John Miglautsch
A few weeks ago, AdAge actually published a Direct Mail article (one of only 13 in 28 years). My attempt to read it was rewarded with a flood of email – 11 per day. Several were subscription offers.
As much as we deny it, Direct Mail (Dmail), the second largest media in ad spending, is off the advertising/marketing radar. Owners, investors, board members, CEOs & CFOs have almost no Dmail experience, exposure, or enthusiasm. I have had to help dozens of marketing people justify their Dmail budget because investors thought it was “too expensive.” Mailers that got new owners often lost not only their jobs but watched the company implode as well, as Dmail was repeatedly slashed.
2024 is the year we fight back!
The direct mail industry has settled for ‘generating a measurable response’ as its test of Direct Marketing. On and off-line we are told we are measuring EVERYTHING. However, measurement alone will NEVER predict the future. ALL data is historical and therefore, MORE is needed!
Applying the scientific method to direct mail marketing
I hold two U.S. Patents in Cement Chemistry. I used direct marketing testing techniques to invent and develop a new kind of cement. Direct marketing is built on the scientific method. Science moves forward by observation, hypothesis, experimentation, explanation, and finally theory.
Observations (often failed experiments) challenge us to figure out what happened – why the real world did not match our expectations. We ponder possible variables which were omitted or perhaps bad experimental design and why that may have effected the outcome. Repeat testing yields preliminary explanation of the causal impact of key variables. Replication of these results (especially by other scientists) confirms the explanation and gives us definitive theory. With theory, we can confidently connect causation from A to B. This is how science and engineering predict future outcomes.
Advertising and marketing education (and practice) pay little or no attention to this fundamental uncompromising process. Marketing press boldly proclaims, “Definitive Data,” “Measure Everything,” “Predictive Modeling,” “Real-Time Data,” and “Target Marketing.” At the same time, our clients repeat the tired whine, “Half my advertising is wasted, I wish I knew which half.”
2024 is the year to turn this around.
“Scientific Advertising” by Claude Hopkins just passed its 100th anniversary. It is time to re-teach and re-learn the fundamentals which AT THAT TIME were well established for 50 years. Claude wrote, “… mail order advertising first established many of our basic laws.”
Can 100+-year-old principles help you prove what is working, get bigger budgets, and save your company from needless advertising waste? YES!
A success story in direct mail testing
Not many years ago, we were hired by Lovesac to turn around their catalog marketing. They would not even share their historical catalog results because there were basically zero trackable orders. We began by loading their transaction data, identifying customers at multiple locations, and identifying important variables which seemed to impact results.
Before we could really get off the ground, a new VP of Marketing was hired. He was from a large well-known CPG brand. He asked to have a serious talk.
“Our consumer research tells us that once people know of us and our products, they are as likely to buy from us as our major competitors, like Wayfair or William Sonoma. Why then, should we waste a lot of money mailing to our past customers, who know who we are and already own and understand our products? We could spend that money on brand awareness; drive new people to our website and stores,” he suggested.
They probably had already decided to cancel the catalog and save the million plus dollars a year.
“That is one of the best questions any client has ever asked, and you’re probably right. But would you like to know the ROI on your catalog, before you do something rash?”
“How can you know that?” he asked.
“We select your customer mailing list, then carefully omit about 10% of the mailing. We know who got mailed and who didn’t, so we compare how both groups of customer spending after the catalog hits. Both have equal exposure to your TV, social, email, retail, etc. If the catalog is effective, those who got it will spend more. If your other media is doing all the heavy lifting, then both groups will be the same and you can safely kill the catalog.”
He agreed to run the test.
Across the 100,000 mailed customers about $10 more was spent compared to the unmailed. Taking out the Cost of Goods and Cost of Order Processing and overhead, for every $1 spent on the catalog, we generated $3 of bottom line profit – 300% ROI.
However, as we did the matchback, we noticed that there were many next-door neighbors who also ordered – not matches, omitted, clearly someone new. The catalog was being shared, perhaps given to visitors who admired the novel Lovesac furniture. When very near neighbors were taken into account, the ROI was 900%. And, for every one repeat customer order, two new neighbors were buying.
Next, we used several other testing methods to experiment on key offers, web and retail traffic generation, and store openings. The direct mail budget kept increasing. Lovesac then tested mail retargeting to anonymous web visitors. They took what we learned in our scientific direct mail experiments and rolled it out to TV, digital, and social media – essentially pouring gas on the overall impact. In the three years we worked with them, total sales went from $50 to $100 million (and they went public).
About that last year, Founder Shawn Nelson said, “Our biggest growth ever… Most of it is due to the marketing department, the way that they’ve spent money very carefully with really great returns has driven this business to a whole new level.”
Direct mail strategy for 2024: Focus on incremental ROI
In 42 years of direct marketing, I’ve seen these principles unfailingly prove INCREMENTAL ROI. A repeating properly-designed experimental system cannot fail. You will always learn and improve.
2024 is the year to fight digital fraud and demand this process in your advertising!
This article was first published on the LOB Blog 12/14/23