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When complexity can become unprofitable
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A prime direct marketing recommendation is to continuously test new lists so that the performance of a cold list mailing file can be optimised. This is often misinterpreted as the recommendation to use any number of lists available in order to find small pockets of strong performing data.
Finding the best households to mail a specific offer to remains one of the greatest challenges for direct marketers. In the struggle to find these households
By using a plethora of lists, some clients have run into serious issues; the list merge process produces too many duplicates – too many to mail even if they have performed well. In some cases the only solution is to delete all duplicates at the end of the season or year.
The Finance Director might eventually ask what cost is related to these duplicates, especially if they can’t be mailed or had to be deleted, and how they relate to the average list cost and the overall return on investment. The calculations might show that parts of the recruitment data were actually purchased at the cost of more than 20p per name even though most recruitment data is available in the range of 5-12p per name.
The same Finance Director might also ask why the Circulation Manager had to purchase 25% more records than the volume that was finally mailed. In addition to the cost of the list, the data processing bureau has also sent an invoice for processing the entire cold list volume – not only for what was mailed.
You can guess what happens next: the Circulation Manager explains to the Finance Director that all lists had to be used to achieve the performance needed for this mailing file. The Finance Director at that moment is reaching for his calculator to find out that when taking into account the cost produced through de-duplication, the acceptable performance criteria could have been lowered significantly. In other words fewer orders would have yielded the same profit if fewer lists had been entered into the process in the first place.
Unfortunately the FD doesn’t stop there: It becomes apparent that some of the lists were swapped with other list owners, meaning that valuable customer data has been given out at virtually no charge. These lists swapped with other mailers did, however, significantly contribute to the costly de-duplication and in many cases didn’t perform well. The Finance Director keeps thinking that if his own list was sold to other mailers instead of swapped he could have added a nice revenue stream to the business. The opportunity cost of swapping customer data with other mailers will have to be added to the ROI calculation.
The Circulation Manager at this point gets a bit nervous about what might come next. The FD keeps going on about the disadvantages of using so many lists that were all selected carefully to match their own target audience. The next question asked pushes the Circulation Manager to the edge: How long did it take to plan the list selection process, acquire all the lists, collect the lists at the data processor, run various iterations of the de-dupe (a few lists came in late…), and output a mailing file? The Finance Director learns that it took 12 weeks from start to finish, from contacting list owners to producing a mailing file -that is almost 3 months. The conclusion: Given the fact that there are 2 large campaigns per year, the Marketing department basically spends half of the year creating 2 mailing files.
The Circulation Manager is now in utter fear. It was discussed previously whether or not to use an agency to do the list planning. Will the Circ Manager role be made redundant? The Finance Director is heavily against the agency idea as this might add even more complexity to what should be a straight forward process. Phew.
A fighter by nature, the Circulation Manager decides to come up with a plan and produces a revised return on investment calculation for future mailings – it contains only 3 proven, high volume lists to reduce duplication, processing time and complexity. With time saved due to the reduction in complexity the Circulation Manager suggests promoting the brand’s own list sales to other mailers and thereby creating revenue instead of spending money. The next meeting with the Finance Director will be the chance to present this.
The meeting goes well; the FD understands all the savings that were proposed and is keen to promote list rentals to other mailers. After 2 more campaigns the new concept has hit the bottom line figures and the Circulation Manager is promoted to Marketing Director.
A happy ending!
Christian Bennewitz
Solutions Development Director
Abacus – The Transactional Database Specialist
