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Saxe Speaks at ARDA's Fundamentals
of Marketing, Sunday 11:00am -12:30 pm.
-by Marc Saxe:
Arda Seminar
April 2002
Las Vegas, Nevada
I want to take just a second to thank Jim Danz and everyone at ARDA for inviting me to participate
on this panel, and thank all of you for attending.
I should be coming up with a joke or a story to get you going, but I guess the topic itself will have to be funny
enough, because I was too tired of trying to pre-qualify all of the respondees to our latest promotions to have
time get out the joke book and find something appropriate.
Let's get an idea of who is in attendance, so I'm going to ask you to clap loudly when I mention your category.
First, would all of the developers in the room please identify yourselves by a show of hands. Let's all clap for
the developers, because without them, this business wouldn't exist, and there wouldn't be a "fundamentals
of marketing". Let's give these brave souls their due_____.
While we've got you here, how many of the developers are either brand new, and are either in the planning stages,
early development or getting ready to launch your first product? _____ Great…I guess all of the vendors out here
now all know who they've got to button hole sometime during the convention.
So would you marketing vendors, industry professionals and service providers, vendors, tour brokers, direct mail
suppliers, call center operators, public relations firms, advertising agencies, and so on?_____ Thanks… Now we
can either rush you or dodge you depending on our situation.
Back to the developers: Would the experienced developers please raise your hands… those of you who have already
begun marketing and selling your projects? ____Thanks, and now would those developers who have been in business
for a while, and have multiple projects that are either completed and sold out, or in marketing and sales. Great…
Thanks.
Next, would everyone who is not in some aspect of marketing any type of vacation ownership, membership, fractional
product, resort land or country club… A show of hands please. Great.
How many of you are looking to get into marketing vacation ownership products? Are there many of that are already
in the industry? In sales… administration, property management. Thank you.
Looking around we all can see that there are a variety of us interested in the Fundamentals of Marketing, and the
Fundamentals of Marketing in our Industry. Hopefully I'll have a little something for each of you, as we are all
necessary parts to the puzzle of delivering our message to the public and delivering sellable prospects to our
sales teams, and velocity to our developer's bottom line.
For our time together, I've planned on touching quite a few bases, and would ask all of you, as Jim Danz already
has, to please hold your questions until the Q and A portion of the session.
As for topics, I intend to touch on:
- Basic Marketing Principals
- Basics of Timeshare Marketing
- Essential Terminology
- Product Types
- Measurable Metrics
- Marketing Planning
- The Marketing Mix
- Product Launches
- The Role of Direct Mail
I have about twenty-five minutes to cover all of this, so please take notes, I'm going to go fairly quickly.
My intention is to try to cover each of these subjects separately, but like anything in marketing, things overlap,
so I beg your pardon if everything doesn't fall exactly into place. If you have a question, we'll get to it during
the Q&A.
If there is one, and only one idea that I can convey to you today it is the first and most basic principal of marketing.
It applies whether you're selling insurance, condos, computers, food, you name it. Anything! Failure to understand
and apply this principal in a timely manner will doom you to a never-ending search down blind alley after blind
alley, looking for an elusive market that behaves more like a mirage than a business or industry.
If you are going to be a successful, and professional marketer, Never, and I mean Never…"Never Fall in Love
With Your Product"! I'm going to repeat this, because it simply cannot be stated enough - "Never Fall
In Love With Your Product".
Now, why should this be the first principal?
Yes, isn't marketing an art, a science? a collection of activities that are designed to deliver a never ending
source of interested leads, prospects and sales to your company and your bottom line? Well, yes it is... all of
those things. And, those things are best achieved if marketing is not viewed the same way as having a new child.
You are better off thinking of your project as a new toy, than as a child. We all know people who have just brought
an obviously homely little critter into their families. They are proud parents. Their vision is one of beauty and
success. Beauty is in the eye of the beholder. But the rest of the world sees the child for what it is, patronizes
the new parent, and goes about their business. Don't be the developer with your project as a new baby, no matter
how tempting it is. The project isn't a baby. It's a project. Please see it that way. Don't be the marketer with
that beautiful direct mail piece, and so on.
Successful marketing requires constant attention, monitoring, creativity, organization and management. All of these
are clouded when you relate to your products and projects as more than a substantial opportunity for income and
success. All of us who attempt to, and have attempted to, offer professional guidance to developers, project directors
and sales teams are confronted regularly with a relationship between these professionals and their products and
processes that are more personal than coldly professional. It is a danger that can infect us all, and when it does,
it can ruin any of the necessary work. So please, let's look at our projects as opportunities, not as our children.
If you find yourself at odds with your project director or marketing director's plans for creating interest and
traffic for your project, at least ask yourself if you are seeing clearly. Most don't. It's a tremendous trap.
Okay, let's say that you've made it past this particular mindset about your product, and you are somewhere in the
planning and early release stages. You need to be able to clearly understand who your market is, how your product
meets the market, the strategies you will use to approach that market, and how you will measure your results and
the status of your efforts.
Conventional marketing divides itself into two basic camps: First, that of the sought good, and second,
that of the unsought good. The second basic trap you can fall into is to not know which of these camps you
are in at all times. For the vast majority of timeshares, club memberships, fractional interests, private residence
clubs, country club memberships, and resort property offerings, you are in the category of "unsought goods".
This is the case even if there is some degree of pent-up demand for one of your products. We'll mention "pent-up
demand" later.
Sought Goods rely almost exclusively on advertising and word of mouth campaigns to impact the market place. How
far does your advertising "Reach", or how big is your audience, and how often do you communicate your
message, "Your Frequency" are the basic elements of sought good campaigns. Campaigns are designed to
"Reach" the appropriate target audience. This audience has certain characteristics, or "Demographics"
that describe their position or status in life. Are they homeowners, making in excess of $75,000 a year, with 1.8
children per household (that .8 kid is really something…and might have been the one I just mentioned"), two
cars, both less than three years old, investments, net asset value of blah blah and you know the rest.
The game of marketing is to know your audience. Sought good marketers target the exact combination of demographics
that match known buyers of their product. Soap sells to homemakers. They are in the home from 11 am to 2:30 pm.
Homemakers have certain needs, including soap, that you will find advertised on daily programs created to sell
soap to homemakers, while appealing to their hidden desires and dreams, while reinforcing the meaning that their
lives are better than the lives of the characters they are watching daily. Messages are sent to the audience repeatedly,
with substantial enough "Frequency" to hopefully penetrate into the consciousness of the target audience.
Penetrate enough so when the prospect is in Need of a product in that category, when they are walking down the
isle of their local grocery store, or Wal-mart, they will remember, from the "top of their mind" that
they need the item, and they will recall the desire that the Frequent advertising messages created to the point
of Selecting that "Sought Good" out of the competitive mix of similar items appearing on the shelves
in various stages of quality and at various price points! ...whew, that's a mouthful!
I hope you got all that:
- Sought Goods; something someone needs
Reach: the Market you send messages to
Frequency; the number of times you send the message
Demographics; the characteristics of a market
Target Audience; those that match the demographics you seek
Advertising Messages; the various product/company appeals delivered by various media to reach the consciousness
of the target audience
Competitive Products; those products/companies competing over the same dollar
Price Points: the range of prices a particular product is sold for
Let's talk about a few sought goods:
- homes
- cars
- clothes
- furniture
- appliances
- computers
- groceries
- supplies
- investments, etc…..
Many, if not a vast majority of products that are bought in the USA are Sought Goods.
How can you tell? If someone wakes up in the morning and says…."I've got to have a _____", and is
willing to just go out and buy it, It's a Sought Good! Everything else isn't.
Our Industry does not generally offer Sought Goods. We are in the business of selling Unsought Goods, sometime
with latent pent-up demand.
This changes the dynamics, marketing style, selling style, advertising methods, lead handling processes, and every
factor in reaching the audience.
This is the world of Direct Response Marketing. It's more Pavlovian. If every night you ring a bell before
dinner, then all you have to do is ring a bell, and people's mouth's will begin to water. That's what we do. We
ring the bell. If people are ready, their mouth's water and they respond. They respond now, to us. They are not
responding to our brand, or the frequency with which me make offers to them. They see the offer…they take the offer.
We get a prospect!
If you've been taking notes, you have a little bit of marketing terminology down. Let's add some of our own, things
that are essential to understand if you are going to succeed in marketing our industry's products.
First, and if you're new…write this down:
B.O.I. - that's BOI. BOI is shorthand for where you are going to be if you fall in love with the product,
or don't get the difference between sought and unsought marketing. It means - Back On the Interstate. Let's
not go there….
Vacation Ownership Marketing is designed to deliver prospects ready and willing to spend the amount of time with
a sales representative that it takes for the sales person to sell the product to the prospect. The vast majority
of vacation ownership sales are accomplished in a "One Call Close" setting. This means that the
prospect arrives at an on-site or off-site showroom and is checked in. They are then introduced to their sales
person, who has the right to 90-120 minutes of the prospect's time. The salesperson has the unenviable task of
reducing the relationship tension that is inherent in the situation, gathering relevant factual and emotional information
about the prospect, presenting the rational for purchasing, demonstrating the product itself, and the reason the
product should be purchased today, not tomorrow. The salesperson also has the job of overcoming any objections
or stalls communicated by the prospect, having them agree to purchase, pull out a check or credit card for the
down payment, and in many situations, having the new owner complete documents that will require a monthly payment
for the next 5-10 years, and an annual fee for the term of the membership, or the life of the prospect, and their
heirs. This process can be excruciating for both the salesperson and the prospect.
Because the prospect knows that they are entering a sales situation that has a reputation for being excruciating,
it is usually necessary to entice the prospect with a value proposition in which the pleasure of the premium, overcomes
the fear of pain of the sales presentation. The value proposition is normally a Premium of substantial value.
Because of the value of the premium given by the project to the guest, and the value of the salesperson's time
in dealing with prospects, it is necessary to set guidelines for who is eligible to be a prospect. These are called
Qualifications.
Legal issues notwithstanding, prospects who match these guidelines are referred to as "Qualified Tours".
Those that don't are "Unqualified". Companies and projects set a variety of "Terms and Conditions"
that prospects must meet in order to qualify. Income Level is the most obvious. The requirement to spend
90-120 minutes is key. And, invariably there is terminology that requires that "if married or a cohabitating
couple, both spouses or partner's must attend". You do not want to give a premium to a "One Legged
Tour". Since almost all versions of our product require state registration in order to market, the prospect
usually must reside in registered states, or be immediately within the borders of the state of the project to be
qualified both to receive marketing solicitations and to purchase.
Two Basic Types of tours are Minivacation Guests and Day Tours. Minivacation Guests respond to a
promotion including lodging and other premiums at a very aggressive price point in exchange for their attendance
at the presentation. The minivacation should be priced to attract guests, not pre-qualify the tour. Day Tours,
or Day-Drive Guests are prospects invited to your project or resort for a presentation during the day or evening.
Most off-site sales centers use Day Tours exclusively. "Day Tours" doesn't mean that it happens only
during the day, a Day Tour could happen in the evening or at night depending on the sales center.
Many companies try to use their Terms and Conditions to sort out those who predominately do not purchase.
These conditions need substantial legal review before being implemented.
So the job of timeshare marketing is to deliver perfect prospects which predominately buy with little or no interference
by the salesperson or resort staff. We want them to walk in, ask what they need to do in order to sign up, select
the best product for them, fill out their own purchase worksheet, and agree to all of the developer terms and protections
in the legally binding agreements…
Just checking to see if you're still awake.
Another way to put is that our job, as vacation ownership marketers, is to deliver as many direct response
messages as we need, in order to deliver as many sales prospects as the company's operating plan requires at a
cost as low as possible or ….lower!
Let's add one other overlay to the description of timeshare marketing: your direct and indirect competition.
Your Direct Competition is other projects in your immediate areas. These projects are competing for marketing
space, advertising locations, personnel, top of mind awareness of your target audience.
Your Indirect Competition are both 1) resort projects in nearby areas that are working the same target market
as you are, and
2) other products that are marketing similarly priced offers to a comparable target market.
As in any business, you need to be as aware as possible of your competition. In marketing, competition is good.
It means that there is business to be garnered. In general, if your competition has been around for a while, they
are onto something. We are a business where survival is success. If they are surviving, then they are doing something
that is successful.
One of the fundamental principals of marketing is to Copy your Competition. You will want to note as much
about their advertising and marketing programs as possible. They have already performed you a substantial and costly
service of entering your market, testing it for viability, and spending the necessary resources to educate the
market about the product. Assuming that you are ready to handle response (big assumption), you will want to allocate
some of your resources to being where your competitors are.
So here we are:
- Don't Fall in Love with Your Product,
- It's an Unsought Good,
- Go after Your Universe of Targeted Qualified Prospects
- Put together an Attractive Premium Package
- Prepare them for your Sales Team
- It's Primarily a One Call Close Situation
- Copy Your Competition, if you're ready
Let's take a second to pick up a couple of terms:
Marketing Universe: Your marketing universe is the collection of households within your state, and within
the states in which your project is registered that match your tour qualifications and demographics of likely purchasers.
Responders are a subset of the marketing universe, and are those who have either responded to similar offers,
or hopefully to your offers.
Qualified Prospects
One Call Close:
We need to spend a minute or two talking about your Product and your Use Plan. In most industries, especially
the more advanced higher technology areas, you will find that there is a job description called the Marketing Engineer.
This person's job is to determine the size and shape of the product that is desired by the marketplace, and that
can be absorbed by the market during the product's lifecycle. There is no Marketing Engineer in the vast majority
of Vacation Ownership companies, although the larger firms have people involved in product planning and product
design.
In our industry, this task is usually accomplished by the developer and the start-up team they have assembled to
bring the project and sales and marketing together. This is usually the developer, the team operations director
or project director, the developer's legal council, project consultants from various disciplines, the architect
and the construction company. There may be representatives from the trade exchanges as well as the finance and
investment community. For new company's new product launches, it is usually rare that the Marketing Director or
Sales Director have been hired while these decisions are still in play. For established companies, the marketing
and sales team management is normally involved in decisions about the nature of the product.
I point this out as a beginning to the topic of Product Launches, but more as advisory guidance. As a developer,
you are entering the Marketing and Sales business. You will be living, breathing and eating Sales and Marketing
for much longer than you will be nursing the project through the formative project development stages. You need
to pay as much attention to building your Sales and Marketing infrastructure as you do to building your resort:
both in time and resources. Your sales and marketing management teams need to have access to your ears during the
product development phase. It is essential to your survival and success that you come to market with a product
that doesn't just make design sense, it Must make Market Sense.
Will your project attract prospects? Will it do it naturally? What is the location? Why that location? Is the location
based on a business opportunity, or a strategic plan to develop a certain type of product in a certain market?
How large is your market universe of targeted qualified prospects? What percentage of those prospects can afford
your product? What percentage of those prospects will need to inspect, and ultimately purchase your product for
you to sell out? What is the size of their "vacationing unit" or family? What add-ons or bonuses will
you need to convert lookers to buyers? What states will you need to register you product in?
There are 100's of questions you must have answers to, if you are going to deliver the right product to your naturally
strongest market. It is absolutely imperative that you not be so in love with your location, design concept, or
proposed use plan that it cannot adapt to market realities.
The types of use plans available run the gamut from fixed unit/fixed week single week intervals, to float unit/float
week seasonal single week intervals, to clubs with totally equal points pools, to fixed unit weeks that drop to
points usage, to biennials, lock-offs, multi-weeks in 20th's, 17th's, 13th's, 10th's, 1/8th's, ¼'s and variations.
There are every variety under the sun.
Please consult your sales and marketing team at all steps along the way in both your architectural planning and
your use plan development. Failure to do so will likely result in either a product that does not have the potential
to be absorbed by the appropriate market in a profitable time period, or one that cannot easily be sold in either
a One Call Close in the case of the smaller intervals, or a relatively short sales cycle of the fractional interests
and club products.
As far as measurements, you will have to become intimately familiar with certain metrics, ratios and statistics
that are common terms for measuring your day-to-day success.
A few key terms are Cost of Sale, Average Sale and Volume per Guest. With these alone you can get a quick reading
on marketing and sales performance. Cost of sale is the total dollars spent on marketing and or sales activities
to earn the sale. You can measure it only against marketing costs, and you have the marketing Cost of Sale, against
the Sales Costs for Sales Cost of Sale. Taken against the Average Dollar Volume of the Sale, you have a quick percentage
to tell you if you are within industry norms for your product type. Volume per Guest, or VPG, is also referred
to as Average per Guest (APG) or Unit or Tour Efficiency. It is the average dollar (either gross or net) collected
per qualified prospect toured. It is the best single measurement of Sales performance by your team, by individual
sales people, and the best single number to determine the overall success of all of your marketing programs, or
each individual program.
These measurements are only possible with adequate data tracking. Once past the initial launch phase, vacation
ownership marketing direction is like the flight direction work of Gene Kranz at NASA. All of the specific information
being measured and recorded about the prospect, the program that generated them, the premiums, the tour times,
the salesperson, the time of tour, the result, the dollar volume of result and more. This data is telemetry for
decisions about future adjustments of marketing programs, premiums, staffing, training, management and more.
There are three fundamental programs that are the mainstays for vacation ownership marketing:
- OPC (Off-Project Contact or Off-Premises Contact): these range from beautiful, custom-built booths and
exhibits staffed by experienced, professional "marketing representatives" or "coordinators",
to roving bands of individuals doing their best/or worst, to attract visiting tourists to take a look at the latest,
or oldest project in town. If you are in a tourist area that has a significant percentage of your target, Qualified,
audience, OPC is an essential component, and may be the most essential component you have. OPC provides "Day
Tours" almost exclusively.
- Call Center/Out-Bound Telemarketing: These can range from a few representatives on phones, to hundreds
of call center operators working with the latest in call center technology: predictive dialers, CRM, and E-CRM
(Customer Relationship Management) systems. It is important to gauge the size of the call center, to the size of
the sales center, sales staff, phase of marketing infrastructure development that your project demands. Offers
are typically made for either a "direct-drive" ("day tour"), or for minivacation programs.
- Direct Mail/Call Center In-bound: You can use direct mail to generate day tours, minivacation guests,
or direct leads for your sales force. A typical package consists of a letter, a brochure, an offer, and a call
to action. It can be as simple as a postcard, or as complex as a multi-piece, timed-release whisper campaign. Costs
can range from under $.50 per piece to over $2.00 or $3.00 each depending on the quality and the market you are
going after.
When using any of these, you will need a fully functional tour administration department, sometimes called "Tour
Central", or your Control Center. It is the task of your Tour Administration to capture all of the necessary
data about the tour guest, their qualifications, time of tour. They need to manage the tour for "sales slot
availability" for all programs and lodging availability and costs for minivacation programs.
Each of these programs has it's own set of key metrics, and ratio's to use to measure status, success or failure.
In general, across the board, the following are a few definitions you will want to know:
Response rate: the percentage of the target market that responds to the offer, or program and agrees to
a presentation;
Show Factor: the percentage of the responders who show to the sales center for their presentation
Closing Percentage: the percentage of the prospects who show for the tour, who purchase;
In addition to the main programs we've already discussed there are a number of variations that are possible. Most
are some combination of the primary techniques of OPC, Telemarketing and Direct Mail for Day Tours and Minivacation
Guests.
Some people might ask, we'll what about Direct Response Advertising? What works and what doesn't. Aside from the
fact that it's a whole other topic, for the most part print and media placements are designed for the sought good
market. If you happen to be in an area where there is some pent-up demand for a timeshare product that isn't currently
being filled, then local advertising programs can prove very effective in generating additional Day Tours to your
mix. Some companies have done a tremendous job of introducing print media ads into their target markets to generate
minivacation guests. This is another area where caution is warranted. Because of exceptionally high ad costs, most
companies should test this program with small ads first. Gauge their effectiveness, and gradually increase the
size and exposure.
We are also one of the first to effectively use the Internet for Direct Response Minivacation Programs. You are
likely to see more and more in this area over the years.
I'm going to wrap this up with a brief look at the marketing component and some of the staffing and personnel issues
of New Product Launches. There are two basic ways of going to market:
- A Ramp Up
- An Event Inventory Release
Ramp-ups usually involve a gradual, phased start-up to marketing and selling the particular project. It is almost
imperative for a new company, and normal for a new resort for an existing company. Many established companies use
ramps ups as a method of shaking out and debugging the marketing and selling process. You'll want to use a ramp,
based on your ability to fill a pipeline of qualified prospects in advance of opening a project.
In most situations, there are tremendous pressures on developers to get as many sales as possible as soon as possible
after loan commitments and product registrations are in place. This runs a bit counter intuitive to the natural
growth that most organizations must go through to become thriving businesses. A vacation ownership company is not
a real estate project. It is a relatively complex series of interdependent activities performed by a staff of individuals.
A new project is usually a collection of professional management, who may or may not have worked together before.
Staff marketing positions usually are recruited locally, and many times are new to the industry, as are the administrative
team. Everyone is excited, and overworked doing their best to put the project together, one or more detail at a
time.
Without going too deeply into organizational management theory, this early stage is not the perfect model for a
successful enterprise. There are a lot of "hand-offs" where a prospect contact, contact information,
scheduling, qualifications, payments, confirmations, etc. need to develop to regular day to day business functions.
It's the nature of a start-up. It is better to build organization more slowly than quickly. Most pre-start pro
forma anticipate the business to take off on a dime, and get to a full pipeline within a matter of days, weeks
or months.
Your larger, and more experienced companies, to the chagrin of our more power hungry sales directors, understand
that they have a choice in starting up, even on a ramp. They can either begin to sell minivacation packages 6 months
to a year prior to opening, or give their projects 6 months to a year gestation period to begin to function as
a team. I guess the moral of the story is that if you are in a conventional start-up, you are going to be on a
ramp, and it will take about the same amount of time to build a pipeline of tours. You should just expect what
you create.
The other type of launch and start-up that is currently being used is the event based, limited inventory release.
These are also called private offerings, preferring offerings, exhibitions and so on. A private offering is a well-choreographed
program to come to market on a particular date and time, going direct to sales with a "mass" volume and
accelerated velocity. These are accomplished best by teams with experience in this form of sales and marketing.
Unlike conventional ramp-up launches, these programs do not go to market with discounted mini-vacations or premium
programs of any kind. They go to market as an "opportunity to get in on the ground floor". There are
a number of requirements that need to be in place before anyone should consider using this approach:
- A very strong comparable real estate market in the area
- An equally high comparable FIT (free-independent-traveler rental market
- Very limited amounts of developable land nearby
- Special situs, with great natural location amenities
- A large group of prospects (not just friends and acquaintances) who have expressed an interest in anything
on the lot
- True "low hanging fruit"
- A team of great closers, who are willing to work endless hours on the phone
- A local real estate brokerage community working closely with the developer.
All of these things need to be in place. As usual, gauging what type of launch you are executing is essential
to being successful. Many problems come when the start-up team, in love with the product, think differently about
the project than the world outside, and try to go to market with the opposite style than they should.
Private Offerings and launches are fueled by a combination of direct mail, and out-bound lead chase by sales representatives.
Sales people have interested prospects obtain "reservations" for an up-coming sales event, or private
offering. The reservation entitles the reservation holder to a selection position. Reservations are awarded in
order of acquisition. The position allows the prospect to select inventory before anyone with a higher reservation
number, and after anyone with a lower reservation number.
Reservations programs, private offerings and event based inventory releases work best when the product has a strong
real estate component. People want to get early numbered reservations when there is a natural buyer's competition
over view, unit size, time of year and other qualities found in whole ownership or Fixed week/fixed unit vacation
ownership. Unit pricing is set based on all of these factors. Intervals in highly demanded locations, in the largest
units, at the best times of the year create tremendous urgency to participate. Reservations programs require a
deposit from the prospect to participate, and are usually escrowed. Because of the closeness of this type of offer
to real estate, it is possible and desirable to enlist the assistance and cooperation of the local real estate
community in the process of surfacing leads.
The cost of sale of these types of programs is generally lower than conventional "tour based" marketing
and sales methods. Costs spent for premiums and minivacation subsidies are replaced by ones for excellent collateral
materials and supporting your sales staff for the 2 -3 month reservation sales windows in advance of the events.
Although these programs can be customized for many situations, it is essential that pent-up demand for the product
is tangible, and provable early in the reservation sales window. Developers who think there is a pent-up demand,
where only few have volunteered to put down a deposit, will be in for a shock as they discover that the natural
market they expected to materialize is actually a mirage.
Both ramp ups and event based launches will require some direct mail component to function properly so I'd like
to take the last couple of minutes and discuss the role of Direct Mail in the start up process.
From my seat at the table some direct mail is essential at the beginning of a marketing launch. There is some degree
of predictability, although minor, in the first round of direct mail. This can insure that your sales organization
has a pipeline of tours either at the start or soon after.
The position of Direct Mail in today's marketing environment is odd. In the very long term, we have seen a gradual
reduction in its effectiveness for a variety of reasons. In the short run, direct mail gets better and better response
with accurate tracking and mail management. And why is this?
Direct Mail programs are driven by lists. Lists are compiled by brokers. You, your mail house or one stop will
initially specify some demographics that you want to reach in your target market. Your list broker will then use
a variety of available lists to compile a master list containing a number of test cells of approximately 5000 names
each. These are enough names to give you a statistically projectable result you can expand into a larger campaign.
Test cells are the key to understanding what is likely to happen as you roll out your mail programs.
In your first mail drop, you will want to mail as many test cells as your budgets can take. Some of these
cells will be total dogs, while others are superstars. Some will generate a 1% or higher response, while others
barely make the phone ring. Now take a step back, and remember that all of these test cells matched your demographics,
but were compiled by different sources. In fact some of the lists weren't compiled. They were lists of responders.
These responders may or may not respond to your offer, but they are known to respond to some offers. Other cells
that are compiled strictly from available information, like subscription lists, credit bureaus or public records
may look like they contain excellent prospects. But maybe, they don't respond. And then again, maybe that response
file you bought, responded to something that has absolutely no relationship to your project.
We still need people to talk to, so we take an educated guess during your launch phase, pick 20 to 30 files and
watch what happens. If everything goes right, the overall list will undoubtedly be the worst direct mail campaign
you ever mail. Don't shoot your marketing director, at least not yet. Why not?
You have just done some real market research. You sent an offer to a known demographically targeted audience, and
some of the cells perform, while others fail dismally flat. Luckily, because you remembered what you learned here,
you didn't just pick one file that looks great, and spend 100% of your direct mail budget on it. What if that one
was the dog? Good luck.
You should be hoping to find which files are dogs, and which files are stars as soon as you can. It is important
to be ready before your campaign begins to record the results of every response, and follow the customer completely
through the transaction. You will want to know the response rate from the campaign as a whole, and from each individual
cell. You will want to follow the show factor, closing rate, total sales volume on the program and each cell.
It would be nice if you could immediately apply this information, but usually won't be able to get an accurate
read on your initial campaign until you are well into your second, and possibly your third or fourth. Your sales
team is hungry, and to keep them happy, they will need tours. So allocate enough resources to build your pipeline
regardless of performance of your initial series of campaigns. But when you do have accurate information, you can
act.
Don't just watch the response rates. Sell though is the only thing that matters, if you want to contain costs,
and maximize sales. So watch all your figures. Get rid of the cells that do not work, and replace them with more
names from the cells that work. Since your best cells aren't infinite, you will also want to continually test new
cells.
There are other areas that direct mailers get excited about: Offers and package. You will want to benchmark your
offers against offers that are known to pull response, and gradually alter them to test other degrees of response
and sell through. The same is true for the mail package that you send. The color, the number and type of inserts,
the envelope or card size, the graphic content and the call to action are all subjects of testing. There are a
few other key areas to watch including the geography, driving distance and the timing of the piece.
The only way to test is to change one thing at a time, not the whole package. Using some degree of direct mail
is essential, as should be your commitment to using it. Only by mailing, and religiously tracking the results,
will you have the information and experience you will need to maximize your returns.
So let's sum it all up:
- Don't Fall in Love with Your Product,
- It's an Unsought Good,
- Go after Your Universe of Targeted Qualified Prospects
- Put together an Attractive Premium Package
- Prepare them for your Sales Team
- It's Primarily a One Call Close Situation
- Copy Your Competition, if you're ready
- It's a three legged stool: Direct Mail, OPC and Telemarketing
- Test Ad Campaigns carefully
- Get Advance Marketing Guidance before going to market
- Don't expect to sell out a project on Low Hanging Fruit alone
- Choose your Launch Method carefully
- Measure your Direct mail and use it as an ongoing program
I hope you enjoyed my speed-reading. Thanks for sticking around. The proctors will be passing out the test and
your home assignment in a few minutes.
Thanks again. Happy trails.
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