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Intelligence Briefings: Direct Mail

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Improving direct mail -- where should you start?
A phased programme

Given the wide range of experience in direct mail from one company to another, it is clear that recommending a move to best practice in all areas immediately would not be sensible. In our consulting, we have seen that a "big bang" approach can create severe stresses within a company and have counter-productive results with customers.

For example, suppose that a composite insurer decides to move to best practice direct marketing to support its efforts across all its channels -- such as direct mail, telephone, sales force and brokers. It develops a customer database and recruits managers with strong direct marketing qualifications and experience. It begins to target its marketing efforts much more precisely but does not consider the organisational problems of integrating direct marketing.

Irrespective of the channel through which the customer was originally acquired, the customer receives mailings related to their propensity to respond and their predicted net value, including risk. The sales force does not pay proper attention to the leads and brokers object that "their" customers are being targeted. Customers become confused as they are subject to approaches for the same products from an additional source.

This company should have moved more slowly, defining a long-term customer management strategy alongside rules and rights for working across different channels, based on benefits for all parties - customers, brokers, sales force and other customer-facing staff. In this situation, the company would have done better to aim for a steadier across-the-board improvement in practice, perhaps piloting or testing different approaches and allowing time for different channels to make adjustments in their practices.

To help companies identify the appropriate direction and speed of movement, we have developed a simple overall classification of stages to develop good practice in the use of direct mail in customer management. This is based on the detailed relationship marketing analysis starting on page 00. In this inevitably simplified classification, we have identified three stages of development - basic, good and best practice. They are described in table one. In our view, a balanced approach to improving the next stage of development is likely to yield the best results.

The benefits of moving from basic to good practice are normally:

  • Substantial savings in customer communication costs as duplicates are removed, contact frequency is more attuned to customer needs and, thus, response and conversion rates and value per conversion rise.
  • After initial investment, steady reduction in systems costs due to removal of duplication and poor inter-working of different systems.
  • Ability to sustain substantially increased volumes of marketing activity through improved marketing and systems infrastructure.
  • Improved image with customers, as mailing tends to be more appropriate and timely.
  • Small improvements in customer retention and development, including cross-selling.

The benefits of moving from good to best practice are:

  • Much more precisely targeted activities of all kinds - cross-selling, up-selling, retention -- with much higher returns on marketing investment.
  • Much better inter-working between different media - particularly mail and telemarketing.
  • Better understanding of the balance between customer retention and yield per customer.
  • Better understanding of the relationship between customer profitability, retention and satisfaction.
  • Much improved customer satisfaction and profitability because of the changes mentioned above.

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