Response Rate Report: Benchmark information for relevant marketing programs

Transcription

1 : Benchmark information for relevant marketing programs December 2008

2 Table of Contents Executive Summary... 1 Introduction... 3 The goal of this report... 6 Getting realistic estimates from the PODi response rates... 8 Direct Order Campaigns... 9 Heritage Education Funds case study: direct order in financial services... 9 More direct order examples Estimating the effect of personalization in direct order campaigns Lead Generation and Traffic Generation Campaigns Steel Aviation case study: lead generation in private aircraft sales More lead generation examples Estimating the effect of personalization in lead generation campaigns Lead Nurture Campaigns Alphagraphics case study: lead nurture in print & marketing services More lead nurture examples Estimating the effect of personalization in lead nurture campaigns New Customer Experience Campaigns Polaris case study: new customer experience in the manufacturing market More new customer experience examples Estimating the effect of personalization in new customer experience campaigns Loyalty Campaigns Specialty Retailers case study: loyalty in retail More loyalty examples Estimating the effect of personalization in loyalty campaigns Conclusions Other Resources from Caslon i

3 Table of Tables Table 1: Suggested response rate targets for direct order - sales to consumer campaigns...2 Table 2: Suggested response rate targets for fundraising campaigns...2 Table 3: Suggested response rate targets for lead generation campaigns...2 Table 4: Suggested response rate targets for nurture campaigns...2 Table 5: Suggested response rate target for loyalty campaigns...2 Table 6: Suggested response rate targets for direct order - sales to consumer campaigns...11 Table 7: Suggested response rate targets for fundraising campaigns...12 Table 8: Suggested response rate targets for lead generation campaigns...15 Table 9: Suggested response rate targets for nurture campaigns...19 Table 10: Suggested response rate target for loyalty campaigns W. Caslon and Company. All Rights Reserved.

4 Executive Summary How much can personalized, relevant direct marketing increase your response rates over static direct marketing? This is not an easy question to answer as response rates depend on several variables including: the relevance of the message, the offer, the list, the creative and the timing. Often the process is as much art as science. This report is intended to help you set expectations for the response rates that relevant personalization can provide. We base our calculations on data from the PODi collection of case studies. For comparison, we provide data (where possible) from the DMA s annual Response Rate Report, which represents the typical results of static mailings. A problem with this approach is that the response rates mentioned in PODi s cases are atypical. After all, the selection process for the PODi cases ensures that they represent much-better-than-average results. Since the purpose of this report is to provide guidance for response rates you can use for your campaigns, we choose to be conservative and use results that are one-fourth the PODi case study medians. Response rates vary by the campaign objective and in this report we will consider five main types: Direct order (including fundraising) Lead generation/traffic generation Lead nurture/follow-up New customer experience Loyalty Two other key variables that arise from analyzing PODi case studies which you can use to help predict response rates are: House list vs. Outside (rented) list Size of the campaign We don t think the PODi case studies are typical; however we think you can reasonably expect to achieve one-quarter of the median increase reported in the PODi data for a given type of campaign. You can take the results of a previous static campaign (or, if you don t have those, the corresponding average from the DMA report) and get an estimate of what to expect from a relevant VDP campaign by applying the PODi factor to the static results. 1

5 Here are the values we recommend using in planning your campaign: Direct order - sales to consumer Typical static response rate (DMA) 1.75% Typical personalized response rate 3.2% Factor increase for personalization vs. static 1.8 For a good house list add 1% For a large (>1000) rented list subtract 1% Table 1: Suggested response rate targets for direct order - sales to consumer campaigns Fundraising Typical static response rate (DMA) 4.46% Typical personalized response rate 7% Factor increase for personalization vs. static 1.5 For a good house list add 1-3% For a large (>1000) rented list subtract 1% Table 2: Suggested response rate targets for fundraising campaigns Lead generation Typical static response rate (DMA) 3.2% Typical personalized response rate 5% Factor increase for personalization vs. static 1.5 For a good house list add 1% For a large (>1000) rented list subtract 1% Table 3: Suggested response rate targets for lead generation campaigns Nurture Typical static response rate (based on DMA data) 2% Typical personalized response rate 6% Factor increase for personalization vs. static 3 For a good house list add 1-2% For a large (>1000) rented list subtract 2% Table 4: Suggested response rate targets for nurture campaigns Loyalty Typical personalized response rate 5.4% Table 5: Suggested response rate target for loyalty campaigns 2

6 Introduction Most marketers know instinctively that personalization can increase response rates for direct mail. But there are very few concrete examples available that can tell a marketer how big the increase will be. And yet, having some idea of what to expect is critical if you want to decide whether personalization is worthwhile or if you have to defend your personalized campaign against criticism. If you are a print provider proposing a personalized campaign to a customer, or if you are a marketer championing personalization within your corporation, you are likely to run into people who think that personalization won t pay for itself. To overcome their objections, you need to be able to estimate how much more profitable your personalized campaign will be than the corresponding static mailing. A key piece of information you will need is the increase in response that personalization brings. Providing that information was our goal when we published the previous version of this report in June of New case studies. Now we have updated the report with information from new case studies that have been added to the PODi case study database in the past 14 months. This has resulted in changes in many of the statistics. (The data on fundraising is an exception: there were no new fundraising case studies with sufficient detail added to the database, so we have re-published last year s data without any change.) We have also replaced some of the cases discussed in the text of the report with newer ones. Since the last report: growing use of personalized URLs. Although the overall results in this year s report are similar to those in our last report, there are some differences that are worth mentioning. The biggest difference this time around was the widespread use of personalized URLs (PURLs). The majority of the new case studies used them, whereas relatively few did in the past. In cases where lead generation was the goal, the typical campaign consisted simply of a mailing that directed the prospect to a PURL. (Of course, a PURL by itself is not a reason to respond, and these campaigns had to be both relevant and interesting to achieve good response rates.) In general, the new case studies we are getting provide better data on response rates than we have had in the past. This, too, is a result of the widespread adoption of PURLs. One of the features of most PURL software is accurate tracking of responses far more accurate than most companies manage to achieve with traditional direct mail, where mailroom tallies or new entries into a prospect database are typically the basis for assessing response rates. 3

7 The detailed information available with PURLs is so great that it actually leads to a question as to what constitutes a response. Is it enough for a prospect to simply visit the URL, or must they complete the survey or other data-gathering steps at the site? Even though most users keep the landing page data gathering to a minimum, there can be a significant difference between the percentage of people who begin the process and those who complete it. In order to compare results with the DMA we define a response to be when a prospect provides information that signals acceptance of an offer or interest in having further contact with the marketer. When talking about PURLs a response consists of a prospect going to his/her URL and then taking the next step of accepting an offer or signaling further interest. Just going to the personalized landing page is not enough. Every campaign is unique and results vary. According to MindFire Inc. there are a several dynamics that drive better results for each campaign. The key dynamics that MindFire sees as critical for more successful campaigns are: A great data base relevant to the opportunity or campaign objective A strong offer Creative that supports personal and relevant communication The timing of the campaign and offer With all of these dynamics in play MindFire sees a 3-5x improvement of personalized marketing campaign results versus traditional direct marketing methodologies. Joe Manos states We often see our customers achieving 10% -40% response rates for really effective campaigns driven by outstanding data bases and offers. Keep in mind it isn t just the use of the personalized URL but also leveraging cross-media ( marketing and any mass media elements in use for the campaign) that provide the improved results. A practical example: F.P. Horak What are the PODi case studies like, and how can we get useful information from them? Consider the case of F.P. Horak, a marketing service provider, which used a personalized mailing to promote an open house. F.P. Horak holds open house events for prospective and current customers several times each year. The company wanted to increase the number of attendees for these events and decided to use personalized direct mail with an adventure theme to invite people and to showcase some of the company s capabilities. 4

8 F.P. Horak combined mailing information for current customers with a purchased list of businesses that mirrored their current customer roster. Horak then called each company on the list and got the name of the marketing contact. They mailed a total of 572 message-in-a-bottle (MIB) packages to prospects located within a 60-mile radius. The mail piece included a personalized URL inviting the recipient to respond to an online survey and to register for one of the upcoming events. When a recipient completed the survey, he or she automatically received a follow-up , with the content varying depending on the answers chosen on the survey page. The survey asked which products and services the respondent s organization currently uses, and which services it needs help with to reach its marketing and business objectives. Using a personalized URL has made it easy for F.P. Horak to check results and gather more information about prospects and customers. 24% of the recipients visited their personalized URLs and 29 individuals signed up for tours. In addition, five prospects have become customers. In this case, it s clear that a smart use of personalization generated a high response rate resulting in great lead generation, plus very good actual attendance at the open house. 5

9 The role of relevance. Improved response rates do not magically occur when personalization is used. Personalization by itself is not even the most important factor. The critical factor is the offer, and how relevant it is to the recipient. If a customer receives a mailing piece that offers them something they really want, just at the time when they want it, they will respond. Otherwise, they will not. It makes absolutely no difference how the piece was produced. What personalization provides is the opportunity to make an offer that is more likely to be relevant because it is tailored to the perceived needs of the individual customer. This concept is at the heart of what we call relevant marketing. More formally, we define relevant marketing this way: A relevant marketing piece consists of a message about a product that the recipient needs, delivered when the recipient is ready to receive it. In the F.P. Horak example, the relevance is in mailing valuable information to a list of qualified respondents and providing the right follow-up, in a timely manner, to their stated business needs. The F.P. Horak case represents a single type of campaign (one aimed at generating new leads and getting more business from current customers) in a specific vertical industry (Printing & Marketing Services). In the report that follows, we will be looking at other types of campaigns and other industries, but always with an eye toward relevant marketing. The goal of this report In the report that follows, we want to provide you with guidelines that you can use to help you estimate response rates when proposing and planning relevant marketing campaigns involving variable print. We will primarily use two sources of information: the PODi collection of case studies and the Direct Marketing Association s annual Response Rate Report. Campaign objectives. Response rates can vary greatly depending on what you are trying to accomplish. In many lead generation situations, for example, you may simply want to get as many prospects as possible to identify themselves and permit you to contact them further. If you are doing fundraising, on the other hand, your goal is to maximize the net contribution dollars you can collect. These are examples of campaign objectives, and in this report we will consider five main types: 6

10 Direct order (including fundraising) Lead generation/traffic generation Lead nurture/follow-up New customer experience Loyalty How much are response rates affected by the campaign objective? We will discuss that in some detail in this report. But the following graph will give you an idea. Response rates for static mailing pieces range from an average of under 2% for direct sales efforts to 4.5% for fundraising, according to the DMA. PODi s own data indicates that (for a relevant, personalized campaign) typical response rates range from over 3% for direct sale to over 7% for fundraising campaigns. Typical response rates, static and personalized campaigns (Data source: Caslon analysis of PODi and DMA data) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Direct sale Campaign objective Lead generation Lead nurture Loyalty Fundraising Copyright 2008 Caslon & Co. DMA (static) PODi (personalized) Figure 1. Typical response rates - static and personalized campaigns Response rates are influenced by the vertical market being addressed as well as the campaign objective. It is the combination that produces the response rate results. This is illustrated in the diagram below. 7

11 For each of the five campaign objectives given above, we will start with one fairly detailed case study from a specific vertical, looking at how relevance was achieved and how success was measured. We will then take a more general look at the issues for campaigns of this type, using additional examples from other verticals. Finally, we will provide the basis for estimating response rate improvements from personalization for this type of campaign. Getting realistic estimates from the PODi response rates This report is intended to help you set expectations for the improvement in response rates that relevant personalization can provide. We base our calculations on data from the PODi collection of case studies. For comparison, we provide data (where possible) from the DMA s annual Response Rate Report. This represents the typical results of static mailings. A problem with this approach is that the response rates mentioned in PODi s cases are often unrealistically high. A typical, relevant, well-designed and well-executed campaign can rarely achieve even a third the rate of response that similar cases in the database have reported. After all, the selection process for the PODi cases ensures that they represent much-better-thanaverage results. Because the actual response rates are often higher than you can expect to achieve, we don t mention them very often in this report. 8

12 On the other hand, the increases in response rate that appear in the case studies are useful as the basis for setting expectations for VDP results. It is true that these increases are higher than average, but you can adjust for that. We ll provide a factor for how much personalization can improve the response rate for each type of objective versus a static campaign. We also provide guidance for the type of database used. You can take the results of a previous static campaign (or, if you don t have those, the corresponding average from the DMA report) and get an estimate of what to expect from a relevant VDP campaign by applying the appropriate PODi factor. So what about the extraordinarily high response rates reported for some of the PODi cases? Some of them report rates of 25%, 50% and more. Are they to be believed? Obviously, PODi has limited ability to verify the claims of those who submit case studies, but we think that, on the whole, they are accurate. If you put together a great concept, a great design and a great list, and make the offer really relevant, response rates can go through the roof. The exceptional response rates from some of these cases serve as a reminder that a really inspired campaign can outperform the averages by a huge factor. Direct Order Campaigns Direct order campaigns are intended to trigger an immediate purchase. This is the type of campaign that typically has the lowest response rate, because the other types of campaigns don t require the recipient to pay anything immediately (and in fact may involve rewards for the recipient). Heritage Education Funds case study: direct order in financial Each year Heritage Education Funds Inc., one of Canada s premier providers of Registered Education Savings Plans, conducts a direct mail campaign reminding plan holders that as the end of the year approaches, they should consider making a contribution to their plan. Heritage had not seen an increase in its response rate in the past three years and its return on investment was stagnant. They decided to try something new a personalized mailer. Within the first three weeks, the personalized piece generated a response rate 10 times higher than their traditional static piece had. Overall, the rate of return for the one-to-one piece was 163% higher without any follow up from Heritage sales representatives. Once sales representatives called their clients, that response rate jumped to 191%. After six months of measurement the return rate of the 1:1 piece was 500% greater. 9

13 At the conclusion of the campaign, the one-to-one piece delivered a 76% increase in the number of units sold over the traditional piece. The cost to Heritage per customer acquisition had decreased by 21%. While the traditional direct mail piece appeared to have little influence in changing the client s purchasing decision, more than 90% of those who received the customized statement chose to make a monthly payment and the average monthly contribution was increased by $40. By compelling clients to increase their monthly contributions, the customer lifetime value of the one-to-one piece is 400 times greater than that of traditional marketing pieces. More direct order examples Heritage Education Fund is an excellent example of how personalization can greatly improve response rates in the Financial vertical. Let s consider a case from a different vertical market. A classic case from the Retail market comes from Sainsbury s, the UK supermarket chain. Each year, Sainsbury s sends birthday cards to members of its frequent shopper program. It switched from a generic card, which included generic coupons, to a personalized card. The card showed the member s name appearing in icing on a cake on the front, and on the back were coupons for products the member was known to purchase. The response rate (measured in terms of coupons used) increased from 33% to 50%, an increase of 50% an extraordinarily good result. 10

14 Putting the recipient s name in realistic-looking icing on the cake is a nice touch which draws the recipient s attention to the piece. But clever design can take you only so far. If the offer was not relevant to the user, the coupon would never get used. Fundraising. A very common sub-category of direct order campaigns is fundraising. Although fundraising campaigns have several characteristics that distinguish them from other types of direct order campaigns, the key feature asking for an immediate payment is something they have in common. Non-profit organizations frequently have good databases that can be mined for personalization opportunities when they do fundraising. When The University of Toronto re-designed its fundraising approach, it made use of a lot of specific information about its graduates. The University is divided into semi-autonomous colleges, so the appeal included information specific to the college from which each alumnus graduated, including material about faculty members and programs there. As result of this change in approach, donations increased by 30%. Estimating the effect of personalization in direct order campaigns Static mailings to existing customers generate relatively low response rates (the DMA reports an average figure of 1.75%). This means that a relevant marketing campaign, even without spectacular response rates, is usually a significant improvement over a static campaign. The PODi case study data has a response rate range from 4%-65%, with a median response of 15% Here are the values we recommend using in planning your campaign: Direct Order Typical static response rate (DMA) 1.75% Typical personalized response rate 3.2% Factor increase for personalization vs. static 1.8 For a good house list add 1% For a large (>1000) rented list subtract 1% Table 6: Suggested response rate targets for direct order - sales to consumer campaigns 11

15 The special case of fundraising is slightly different. Fundraising campaigns usually get response rates that are higher than other direct order campaigns because of the loyalty many contributors feel to charitable organizations. At the same time, the increase in response that personalization produces is more muted. This is probably because the relevance factor is already strong in a static campaign and is not affected as dramatically by personalization. Here are our suggested targets for fundraising campaigns: Fundraising Typical static response rate (DMA) 4.46% Typical personalized response rate 7% Factor increase for personalization vs. static 1.5 For a good house list add 1-3% For a large (>1000) rented list subtract 1% Table 7: Suggested response rate targets for fundraising campaigns Remember, the list you use is a critical element in determining your response rate. 12

16 Lead Generation and Traffic Generation Campaigns A lead generation campaign is the first step in a multi-step sales process. In the initial lead generation step, the objective is to get the recipient to respond in some way, thus obtaining permission for further contact (as well as more information about the consumer s needs). The second step is to follow up the leads, which we will discuss later. Steel Aviation case study: lead generation in private aircraft sales Steel Aviation is an aircraft reseller that specializes in Cirrus aircraft. The company wanted to increase the number of highly qualified leads coming into the sales department before unveiling a new Cirrus aircraft. Owners often broker an old plane to buy a new one, so Steel Aviation wanted to locate a number of possible buyers for the older planes and quickly. Using a highly targeted direct mail campaign with a personalized URL as a response device, the company generated leads and positioned itself as a market leader. 13

17 Working with Engage (which acted as both agency and print provider), the company decided to do a direct mail campaign with a personalized URL as the response device. Using a rented list of current Cirrus owners, Engage was able to get more information for personalization than a name and address. The direct mail piece was a personalized postcard with an image of a Cirrus plane similar to that owned by each recipient, with the recipient s aircraft ID number embedded in the personalized URL. To encourage people to respond, Steel Aviation included an offer of a free market evaluation of the owner s current aircraft and a discounted broker fee. Steel Aviation got four leads very quickly after mailing the project and kept the personalized URLs open and available for three months. Eventually, 12% of prospects visited their page. Of these, 6% completed the survey and asked for follow-up. (Although their numbers were small in absolute terms, these respondents represented very large dollar volumes of potential business.) In addition, some people who received a card mentioned the card and the offer on a Cirrus owners web forum. These mentions led to additional responses. And, a business broker and participant on the forum read about the Steel Aviation campaign and contacted Engage to begin a campaign for his business. Steel Aviation was very pleased with the results of the campaign because it met all of the company s goals and helped position it as a market leader. The community of Cirrus plane owners is a small, tightly knit group. The piece was relevant to them because it included a picture of a plane like theirs, with their plane registration number on both the mail piece and the personalized URL. And, of course, it included an offer they found hard to refuse. More lead generation examples In lead generation campaigns, the offer can be paramount. If you can get people to your landing page with an offer, you have a better chance of informing them about your product and gathering the leads you re looking for. Take this example from the Farming/Agriculture market NuFarm Limited. NuFarm Limited sells its products through distributors. The company was promoting two products to the United States market and wanted to raise brand and product awareness among current and prospective end users. A direct mail campaign with a PURL response device, as well as offers of prizes, helped the company reach these goals. 14

18 One thousand distributors were mailed a box with a big label on the outside that said, We've got your back, mate, with a back scratcher and personalized game piece inside. NuFarm then purchased a list of farmers in targeted areas. More than 9,000 current and prospective end users received a postcard that used the same imagery and slogan. All of the pieces contained a PURL that directed recipients to a landing page. The offers used to drive people to the landing page were a chance to win a prize valued at $2,500 or merchandise worth $25 to $500. Once they visited the PURL, recipients were notified if they were instant prize winners or entered into the Grand Prize drawing for the $2,500-valued prize. The program was very successful, and NuFarm, which would have been happy with a 5% response, got 11.4% overall. The highest response rate was from distributors, 46% of which responded by visiting their PURLs. The company got a higher than normal response rate from users and potential users: 6.7% of them responded in the same way. The PURLs were open and available for three months after the initial mail drop, but NuFarm is still hearing from people who received a box or card. In another example, this time from the Financial vertical, Flagstone Mortgage used information from credit firms and county records to target borrowers who had mortgages with other financial institutions. The campaign (an introductory postcard, a letter, and a follow-up postcard mailed a few weeks apart) mentioned the recipient s current mortgage amount and rate, and told how Flagstone could offer them better terms. Flagstone achieved a remarkable 11% response rate. None of its previous mailings had ever exceeded 1%. Estimating the effect of personalization in lead generation campaigns PODi case study data had a median response rate of 20% and a range from 1% to 100%. If you are planning a lead generation campaign, you can use these values as a starting point for estimating your response rate improvement: Lead generation Typical static response rate (DMA) 3.2% Typical personalized response rate 5% Factor increase for personalization vs. static 1.5 For a good house list add 1% For a large (>1000) rented list subtract 1% Table 8: Suggested response rate targets for lead generation campaigns 15

19 Lead Nurture Campaigns Once you have a lead, how do you follow up with that person? This step is a natural fit for relevant marketing programs, because you can use the information from the initial lead generation process to tailor the follow-up. Alphagraphics case study: lead nurture in print and marketing services AlphaGraphics in Billings, Montana, takes targeted marketing seriously. It has developed DirectHit, a coordinated approach to using technology to solve marketing challenges. And what better way to explain how it all works, than to have some fun and demonstrate it in action? Its clients got the picture to the tune of eight new campaigns within two months of the DirectHit launch. Billings AlphaGraphics has taken an integrated approach to direct marketing one that combines direct marketing concept with a variety of technologies to achieve optimal results for its clients. The product, DirectHit, uses mail services, variable data printing, and personalized web sites to achieve more relevant communication and higher response rates. In launching the new product, the goal was not only to introduce it to current clients, but also to make a powerful demonstration of its effectiveness. The underlying strategy was to connect with 437 current clients (marketing professionals and owners of larger companies) that AlphaGraphics felt could benefit from the DirectHit approach. The majority of the clients (80%) were located within 100 miles of AlphaGraphics. They knew that the approach itself would do the convincing and decided to forgo any hard-sell messaging and keep the communications fun. Because the client list included professionals from a wide range of vertical markets, AlphaGraphics initial idea was to build the campaign around music, movies, and chocolate things almost everyone can relate to. AlphaGraphics, along with its design partner, Heins Creative, built on their concept to create a multifaceted, four-step campaign. (AlphaGraphics allowed from 1½ to 2 weeks between each mailing.) 16

20 The launch began with an oversized four-color postcard, simply personalized with the recipient s first name, a personalized URL, and a unique password, along with the image of a standing-room-only audience. The copy continued the audience theme and introduced DirectHit. The callto-action offered a demonstration of how DirectHit works, plus a chance to win an ipod if the recipient visited their personalized Web site. The response to this first mailing was impressive 7.55% of the list (33 people) visited their web sites and answered some seemingly odd multiple choice questions: What type of music do you prefer? What kind of television shows do you prefer? What kind of movies do you like? What s your favorite kind of chocolate? While these folks were puzzling over the questions, the people who had not responded were being contacted again with Step 2. This was a second, similar postcard, delivered in an envelope. We ve seen that while postcards sometimes get stopped at the front desk or thrown away out of hand, individually addressed letters in envelopes almost always get delivered and opened, says Doug McIsaac, Manager of AlphaGraphics Direct Marketing Group. We had also discovered that our branding was too subtle on the first mailing and used the envelope to make that more apparent. This time, the response rate for this sub-group of 404 jumped to 14.1% (57 people). It was time to show the respondents what some of those questions added up to. Step 3 was a custom tin with a personalized label. Inside was a chocolate CD in their favorite flavor: white, milk, or dark chocolate. The label included an image representative of their favorite music: rock, country, or top

21 Non-responders also received the same treats, but the labels and flavors were chosen at random, and a personal letter from AlphaGraphics president was included to nudge them to visit their web sites and see what DirectHit was all about. Out of the remaining 347 people on the list, 72 finally visited their sites a response rate of 16.48%. The final step was a fun, personalized, Variety-style poster that included personalized content and images. This was sent to all responders. Over the complete multi-touch campaign, 162 people out of 437 visited their sites and learned about DirectHit a total response rate of 37.07%! The best responses came from marketing firms, which are quick to understand the power an approach like this can have on their clients bottom lines. The cost of the campaign was under $10 per person. Says Doug, A typical DirectHit campaign can average around $4,000. Our return on the project was great 8 new campaigns closed within 60 days and we have several more in the pipeline. We gave 20 presentations of DirectHit as a direct result of the mailings. Plus, we ve brought in a number of smaller VDP jobs as well, due to our increased visibility. This application won PODi s 2008 Best Practices Award in the Self- Promotion category. More lead nurture examples In the Manufacturing vertical, Canon, like many companies, had accumulated a database of prospects from trade shows, inquiries, and other sources. It wanted to keep in touch with them and, eventually, turn them into customers. It decided to send out a personalized, full-color newsletter. As a test of the idea, the company mailed a small four-page newsletter to 1,300 prospects from its database. The newsletter contained articles that varied according to the known interests of each prospect (for example, wideformat printing, variable data printing, and so on). At the end of each article was a personalized URL that could be visited for more information. Since 18

22 there was a different personalized URL for each article, Canon could not only tell who was responding, but also which article they had been reading. Canon reported that 5.48% of recipients typed in their URL. What s more impressive, the company reports that 93% of those who visited their personalized landing page ultimately bought something from Canon. A Retail example for lead nurture is the customized brochure sent out by American Signature Furniture to prospects that browse at a store. A sales associate collects contact information from the prospects and notes what furniture they are interested in. A personalized brochure, featuring the furniture of interest, is printed and mailed the next day. The number of people returning to the store after receiving the personalized brochure went up by 10%, and they spent 40% more than the average shopper. There are also multiple examples in the PODi database of lead nurture campaigns in the Higher Education vertical. Estimating the effect of personalization in lead nurture campaigns Based on the PODi cases, here are our recommendations for estimating your response rate in a campaign to follow-up leads. Since the DMA does not break out lead nurture as a category, we have made an estimate for static campaigns, based on information from other DMA data and the PODi cases. PODi case study data response rates range from 6% to 48%, with a median of 25% Nurture Typical static response rate (based on DMA data) 2% Typical personalized response rate 6% Factor increase for personalization vs. static 3 For a good house list add 1-2% For a large (>1000) rented list subtract 2% Table 9: Suggested response rate targets for nurture campaigns The response rate increase shown, 3x, may seem high; however PODi case study data response rates range from 6% to 48%, with a median of 25% indicating a high lift is possible. Still, because there is uncertainty surrounding the increase, we suggest taking the 6% figure with a grain of salt, and presenting potential clients with a lower figure that still offers a great return on investment. 19

23 New Customer Experience Campaigns New customer experience programs are a growing category of direct mail campaigns. One reason is simply that new customers are excellent prospects for additional purchases. Direct mail marketers have long known this. (In the periodical subscription field, new subscribers are routinely offered special deals to extend their subscriptions for additional years a process known in the industry as renewal at birth. ) Looking at it from the relevant marketing perspective, the new customer presents a unique opportunity. As a marketer, you have a chance to build on the good first impression that your new customers presumably have, based on their initial purchase. Since you know what they bought and when they bought it, you have a good basis for knowing what else would be a relevant purchase for them. Polaris case study: new customer experience in the manufacturing market Polaris Industries created an easy-to-use, Web-to-print program for its dealer network in the United States and Canada. The program is now more than five years old and 38% of dealers now participate. Each new customer receives three mailings at key points in the first year of the relationship shortly after the initial sale, on the anniversary of the sale, and during the December holiday season. 20

24 Each card is customized to reflect the product purchased. An image of the product is used; for example, a snowmobile purchaser s card would have an image of a Polaris mountain, sport, or performance snowmobile depending on which type they purchased. In addition, each card is personalized with the customer s name and dealer information and signature of the dealer. Dealers can elect to add a coupon created by Polaris or design their own coupons online with their own images and text. A few dealers have reported an overall response rate of 15.5% for the new customer experience program. Response rates for some of the communications as been as high as 40%. More new customer experience examples Campaigns that specifically target new customers are relatively new, and there are only a few of them in the PODi database. Most have no response data, so we will not include them here. Apart from the Polaris case, other cases are from the Higher Education vertical (Boise State University) and Telecommunications (Carphone Warehouse) market. Boise State University mandates incoming students attend an Orientation session. But for new students, sometimes even finding the campus is a challenge. Navigating it, finding the right location for their specific sessions, and identifying the closest parking lot can be confusing and potentially ruin a first experience with the university. Boise State understands that a positive initial experience is the key to building a long-term relationship with students. It has developed personalized Orientation invitations, full of individualized information, maps, and directions; designed to make that first visit to campus for students and their families easy and enjoyable. Although Boise State did not report response rates, they have seen an up tick in on-time and unstressed attendance, and have received extremely positive feedback from students and families. In an example from the Telecommunications vertical, the Carphone Warehouse uses personalized welcome packs to give every new cell phone customer good first experience. The packages are also used to cross-sell options, accessories, and related products. 21

25 The company recognized that it could increase its revenue by selling existing cellular phone service customers complementary products and services. This increased revenue could come from a new contract or phone upgrades, as well as the purchase of other products and services such as insurance and phone accessories. To these ends, the company gathers a variety of information from customers when they sign up for a phone. This point of purchase information gives the retailer an excellent opportunity to cross-sell accessories such as hands-free kits, Bluetooth connections, insurance, service contracts, or upgraded connection plans. The welcome booklet is customized to the individual s particular phone, network service provider, tariff, and mobile phone number. Depending on their purchase, the booklet also cross-sells products and services not purchased as well as offering a trade-in incentive to use when their mobile phone contract comes up for renewal in 12 months. Research revealed that the customers felt this to be a very useful reference guide. They are also happy that the Carphone Warehouse has communicated on a one-to-one level with products and services applicable to them. While there is too little data in these case studies to provide a basis for estimating response rates, you can get a sense of the power of relevant marketing from the fact that Carphone Warehouse produced 1.2 million Welcome Packs in just one year. Estimating the effect of personalization in new customer experience campaigns As noted above, we don t have enough data to make an estimate of personalization effects yet. As the PODi database continues to grow, we hope we will be able to offer an estimate in a future edition of this report. 22

26 Loyalty Campaigns Loyalty campaigns, as we define them here, are campaigns that promote interaction with existing customers, but with the goal of cultivating a longterm relationship rather than an immediate sale. Precisely because they are not asking for payment (and are usually offering something valuable), loyalty campaigns can have very high response rates. Specialty Retailers case study: loyalty in retail Specialty, a clothing retailer with 660 locations throughout the South Central and East Coast states, knew it wasn t retaining all of its customers when they moved. In part, this was because these customers didn t know where the nearest store was in their new location, and in part it was because they didn t recognize the brand. (Specialty Retailers operates under four brand names Bealls, Palais Royal, Stage, and Peebles in different areas.) One of Specialty Retailers marketing analysts suggested sending postcards to loyal charge-card holders whose addresses changed to let them know where their nearest store was. Specialty Retailers worked with a printer to produce postcards offering a 25% discount and providing a map of the route to the nearest store. If the local store was a different brand from the one where the customer had previously lived, the postcard let the customer know that his or her existing store charge-card would work in the new store as well. 23

27 The postcards measure 6 11 inches and are printed in full color on both sides. Variable elements include the greeting, the address and the map. There is also a bar code that is scanned at the register to track redemption of the 25%-off offer. Two versions are printed: one for customers whose nearest store brand has changed, and the other for those whose brand is still the same. The cards are produced and mailed monthly in batches of 4,000 to 8,000, and they continue to be very effective. The redemption rate has gone as high as 42%. Specialty Retailers is reluctant to disclose much detail about the ROI, but Kathy Barbee, Specialty Retailers Director of Advertising Operations, was willing to reveal that most of the customers who move do eventually make a purchase in the new location, and the postcards cause this to happen sooner. Some customers who would otherwise be lost are retained because of the program. And purchase amounts by those who redeem the postcards are above average. Obviously, this campaign is a big success. To say exactly how successful, you would need some additional information, such as how many customers would otherwise be lost, and how much bigger than average the couponusers purchases are. But the key to the success is the very high response rate. More loyalty examples Loyalty campaigns are among the most diverse campaigns in the PODi database. The two that follow show some of the possibilities. 24

28 The Co-operators, a Canadian insurance company, decided it was time to change the way it communicated with its customers. The company had been sending a static newsletter twice a year, but this generic communications vehicle did little to highlight the recipient s agent or point out specific insurance products they might find useful. Given that The Co-operators has 450 franchise agencies, the challenge was significant: How could the company create customized communications pieces that were positioned as coming from individual agents? They devised a communications strategy that featured personalized newsletters. The newsletters have 10 to 12 content zones in each issue for copy related to a specific customer s interests and preferences, with each zone having a high degree of variability. Customers whose policy is coming up for renewal receive their newsletter two months before the renewal date, with content designed to keep The Co-operators top of mind when the renewal package arrives shortly thereafter. Customers who have recently renewed receive a newsletter with information on related products that might be of interest. New customers receive a newsletter that welcomes them and provides handy reference information. All customers receive an agent message on the front page that includes the agent s contact information, signature, and photo. Although The Co-operators tries to promote sales through the newsletter, and targeted offers have drawn response rates up to 14%, that is not their primary objective. It helps set the company apart from the competition and helps educate customers. We want to build relationships and have the customers grow with us. Customers have indicated their satisfaction with the revised, personalized newsletter through positive feedback on surveys. A Textbook Loyalty Program. No one does loyalty like resort casinos, and the Borgata case study is a textbook example. The Borgata is a billion dollar gaming resort in Atlantic City. In order to encourage repeat visitors, the resort set up a loyalty card program, a common practice in the gaming industry, to help track the spending and gambling habits of its customers. In return, loyalty cardholders receive special offers from the Borgata. 25

29 Each day the Borgata captures customer transaction data from three different sources: the hotel system, the casino system, and the food and beverage system. In addition, based on their spending habits, casino customers are assigned to a tier (Titanium, Black, or Red). These tiers, used in combination with the customer transaction data, help trigger the selection of variable images and special offers contained in a Welcome Back mailer. The resulting mailer is fully variable. In addition to name and address variables, it has twelve rectangular panels that are variable. Six of these panels contain variable images and the remaining six have variable text elements. The response rates from the completely personalized mailer have been double, if not triple, the response to other static campaigns the Borgata had produced on average, in the high 20% range. It is important to note that, as is customary in the gaming industry, response rates for marketing campaigns that encourage return visits are calculated on the basis of how many people return and spend money at the facility. Thus, the reported response rate is not simply the number of people who indicated interest. Estimating the effect of personalization in loyalty campaigns Interestingly, very few of the loyalty campaigns in the PODi database present their results in terms of increased response rate. Apparently this is because most of these campaigns have never been done on a static mailing basis, so no measurement of improvement was possible. There are, however, 13 campaigns that provide absolute response rates. The median of these is 22%. In the absence of any other source of information, and given that these 13 represent exceptional programs, we think it is reasonable to use one quarter of the median (5.4%) as an achievable target for loyalty campaigns. The DMA data is not helpful here, since it does not break out loyalty as a category. Loyalty Typical personalized response rate 5.4% Table 10: Suggested response rate target for loyalty campaigns 26

30 Conclusions The following chart (which also appeared at the beginning of this report) summarizes our data about response rates for static and personalized campaigns of various kinds. In all cases, personalized campaigns do better than static ones (this is what you would expect, especially given the source of the case study data). Personalization seems to make more of a difference in lead nurture campaigns than in other types. Note that new customer experience campaigns are not shown in the chart, since we have too little data about them at this point. Also, we do not have information about the response rates achieved by static loyalty campaigns, so only an estimate of the personalized response rate is shown. Typical response rates, static and personalized campaigns (Data source: Caslon analysis of PODi and DMA data) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Direct sale Campaign objective Lead generation Lead nurture Loyalty Fundraising Copyright 2008 Caslon & Co. DMA (static) PODi (personalized) Our approach. Our approach in generating these numbers has been to focus on the increase in response rate reported in the PODi cases. As a baseline, we use data about the response rate for static mailings (mostly from the DMA). 27