Direct marketing is the new black

Scott Hornstein, president of marketing, Hornstein Associates, and CMO, Wired Assets Data Corp.

These are the times that try marketers’ souls. On the other hand, this is not the time to hide or be timid. It is the time to be effective, and to redeploy the majority of what’s left of your marketing budget into direct marketing for one very good reason: The strategy is, at its core, measurable and ROI-driven.

Here are some critical factors that can lead to direct-marketing success. Each one is a powerful lever, and energy spent here will be highly rewarding.

• Integrate the media mix. Let's face it, people do not learn effectively from one source or medium. People—and here I mean potential customers—have their own private networks buzzing in their heads, chock-a-block with things great and small. As marketers, it takes a bit of effort to get on their play lists. To penetrate, consider using several media in concert to reinforce core messaging

All individuals have their own media preferences, so they may tune you out just because you’re on the wrong channel. Marketers may feel that their messages are most powerful and effective via one channel, such as tele-sales or e-mail. But if a good portion of your prospects hate receiving one or the other, or some other form of communications, they won’t even listen. So mix it up.

• Integrate a healthy dose of customer care. Our carefully crafted brands can be blown up in three minutes of poor customer care. It’s my bet that in this flat world, the level and consistency of customer care, as experienced by the individual customer, is one blockbuster of a competitive differentiator.

To do this, measure the downside as well as the upside. That means paying attention not just to conversion rates and average orders, but also to how many “irates” you got—unhappy customers or prospects—and how that stacked up against your goal. I’d certainly like an early read if there is a customer service or satisfaction problem brewing. Bad will is tough to undue in this hyper-connected world.

• Invest in database quality. You'll want to do this simply because the strategic purpose of the database is to help you allocate your precious resources most effectively. Thus, a lot of little errors can cause a big problem with something as simple as deliverability or as complex as database mining. We’ve got a ton of science but, unless the raw material is of high quality, the output will be flawed.

And consider carefully your focus. It's likely that about 20% of your existing customers account for about 80% of your revenue. However, marketing budgets are often devoted to prospecting, with a smaller amount allocated to existing customers. What would happen if we had a better correlation between budget and revenue, and spent more on our best customers? I think I know.

• Account for everything, but report only key metrics. We have to measure everything because we want to know where the money goes. But day to day, we want to pay attention only to the most essential metrics, and dig deeper if we need to. (Hint: E-mail open rates and Web site visits are not key metrics.) Use metrics as a basis to test assumptions and to continuously improve.

• Measure performance. Set aggressive standards. How aggressive? Each direct marketing effort should achieve at least a 10% response rate.

Look at it this way: If you get a 2% response, 98% of your customers threw you in the garbage. Hand that 98% more stuff they don't want over a period of time and they are going to get tired of hearing from you. I’ll bet that you, as a consumer, exhibit this very behavior. So set your the bar as high as you reasonably can.

• Measure the ratio of expense to revenue. I like this metric because it gives you a quick read. Let’s say you spent $10 and made $100. That’s a 10% expense-to-revenue (E:R) ratio. However, if it’s over 25%, you're spending too much. Figure out what’s wrong and don’t do it again.

Scott Hornstein is president of marketing and sales consultancy Hornstein Associates (www.hornsteinassociates.com) and is CMO of Wired Assets Data Corp (www.wiredassets.com). He can be reached at scott@hornsteinassociates.com.