. And with marketing automation, we could see when those changes happen. And now we’re down to, “okay there’s been a change. What do we do next?”
Well, marketing automation can tell you the change happen, but it can also help you to deploy the right series of messages at the right time. Now, the other place where I think there’s a great union between these life-stage changes and where marketing automation can help is in the buyer lifecycle. And so, a simple model that we have employed, probably deceptively simple, is the buyer lifecycle management process where everyone begins as a prospect. That is we’ve identified them based on potentially life-stage, demographic, psychographic, purchasing patterns, media consumption. Nowadays, you could see things like what have they searched on, what kind of websites have they visited?
These are all potential clues that help us dial in that target, but they’re prospects. They haven’t bought before. Sometimes the prospect is just someone that showed up at our website, found us potentially through Google or Bing and filled out a form on our website saying if there is a promotion, I want to get it. But they’re prospects. They are people that have bought zero times.
Of course, the next stage is, if our communications are on target, and we understand who are the prospects that should have which touches and when because we’ve enhanced their data, and we understand them better, and we understand the life-stage that they’re in, that might be a tremendous signal that changes how we approach our prospects, then we’re in a place where we could actually get to our first sale. And so, after that first sale, that’s surely a victory, but now we have what we would consider an “active buyer.” And the trick with active buyers of course is to keep them buying. Now that may seem like, it’s always duh after it works, but the simple fact of the matter is almost all of the databases that we look at, and we look at more than a few, across many many clients, customer databases are predominantly one-time buyers. Now, how much that’s the case does vary, but it’s always the biggest segment of customers when you segment them by frequency.
So, we can’t really assume that if they bought once they’ll buy again because statistically speaking that’s just not the case. Again I would bring it back to if that second purchase coincides with a lifestyle change or some other change that we could detect with data. There’s no way to do that manually and do it well because that entire database is going in different directions. It’s very dynamic, but in order to get to that second purchase, we need to have some intelligence on what moves that customer from trial, the first purchase, to the first stages of loyalty. When a customer is about to make, or more likely to make, that next purchase, we could determine that through cohort analysis and inter-order purchase times among other things. We call those in-markets and an in-market is an individual who’s statistically, the odds have gone up significantly, that they’re likely to buy again. Now a lot of folks might assume that an in-market is someone who is going to buy and you’re going to get the sell regardless because it’s such a high probability that they’re going to buy.
“…The simple fact of the matter is almost all of the databases that we look at, and we look at more than a few, across many many clients, customer databases are predominantly one-time buyers…”
Well what we’ve found is, that’s not entirely the case because an in-market is more likely to buy, there’s just no guarantee they’ll buy with you. We know that inboxes are crowded. There’s countless billions in advertising trying to reach these individuals, and they have many many options. So it’s very important that we look at the data we have, and to do it at scale, we’d need some marketing automation to make it happen. And we could get the right message to the right individual to get that next purchase before someone else does.
If we succeed at doing that, they move back to active. But if we don’t, those folks move to the next stage in the buyer lifecycle that we call “faders.” And what they’re fading in is loyalty. Statistically speaking, and we run back tests on this nightly, but our fader algorithm helps us figure out that these folks are now less likely to make that second purchase. And so what we typically do there is, we can move that customer using marketing automation to the very next step which might include a more aggressive promotion. It might include slicing out the most valuables, or those with highest potential value, and automatically getting out a higher engagement communication to them which could very well include direct mail, and in fact we’ve had good success doing so.
But it’s really important at this juncture that we push them back over to the active buyer side of the spectrum in the buyer lifecycle because there’s only two stages left in the buyer lifecycle. And the next one is “at risk,” and at risk customers are those who are actually fairly likely to go into attrition. And now we’re down to our most aggressive marketing if we’re going to keep them a loyal customer and keep their customer value growing which is integral because customer acquisition, as we’ve said in other podcasts, is expensive even if you’re great at it. So growing that customer value is how you get the out-sized ROI we do when we have these mechanisms in place.
And then of course the last stage in that buyer lifecycle is “inactivity.” The inactive file if you will, or the inactive life stage, is a customer that statistically stopped spending with you, on your products, and with the brand. And those are challenging customers. Everybody has a reactivation program. I shouldn’t say everybody, but many customers do. But that’s basically- most of them are pretty low-tech. More sophisticated direct marketers are modeling who to try to reactivate. And again that brings us back to the delta. Who in that group is different in some meaningful way? A lifecycle change occurred. Maybe they feathered the nest so to speak, and they’re years past the new home ownership or children stage, and they were in a transition period. And now maybe they’re moving into retirement or pre-retirement. The kids are grown up. They’re traveling more. They have different needs.
And so all of these things can help us to identify the delta or the heterogeneity from other members of that life-stage and the Buyer lifecycle stage. So I think that union of the customer’s life-stage and the buyers lifecycle is a powerful combination, at least that’s been our experience- a very powerful combination. But frankly it absolutely requires both speed and dexterity with your data and significant marketing automation that is intimately connected to it in order to execute it and to create value.
Gary: Marketing automation is vital today to help retailers and marketers respond to market changes and customer changes, and one of the things we should probably mention is the importance of monitoring the buyer lifecycle in light of competitive activity.
Mike: That’s a great point, Gary.
Gary: So when we think about, – we’ll take a very simple example, and let’s talk about perhaps a coffee club. And there are some people, and I might include myself in this group that enjoy a cup of coffee every day. And if I’m in a coffee club, then I might have my coffee needs, my coffee preferences, taken care of by the club who might send me a month of coffee at a time. Now if you know your average coffee drinker who is purchasing once a month, and then all of a sudden he stops purchasing, the delta should be alarming to the coffee club because the odds are that a customer who has changed their purchasing habits has not stopped drinking coffee, but they’ve simply found an alternative retailer to purchase from or they’ve changed their habits in some way. So that customer has moved from being an active customer to somebody who is potentially fading to use the nomenclature that we discussed. So marketing automation gives marketers the opportunity to respond to those changes quickly, and it allows them to execute the right counter offer if competitive activity is actually the cause of the change in behavior. It gives marketers the opportunity to quickly respond to customize an offer that will hopefully win back that customer or keep that customer as a loyal customer for the future.
“Marketing automation is vital today to help retailers and marketers respond to market changes and customer changes, and one of the things we should probably mention is the importance of monitoring the buyer lifecycle in light of competitive activity.”
Mike: Great points Gary. Yeah, I think the other thing that you mentioned is really the- it’s timing. So whether we see it or not, whether we have the resolution to observe those changes or that delta or not, it’s happening, and it will have an impact on our relationship with the customer and the total customer value that we can expect. So first you have to be able to have that visibility, and that’s a combination of speed and dexterity with the correct data and marketing automation to do that identification on a daily basis and at an individualized level, but then you have to be able to take action. And that’s the other piece. We’ve found in our own evolution of developing solutions, we found that no amount of intelligence could be served up in a way that a marketer could get full value other than coupling that divining of intelligence and opportunity at a point in time and coupling that with automation that would deploy the right message to the right person at the right time which arguably has been the holy grail for direct marketers for decades.
Gary: The holy grail is finally becoming a reality I think in many different ways because we can now turn data around much more quickly. The quality is much better, and the trackability, the ability to actually track our marketing promotions to know what’s working and what isn’t working is really so much better than ever before that it really has changed the way marketers can evaluate different channels. And to bring you full circle, I actually think that’s one of the reasons why direct mail is making a comeback because direct mail is so trackable and so easy to target. And with the intelligence that we have, it’s better than ever at providing personalized offers. The end result is that media that we thought might be no longer competitive are now proving themselves to be effective, and marketing automation is at the heart of helping us understand those trends quickly and from which segments it is most effective.
Mike: Agreed. I think that plus the simple change of channel to the one that is really falling off, the amount of direct mail- I know the amount of direct mail I get in my own home is way less than it was years ago. Millennials are big responders to direct mail which comes as a shock at first, but again it’s almost like the new thing. And the new part isn’t that it’s paper mail. The new part, and the valuable part, is that it is targeted well, and it is using the recency of those changes that we can now observe with technology to get that relevant message at the right time into their hands, and that’s what changes the game. That plus the fact that the level of competition for their attention when they look at their mail is much much lower than in a digital world where the entire universe of all things is never more than one click away which has very very significant challenges as most marketers have experienced.
So, on the one hand, I think it’s more than fair to say for most brands that using direct mail in your omni-channel marketing is a new thing for some. It’s an old thing that’s new again for others, and perhaps it’s tricky to get it right given the high costs of postage today, and the fact that you want to deliver a mail piece that has real value comes at a cost as well. But the benefits are actually pretty clear: much less clutter than the average e-mail inbox has or the average Facebook browsing session has, and a lot more durability. That mail piece- and I know I’ve done it myself. I get the right one, and my wife has postcards that she keeps tacked up for sometimes two or three weeks before she gets to it, but she ultimately makes a purchase.
It’s hard to do that in a super crowded inbox that you’re viewing on your phone while you have a gaggle of children you’re leading to sports, or you’re doing many many other things you could be doing at the same time. Direct mail has a much lower distraction state that savvy marketers are beginning to take advantage of. And the irony isn’t lost on really anyone that some of the most successful marketers in using it today are actually digital marketers.
“The benefits (of direct mail) are actually pretty clear: much less clutter than the average e-mail inbox has or the average Facebook browsing session has, and a lot more durability. “
Gary: And I think that the use of traditional mail, whether it’s postcards or letters or catalogs, having a tangible reminder in your hand to drive you to the Web for fulfillment on your room timeline seems to be very effective for marketers. So I do think that direct mail is not dead. It is alive and well. It may be perhaps more effective now than it was just a few short years ago, and it will continue to play a key role for marketers. The key to your point, Mike, is that marketers need to be smart about how they use it. They need to be disciplined in how they evaluate its use, and they certainly need to think about it as part of an overarching omni-channel campaign because it works most effectively when combined with other media. And there’s no reason not to sort that out today given the automation tools that are available to help us identify what works and what doesn’t.
Mike: That sounds like a great sum up and great advice. I’d like to leave our listeners today since we’re talking about direct mail with just a few facts or ideas or actionable practices that can help them with their direct mail. Number one I mentioned earlier, direct mail done well is very different than direct mail done without experience and a strategy. I think the first point that you’ve made today, Gary, is that direct mail needs to be synchronized with the communications online that they’re having with the customer.
So be sure that your direct mail lines up very well not only with your overall brand message but with the other communications that you’ve singled out for that individual that had potential such that the direct mail investment made sense. When you’re putting that direct mail together, one of the things that we see is folks that do it really well, they make the investment in high quality photography. If you have a product that’s worth showing, it’s worth it to get good photography. Show it in all of its glory in different scenarios.
If you’ve got very different cohorts you’re reaching out to: a late stage in life versus a first time homeowner. It makes sense to get that product shot in different situations perhaps with different customers engaging with the product in either case. Help them feel like it’s their product, and it’s a fit for them. In the age where an iPhone X produces DSLR caliber photography it’s hard to say that we can’t do good photography all the time anymore. So that’s an important one. Showing options to make the purchase, whether it’s phone, whether it’s online, and whether there are options for it i.e. level of product.
We have a client that actually created more enhanced or higher value versions of the same product so that when they went to their more affluent later-life-stage groups, they had the option to trade up that wasn’t there before. So options always help the consumer to find and feel that there’s something that’s right for them. Gary, maybe I could give you the last word on direct mail tips. Maybe if you had one or two that you really liked that you would float to our listeners today?
Gary: Sure, Mike. I’d love to. I think the things that I would leave with our listeners today is that, some of the axioms that we’ve covered in other podcasts apply to direct mail . And I think like any media, what we really want to do with direct mail is to be smart about testing and learning our way into finding what’s most effective. I would say that if mailers or marketers have not tested mail recently, it’s time for another look at the channel, taking advantage of all the tools that are at their fingertips. I think making sure that the tracking is in place so that we can read the results.
While that may sound basic, it’s really key to understanding what’s working and what’s not working. And then we’re not talking about abandoning other channels but thinking instead from an omni-channel perspective and blending in direct mail to provide synergies with existing channels while complementing the overall experience that a customer is having with your products or with your company are really the key things that I would leave with our listeners today.
It isn’t rocket science, but the customer is always right. And if we can make that customer experience better, and if we can provide them with tools to shop more efficiently and effectively with an understanding of the benefits from shopping with us, then we can expect that experience to be a good one with the customer and that we will maximize their lifetime value over time.
Mike: Gary, that is a great summation. That’s great information. I know for sure, there are many many organizations that will find this conversation informative and helpful as they explore either, for the first time, bringing back direct mail into their mix, or those who may have done it before and are taking a new perspective and a new look at it that is fueled by the explosion of data and the accessibility and the capabilities that are relatively new today that could improve their omni-channel marketing, their outbound marketing, their marketing to grow customer value, and their marketing to acquire net new customers in significant part in many cases with direct mail.
So I thank you, Gary, for joining us. You are obviously a tremendous wealth of information on the subject and thank you so much for being with me today.
Gary: Mike, thanks for having me. It’s always a pleasure.
Mike: Thanks for being with us again today. If you enjoyed today’s episode, we’d love it if you would leave a rating and write a quick review on iTunes. And better yet, please share the episode with another marketer you think could benefit in creating their own inevitable success.