Let's say you identify a new market, one that you think is going to be very receptive to your product or service. The cost of advertising to this market may be prohibitive: The best publications are frightfully expensive, and your ads couldn't appear for a few months.
Direct marketing provides you with a way to conduct a test of this market relatively quickly, at a reasonable cost, and with convincing certitude. You'll know whether this is indeed the gold mine you hope it is.
Perhaps the most common use of a marketing database is to generate a target list for a direct-mail campaign. Of course, direct mail also works with purchased lists. Direct mail provides giant companies with the ability to target defined markets with specialized offers.
For smaller companies, using direct mail has a number of attractive advantages:
- You can target recipients very precisely.
- You can protect against overwhelming response. If you ran an advertisement, you can't know whether you're going to get 10 responses or 10,000. For a small company, a powerful response to an ad can be even more disastrous than no response at all, since a poor reaction to a prospect's response will likely damage your relationship even before it's begun. With direct mail, you can start out with a modest-size mailing to study the response and make sure you can handle it expeditiously.
- Costs can be modest. Or, more accurately, you can create a campaign to fit large or small budgets.
- Definition, Please"Direct marketing," "direct mail," "direct reponse": These terms are used confusingly in the trade. Direct marketing typically refers to marketing efforts by the manufacturer that are directed at the end-user when a retailer or distributor is in the middle. Direct-mail advertising uses the mail service to deliver your best sales effort directly to the mailbox of your prospect. Direct-response advertising is any advertising (print or broadcast ads, or direct-mail packages) that invites the recipient to contact you directly through an 800-number, a mailing address or a business reply card.
- Direct mail can happen fast. With a modest campaign to a known target audience, you can acquire a mailing list, develop mailing materials (including direct-mail letter, flier, reply card), launch a mailing and start to receive results in just a few months. This is faster than the typical advertising campaign-and a lot faster than waiting for the phone to ring.
- You can test different appeals, called "offers" in the trade, to revel the most potent message. By making a different offer to randomly different portions of your mailing list, you can see which offer pulls best. Go with your best puller until you find a better draw. As you try different offers and different letters, you'll find one does better than another. Use the better one, than try to beat that in your next mailing. Eventually, you should get better and better response rates.
- You can mail to the same list again with a slightly different mailing and still garner worthwhile results. Most direct-mail experts say that companies don't get enough mileage out of their materials. Use them until they no longer pay their way.
- You can never run out of prospects. Use your imagination to find new niche direct-mail markets for your products, whether retail or business-to-business. Your list broker or mailing consultant can suggest possible target markets worth trying.
With consumer products, you can often sell them right through the mail . . . or at least get customers to stop in. With business-to-business products, you usually face a two-step process. First, you get a response to your solicitation with an indication or interest (request for catalog, literature, report or sample). This is the lead-generation phase. Once you mail off the requested material, you then follow up with additional material or a phone call/fax/e-mail to use your skills at transforming the lead into a prospect.
Building a List
One of the most important aspects of direct mail is the mailing list you begin with. And the most logical starting point for creating a list is to start with your current customers. Build outward from what you know. Everything starts with your first customers. This is the known. You may have to guess at lots of things in targeting your market, but you know this customer purchased your product-an island of certainty in a sea of haze and obscurity.
Where do your customers live? Sort by ZIP code. Do one or two ZIP codes stand out from the rest for a majority of your customers? What are the demographics of that ZIP code? The Census Bureau and other data suppliers can provide you with significant demographic data by ZIP code. You can use this to get a more thorough understanding of the profile of your geographic market. Chances are you're selling much more in a few ZIP codes than in others, and it may have little to do with your physical location.
As you learn more about your customers, take the next step. If these people buy your product, then people like them will be likely to buy your product. At least they'll be more likely to buy your product than the public as a whole.
One business sells desks, filing, shelving and storage units to the business market. They conducted surveys of their customers and found that a disproportionate percentage of sales were to SOHOs: small office/home office owners. They purchased a mailing list of these companies (sole proprietors with less than five people, sorted by the appropriate ZIP codes for their geographic market) and scored several successes in direct-mail programs. They supported their mailings with modest ads in several of the publications that target this growing market. They included tear sheets (color copies) of the ads along with their mailing to bolster their credibility in this market. Prospects can see they're sophisticated enough (and stable enough) to advertise in respected publications.
With your best customer profile in hand, go to professionals in the database/mailing list business and see what lists they have that match your current customer/prospect demographics.