Ted Grigg's Reflections about Direct Marketing

You might be tempted to ask why I am still harping about the state of the database in corporate America.

The answer is that many of my clients still struggle year after year with improperly integrated databases following mergers and acquisitions. Or in some cases, the name file does not automatically attach purchase or inquiry information at the record level.

Top management in most companies simply do not understand the critical need for a reliable and fully functional relational database to compete effectively in today's world.

This state of affairs makes it nearly impossible to evaluate direct marketing efforts or segment the database to improve response and customer service to say nothing about getting better returns on marketing expenses.

Forrester researched the State Of The Database Marketing Organization in 2008. They interviewed 107 database professionals including 52% with budgets exceeding $10 million. And 61% of them say their budgets make up at least 21% of the overall marketing budget.

Forrester found that funding models vary widely within these companies and that customer analytics is the BIGGEST area of growth.

So reading this gives some hope that a few companies generally recognize the need for the database as a major contributor to marketing intelligence.

But disturbingly, only 27% of them use customer communication strategies, analytics or CRM strategies across all product lines sold to the customers listed on their databases. The overwhelming majority of the interviewed companies limit their database to market singly by product line or business unit.

The report adds further that the adoption rate for strategic, enterprise wide contact ownership has not grown much since the last report in 2005 because 43% of all of the databases are set up and work within a single line of business. The other 34% are funded by various individual lines within the company or on a volume/project basis.

My perception:

Businesses that remain product driven rather than customer driven will never set up relational databases.

They do not view the customer as buying multiple products across the company's lineup. They see their business model as selling various product lines with independent profit centers that happen to have customers.

Only about a fourth of these companies attained the goal of leveraging the database to gain global knowledge about their customers' multiple purchases across product lines.

This all represents a deplorable record considering the available technology and evidence that supports the value of strategically driven databases.

This Forrester report made the strong recommendation that companies centralize funding at the corporate level acting as the arbiter between lines of business. I agree completely with this recommendation.

You can purchase the full report directly from Forrester Research here.

I have two long time friends. They are both CMO types with tremendous direct marketing backgrounds. And neither seem to be able to land jobs that make sense anymore.

One of these friends tells me that he is unemployable at age 54. No, not because of his age, but because he can't find a decent employer to work for.

That's a switch. Now employers have to make the grade with skilled employees? I know we are told to do this. But in reality, most of use do not get three executive level offers concurrently that allow us to pick and choose the best. We will accept offers even when the employers show significant weaknesses. After all, no one is perfect.

But it appears that some companies are under the illusion that there are perfect candidates out there only to realize 23 months later that neither the candidate nor the company were perfect. (According to a recent Execunet research report, the average CMO tenure is 23 months).

It reminds me of the famous Paul Newman movie Cool Hand Luke when the cruel warden said to the prisoner, “What we have here is a failure to communicate”. Companies often expect far too much from their new CMOs while at the same time expecting far too little from themselves. So there exists a miscommunication with unmet expectations.

As an example, even though both of my friends have over 25 years each of marketing experience making over $150,000 base a year in the last five to ten years of their careers, they were turned down after third or fourth interviews based strictly on length of tenure in their past roles.

One candidate had 7 jobs with ever higher levels from job to job in the last 20 years with an average of 2 to 4 years at each company. His skill falls clearly in the "change agent" category. The other candidate has 30 years with one company demonstrating regular promotions and clear marketing and management contributions over time.

The reason given by the prospective companies for not hiring them sounds like the same old saw.

1. The one with the 7 jobs had too many job changes and was not offered the position even though many on the hiring committee wanted him as part of their firm.
2. The other candidate had too few jobs. The hiring company felt his long tenure with a single company demonstrated a lack of initiative and diversity.

Companies say they want change agents, diverse experiences, proven expertise, strong interpersonal skills... and the list goes on. But who can qualify on all counts? No one. So companies hire based on old maxims rather than attracting deep talent and taking responsibility for the tenure of their employees propagating people they consider desirable.

They want resilience, but seem unwilling to return the favor.

I thought maybe these were excuses for other problems on these candidates. But I see this story repeated time and again with other companies and people I know well.

So the evolution continues. Employees are now corporations unto themselves and must make their own way in the work world moving from company to company at an ever increasing rate.

Has the time come for many CMOs to ask. "You may need me, but do I really need you anymore? What will you give me that I can’t do better on my own?"

Are you having these thoughts? If so, then maybe it is time for you to expand your horizons.

Its a big world out there that is limited only by your desire and imagination.

What concerns you most about striking out on your own? Do these same risks not exist on the employer side as well? What about finding that "perfect company"? Does it exists? I'd love to hear from you and what you need to take that leap.

If you plan and evaluate direct marketing efforts, then you know the challenge of pulling together the essential information for your creative assignment.

Due to the scope of the creative brief required for direct marketing projects, I see the creative brief as a melding of the marketing plan with the creative strategy.

For that reason, the creative director should not be the primary point person for writing the creative brief. That duty falls upon the marketers of the organization.

There are literally hundreds of creative brief formats out there. But they all tend to miss at least one of the essentials parts that can make the difference between success and failure.

Let's start with the characteristics of strong direct response creative briefs.

Effective briefs are:
• Clear about the objective
• Focused and direct
• Logical and brutally truthful
• Rich with emotional insight
• In sync with the overall brand
• The result of information provided by the client, the agency team and any primary/secondary research available about the product or service

Weak briefs are:
• Provided to the creative team without an offer or lack guidance for the development of a compelling offer
• Preoccupied with the client's needs rather than those of the audience
• Incomplete and unconvincing
• Missing concrete and factual support for the claimed product benefits

Looking at the contents rather than the format, here are the four essentials of the DM Creative brief.

1. Get a handle on the product or service benefits.

- What are the benefits offered by this product?
- What is the primary benefit?
- Is there a unique selling proposition?
- What do present customers say about this product?
- What do third parties who are respected by the audience say about this product?
- How does your product compare to competing products or services?
- Compile printed and electronic literature that may already exist about the     product.

2. Share the objective (s) and what we have to do to win? For example...

- Generate actual appointments from key businesses.
- Beat an existing control.
- Enroll new members.
- Convert existing leads to buy the product "off-the-page".
- Remind lapsed members of a deadline for an existing offer.
    _{Note: I like to share any known response rates generated by past efforts telling the creative team what success looks like. Quantify the objectives.}

3. Who are the targeted prospects or customers and what makes them tick?

- Share the list information if it is a mailing going over data contained in the file that can be used for personalization.
- Provide any available psychographic and demographic information about the target market (s).
- Go into the research of why people buy and do not buy the offered product.   
- Get deeply into the emotional motivators of why the audience might buy or not buy the product.
- Summarize key research information about the customer or prospect audience.
- Provide any relevant testimonials or third party endorsements.
- Based on the audience descriptions, what tone should the creative take on?

4. What is the call to action or offer for this particular communication?

- What offers have worked in the past?
- What offers have not worked in the past?
- How much can we afford to spend on the offer based the allowables for this product or service?
- What other offers are worthy of a test?
- What offers have worked for competitors or in other industries to the target audience?

5. How does the target audience view the offered product in the competitive environment?

- Describe any notable messages/content from competitor advertising.
- If possible, give the creative team a comparison chart pitting the offered product against the competition.

6. What are the executional mandatories or "givens"?

- Includes any regulatory or legal copy requirements.
- Provide any graphic guidelines, logos and other graphic support as required for the creative execution.
- Review any verbiage or language that must not be used in the copy.

7. What is the executional budget for this creative effort?

- Provide production limits that take into account the allowable cost per lead or cost per sale.
- Provide direct mail costs limits based on the allowables for any direct mail rollouts.
- Give comparable budgets for online, DRTV, radio or print advertising at the onset of the creative effort.

What other elements would you add to this list that I omitted? How do you deal with clients who cannot provide the specifics needed for your campaign to succeed? Do you turn down the project? Do you go with what you have and cross your fingers warning the client that they need to compile more information for the future? As a client, how do you deal with pesky creative resources that never seem to have enough information?

The editor of Inside Direct Mail, Ethan Boldt, interviewed me recently asking a number of questions related to the importance of the offer in generating response. The range of his questions covered the how, when and what offers to test.

This subject interjects itself into virtually every direct marketing program I touch. So I wanted to give him my best effort when answering his questions.

This blog exposes less than 15% of his questions. Answering all of the questions here would make this blog far too long.

I have come to believe that offer development and testing them separates direct marketers from the pretenders.

If you practice direct marketing programs with any frequency, then you know the major predictors of response. This list provides those predictors by priority.

    1. The target market or lest selection.
    2. The offer
    3. The main or unique selling proposition
    4. The selected medium or combination of synergistic media
    5. The creative execution ( this includes such things as layout, tone, format, correlation to the brand image and so forth)

When estimating the impact, the offer usually carries 40 to 50% of the response burden if the market was targeted correctly. A good offer makes the difference between success and failure. It is not uncommon to see offers that make a difference of 200% or more in the overall response score.

Here are some of the questions the editor asked and my response to each.

Do offers impact response more than creative?

In my mind, offer development is a major part of the creative development. I do not separate these two functions. The offer is central to the creative and holds a starring role in effective direct response copy. So yes, the offer is the most important element in predicting response rates.

How do you evaluate offers?  How do you test them and how often?

Direct mail is still the core medium for direct marketers. It dwarfs all other media in terms of spending levels. So we tend to use the same offers in all media once they work in direct mail.

When evaluating effectiveness, we look not only at costs per lead, but costs per sale. In the insurance business, we actually look at contract persistency by offer, medium and list source going back 3-5 years.

The offers vary by product and the particular regulations of a given industry.

For two-step offers such as lead generation, we go from inexpensive premiums to very expensive gifts like free golf clubs for agreeing to an appointment with C level executives.

For product sales to consumers, we offer FREE services, valuable information, inexpensive premiums or discounts for quick response.

Do you pretest your offers?

The only way we test offers is through behavior testing. We tried focus groups and other pretesting methods. But they did not save us money or accurately predict response in the real world.

Do you ever test offers in email campaigns to save costs?

We typically recommend testing offers with customers. But since most of our clients do not use email for acquisition, we do not test offers via email for getting new customers.

As a general rule, we recommend testing testing offers in the core medium, and then expanding successful offers in non-core media.

For direct mail, how do you use offers in copy? On the outer envelope, the letter, the brochure, the response form?

We like to make the offer the lead.

 

This often mean implying the offer on the outer envelope. But we prefer not to spill the beans on the whole deal here. We want the prospect to open the envelope and read the letter as well as the balance of the contents. So the teaser copy is written to get the recipient to open the package.

In some cases, the product benefit is so strong that we prefer to state the main customer benefit on the outer envelope rather than the offer.

The strongest offers combine the reward for responding with the products' main selling proposition. For example, "Not only are we offering this product to your industry for the first time ever, but we are giving you a 50% discount for being among the first 50 customers to buy."

Once inside, each piece (except for the Business Reply Envelope) should stand alone. This means the offer and key benefits are enumerated in the letter, the response device and the brochure. The offer is indeed the star.

This does not mean that the offer always resides in the main selling proposition copy line. But it is the spark that stimulates interest and prompts immediate orders.

 

Stated differently, put your best food forward in the key locations of your direct mail package. 

-The first line of copy in the letter

-The Johnson box in the letter

- The headline for your response form 

- And finally, a place of prominence in your brochure

The interviewer asked many other interesting questions about the offer. But I will let him compile the other 80% of my missing responses in an upcoming issue of Inside Direct Mail. I will provide you with a link to this article when it is published.

What other comments do you have about offers? What results have you seen when testing your offers. How do you go about developing compelling offers?

 

If you are a freelancer, independent consultant (like me) or a small business offering marketing services to companies, then this blog speaks directly to your #1 problem. That is, stabilizing your business to yield consistent and profitable revenue.

Unlike most businesses that sell widgets or commodity items with a known value, we sell ideas and thinking. And specifying a project's thinking to outline the needed talent and money requires clients who have been there and already know the general parameters of the work we bring to the table. In other words, educated clients who truly understand the services we offer are getting scarcer.

This brings me to one of the causes for poor stability with freelancing. New business requires an inordinate amount of time, money and effort to acquire for the independent or two man shops.

Compounding this challenge for freelancers includes other related problems.

    •    As professional thinkers, we lack interest in selling on a daily basis. This is not our strong point. We want to practice our trade and hope referrals will be sufficient in bringing a steady flow of assignments. But 95% of the time, this does not happen, regardless of the level of our expertise.

    •    Knowing that we do not like new business activity, we stop all networking and contact efforts when we are overloaded with work. After all, we have to implement what we sell. We really don't have the time for new business even though we know better. So we experience these incredible swings between too much to do to very little to do.

    •    As very small businesses, we have insufficient capital to advertise online with SEM services or paid search or any other form of advertising that professionals might want to use. Added to this are leads form prospects that are not qualified and want to trade time for equity in high risk start ups or pay inadequate fees.

    •    We are further challenged by undisciplined prospects or clients who have stagnant businesses and want marketing help in three easy lessons with a magic bullet. Then when you have pity on them and provide some sound advice, they will say that they tried that already and it didn't work. And upon cursory examination, it is clear the client implemented the idea without skill and overlooked elements essential to success. All they really want is for you to parrot their own, unsuccessful ideas.

Fortunately, there are some smart and reasonable clients out there. But how do we find more of the them without breaking the bank? What efforts have you used to attract new clients? We are all eager to learn better ways to stabilize our assignment flows.

Advertising agencies are in trouble. At least that is the conclusion drawn by a recent Forrester Research study that says:

“… despite sales growth, their earnings per share lag behind the S&P 500 and profit margins are squeezed.”

As most of you know by now, I have worked for, managed and even established direct marketing divisions for general advertising agencies over the years. And if you have also worked for or with agencies, you probably share my love/hate relationship with them.

To begin with, agencies attract entrepreneurs who tolerate agencies’ lack of stability and low quality management in exchange for stimulating, intellectual environments that thrive on creative problem solving. But this freewheeling style also contains an Achilles heel.

In their unrestrained efforts to solve their clients’ problems, they neglect their own.

In a February 23, 2007 Forrester Research report entitled Help Wanted: 21st Century Agency, its author Peter Kim wrote this subhead. Firms With A Vested Interest In Traditional Media Models Need Not Apply.

His report summarizes the agency challenge.

"Agencies continue to influence the marketing function; however, they struggle to help clients capitalize on emerging channels and technologies. In the meantime, marketers are diffusing agency power by turning to a portfolio of players in search of specialized expertise. As marketers select new agency partners, they must revise their evaluation criteria to build an integrated marketing team."

Kim's client research analysis found the following weaknesses.

1. Advertising agencies overestimate the role they play
2. Customer-centric marketers stem agency power
3. Agencies must become client-centric — or perish
4. Lack skills in emerging channels
5. Overstate their role in marketing success. "Almost all agencies (93%) believe their contributions drive their clients’ marketing success, while only 63% of marketers [clients] feel the same."
6. Agencies must be held more accountable for results. "Despite the fact that agencies wield influence over a majority of the marketing budget, 76% of marketers [clients] do not measure the return on investment of their lead agency relationship." As one marketer admitted, “We are only now beginning to measure our return on programs we implement... Other interesting statistics show that "69% of marketers feel their ROI is too difficult to measure.“

What does all of this mean?

Simply stated, agencies are finding that the speed of change is outpacing their ability to keep up. They continue to hold on to the past and bemoan the emphasis going increasingly to sales results rather than continued wholesale adoption of sacred strategies such as awareness and brand building for their own sake.

For direct marketers, this channel integration and performance based evaluation trend took too long to happen.

But we can hardly sit on our laurels. The front line struggle has taken on all weak spots such as online analytics, reliable sales channel attribution, and balanced media integration.

What other trends do you see that are upsetting the apple cart for direct marketers?

 

I grew up in the direct marketing world starting with advertising agencies then moving over to the client side where success depended upon proper application of the discipline. But with everything changing faster than ever, I think we must sit back for a few minutes and get our bearings.

Let’s revisit the definitions of what direct marketing was to the earlier practitioners of the trade. The chart below does not represent all of the definitions out there. But the authors of these definitions represent some of the best-known leaders in the business over the years. (Double click the image below to enlarge)

Yes, direct marketing elicits some form of response. it tracks response, applies testing as a core strategy and uses all available media to solicit a response. All of these tools characterize the direct marketing discipline.

So we are left with determining if new media fit this definition. For example, is the new “social media” concept a direct marketing strategy? Is this activity trackable or is there a “measurable response”? I submit that if this effort is not measurable, then it no longer qualifies as a direct marketing strategy.

Some online activities may require the creation of an entirely new discipline that does belong to any established marketing category. If forced to categorize it, then I would place it in the branding camp.

The measurability dilemma existed long before the advent of new media. And the explosive growth of the Internet has made the quantification challenge more complex.

Could you help expand on this idea of where these new applications Internet belongs? Clearly, some aspects of online marketing fit comfortably with the trade. But there are new ideas about how marketers should view the selling challenge that do not belong in the direct marketing camp. What is your view?

Business to business lead generation strategies continue to evolve. The Internet plays an increasing role in building interest and qualifying prospects.

But setting up live appointments with C-level executives for highly compensated sales people still relies on the penetration tool of choice --- telemarketing.

No single medium alone will yield satisfactory results. Online, direct mail and telemarketing work synergistically to create high level appointments with a winning Return on Investment. But the core medium remains telemarketing.

If a program allowed the use of only one medium, I would select telemarketing as the most important and reliable medium for B2B lead generation.

Do not underestimate the challenge of securing appointments with C-level decision makers in today’s companies. Their time is valuable and they do not respond well to interview offers that do not promise solid opportunities to solve their business challenges.

It is not uncommon to spend $1,000 to $1,500 or more per qualified appointment with these executives. So the direct marketing lead generation program must yield both a consistent lead flow combined with prospect quality.

The following example represents a lead generation program I designed for a client in the health care industry selling two to three year contracts that could easily amount to one million dollars each.

Here is the program summarized in a simplified flow chart.

 
The strategy calls for a personalized mini-proposal with case studies and key product benefits in a personalized direct mail package sent as certified mail. The telemarketers follow up every direct mail package with a call to the individual it is addressed to.

The call to action includes an 800 number, a response form with qualifying questions and a personalized url (purl) to complete the same questions and/or request an appointment.

After repeated, unsuccessful attempts to contact the executive or set up an appointment by phone, the strategy includes a follow up 9X12 package sent priority mail to these individuals in a last effort to secure an appointment.

The entire project works best with sales staff involvement when they contribute to the content of the direct mail packages and assist in the training of the telemarketers.

What modifications would you suggest for the strategy as laid out? What results did you achieve? Did you test your strategy? If so, what were the results?

Freelancers, consultants and small direct marketing agencies can make the difference between success and failure for multi-million dollar businesses. But you would never know it by the way prospects and clients sometimes treat us.

I have great clients who do not fit the descriptions below. But I must admit that I have worked for such clients in the past and find that they permeate the new business scene. So my chances of working for one of them again are very real.

For the last quarter of a century, clients have demanded speculative work requiring no remuneration as a rite of passage for their new business. But this trend has exceeded the original bounds.

It is one thing to create plans and speculative creative work or research for a prospect with a $10 million budget and another thing to do the same for a prospect with less than $100,000 who expects the same treatment.

Many prospects do not understand the effort it takes to come up with a campaign budget. Or if they do, they still require that the consultant spell out for them what it will take to solve the problem.

They are not content to know what YOUR time budget requirement is. What they really want is a turnkey budget to solve a problem without paying you a dime to create the solution.

The time required to answer this question costs the same as it would for a large budget. And winning the business --- which is by no means guaranteed --- barely pays for the process of coming up with such a budget!

Most consultants will price out the PROCESS for the prospect to solve the problem. But they will not provide turnkey budgets unless there is at least a 75% chance of winning the business.

Or better yet, many consultants will charge the prospects for the time and skill required to come up with the turnkey price required to solve the problem.

The turnkey pricing process to solve a direct marketing problem requires strategy formation, tactical implementation steps and creating estimate specifications for the printer, the lettershop, the telemarketing service, the service bureau, list rental costs, projections of counts for the target audience ad infinitum.

Most clients have no idea that pricing in our business means that the campaign requires hours of planning and preparation before pricing can happen. The consultant must create the campaign and create specifications in a vacuum without adequate input from primary research or the client to price the campaign with any degree of accuracy.

Just once, I would like to say something like this.

“Before we can price your campaign, we need to know what it is. What is the size of your target markets with net list counts? What media mix do you need? Give us the specifications for your direct mail and collateral materials. (And the list goes on.) If you cannot answer all of these questions, then we need $10,000 to come up with the specifications to achieve your sales objectives.”

Unfortunately, clients want a lot for no upfront commitment sometimes caring little about what our small businesses must go through to earn even the smallest projects.

The only solution to this problem comes back squarely on the shoulders of the consultant. Refuse to provide turnkey budgets without financial commitments for preparing such campaigns. We must turn away this intentional or unintentional abuse.

Without such discipline, the consultant cannot succeed long term.

The major reason for accepting this treatment in the first place lies with the agency or consultant that does not possess a proactive and successful new business program.

Without an active new business plan that works, agencies allow themselves to get trapped in a no-win situation. They feel obligated to accept ANY business that comes down the pike regardless of its size or quality.

Are you are one of those agencies or consultants that accepts anything that comes down the pike. Ask yourselves why you are doing this. I think you will conclude that it has to do with the fear of turning any business away when you do not see other options for attracting new business.

This vicious circle of giving away the store has little to do with prospect abuse and a lot to do with our own ineffective new business strategy.

So set out today to solve this problem for your organization. Only a projectable and consistent new business strategy will cure what ails you.

Have you been guilty of letting clients and prospects abuse your professionalism and talent? If so, why do you do it? Do you think the problem can be solved? If so, what advice would you give the rest of us to control the situation?

 

After nearly 25 years of selling consulting services, it surprises me to find so many clients that have no idea about whether or not they are paying appropriate fees.

The problem sometimes gets out of control when a client knows that they are making $70/hr in net salary while paying a consultant $200/hr. So the client always feels cheated.

I reality, this client may actually make more money than the consultant.

Here’s how consultant’s typically set their hourly rates. Artists and copywriters use a similar approach. In some cases, they simply charge what the market will bear. But they often under price their services due to a lack of understanding of how rates should be set.

If a consultant made $150,000/year on his last assignment, then he wants to at least break even when striking out on his own. In reality, anyone taking the leap to set up his or her own business should make more money.

One major feature to remember is that a $150,000 salary carries at least a 30% load on top of the $150,000 for benefits and other overhead costs. These include the employer’s portion of the social security tax, group insurance, paid holidays, vacations, computers, other business support expenses, retirement and/or tax sheltered savings accounts such as 401K’s with some employer matching and so forth.

All of a sudden that $150,000 was really worth $195,000 (150,000 X 1.30).

But let’s assume that the consultant only needs to match the $150,000 in fees. What should his hourly rate be?

First of all, no consultant can sell, invoice his clients and implement projects 20 days each month. The best he can do if he is very successful is to invoice 10 days of his time each month.

Here’s how it works.

Assuming 10 days of billable time each month, the consultant needs the following rates for his services to make a gross base of $150,000 WITHOUT BENFITS or reimbursement of business expense overhead.

Monthly rate:        $150,000/12 months    = $12,500
Daily Rate:           $12,500/10 days          = $ 1,250
Hourly rate:          $1,250/8 hours            = $ 156/hour

At $156/hour, this successful consultant is really netting far less than he made as a full time employee.

To truly match his salary and benefits for a gross of $195,000/year, the rate would total the following.

Monthly rate:        $195,000/12 months    = $16,250
Daily Rate:           $16,250/10 days          = $ 1,625
Hourly rate:          $1,625/8 hours            = $ 203/hour

At $203/hour, this consultant cannot afford to bill less than 120 days of his time each year. Few independent consultants manage to bill this many days.

The real challenge for any independent consultant is to figure out how to keep the work flowing on a regular basis so he will average that 10 days/month of billable time. He must also bill a fair hourly rate based on his skill and experience level.

Most capable consultants I know cannot project their income annually or even monthly. The peaks and valleys are deep and the hourly rate seems inadequate to make up for the valleys.

So what most of us in the consulting business end up doing is invoice by the project with guaranteed pricing hoping to keep our hours under control.

Have you sold your hourly rate using a different approach? If so, how do you calculate your rate? If you bought consulting services in the past, how did you evaluate the consultant’s worth?