February 2008

The direct marketer’s guide to surviving
an economic downturn
Apply these ten tips to help your firm weather the storm. By Kevin Klein

Subsequent to his review of the firm’s portfolio, or even worse, after a board of directors meeting, the CEO invites you into the boardroom and announces there is an immediate call to reduce overhead. The low-hanging fruit he expects you to fork over is your advertising and marketing budgets, since there’s no guarantee that every dollar spent from them will lead to a sale. Although you want to help, a gnawing feeling in the pit of your stomach reminds you that such a move would be a serious mistake… but what alternative is there?

Impetuous overreactions like this one happen more often than we would like to admit, causing organizations to effectively cut off the proverbial hand that feeds them. Instead of broad stroke cuts to those budgets, investigate your marketing mix, taking the following considerations into account to save money and make your company more competitive.

1. Stay the course
Knee-jerk reactions to turbulent times tend to generate little more than a ballooning expense budget and poor outcomes. A scramble to succeed is usually characterized by a lack of real understanding of the market, which leads to mixed messaging to prospects, and ultimately, continuous failed attempts to find a “winner.”

By contrast, a well conceived and documented plan takes the current economic climate into account and identifies contingencies for weathering the storm. Stop, sit and think them through.

2. You can’t manage what you can’t measure
Online strategies should have landing pages that allow you to track response. Insist that your call centres and data entry staff increase their source code capture rates. Introduce standard scripts for the call centre and motivate your data entry team to do better.

If you maintain a large number of Stock Keeping Units, code your products so they are related to a specific effort.For example, the first two characters of the product code could be related to the effort, thus the data entry clerk will always have a 100 percent source code capture rate.

3. Focus on share of wallet
A key metric to watch during tough times is definitely Average Order Value (AOV) and Customer Life Time Value (CLTV). If these metrics are not already established in your campaign management process, this a great time to have them integrated.

Make sure your existing clients are aware of all of the products and services that you can provide. It is easier and cheaper to retain, reactivate, and cross-sell existing customers than to acquire new ones.

4. Reduce Waste
Really, you should be doing this all the time. During the heady days of unlimited growth, you may have made some decisions that appeared to be right in the short term but are no longer appropriate.
If you’re mailing duplicate records to households, eight percent of your mail is undeliverable, Canada Post is getting a lot of returns (and you’re not using this information to your benefit), and your four-year-old database of older customers has not been touched in three years, shame on you. This is a recipe for waste, lost profits and a good talking-to from your manager.

Make sure to eliminate duplicate records. It does more than just save you money; imagine how your prospects feel about your managing their money if they are receiving your message twice: once to Kevin Klein and once to K. Klein. If your in-house team can’t get this right, invite an outside vendor to help. The cost of getting such expertise is less than that of the waste.

National Change of Address (NCOA) — use it! Over 19 percent of Canadians move every year. Mailing to John Smith at an address he hasn’t lived at for the past four years isn’t going to be very productive is it? NCOA only goes back three years. If you can locate John on a more recent database and verify that he is still living there, you will save a lot of wasted resources and efforts. Verification processes are very cost effective when compared to the cost of useless mail.

Use Canada Post‘s help. You can clean your database by understanding how much of your data is being returned. Spend the extra on a random portion of your mailing to see what your return rate is. Then you’ll have the information you need to make recommendations on what needs to be done to improve the database and have the numbers to prove the ROI case, as it will be needed these days.
Employing these simple data hygiene strategies will organically increase your response rates as you will increase the percentage of mail that actually reaches your intended recipients.

5. Treat the best as the best
You’ve heard it all before: 80 percent of your revenue comes from 20 percent of your customer base. But given the economic circumstances, you will need to be extra diligent about continuing to engage these customers. Your competitors will do more to woo your best clients, including using the dreaded price cut, as an inducement.

An appropriately engaged customer who knows your products and services and is treated properly within their preferred channel is less likely to switch — even if your competitors’ price is less (within reason of course).

Focus on the complete customer experience. With the National Do Not Call List now in force and heightened sensitivity around privacy laws in Canada, ensure that you are not only using the most effective communication channels, but also the ones that your customer prefers. If you already have a mechanism to track this, ensure it is being used.

6. No time for experiments
While there may be some wow factor in targeting neighbourhoods by dropping leaflets from a hot air balloon, you may want to shelve the idea until your marketing budget has a little more substance. Now is not the time to blow the budget on unproven options.

Even though there is a growing desire to find the next great medium, tough economic times require doing what you know works best. Look at what has allowed your company to get to where it is and repeat that. Given the need for results, you may want to ensure all communication is measurable.
Keep in mind that smart tests, which are measurable and budget conscious, should still be worked into the overall plan, although they will be a smaller portion of it. This practice will serve your department well when the economy turns around (and it will) and you can once again ride the leading edge.

7. Smart marketing
Take a look at what you know and don’t know about your customers. Is there anything there that can help you target more effectively? Most likely, you just need to know how to get to your customers. Modeling, profiling and the like are great tools to help find your target market and segment your offers. Such analytics are also effective for promoting acquisition and cross-sell.

But if all this strategic activity is too daunting, there are companies that can help you get started, take it completely off your hands, or some other combination that meets your budget. Analytics surrounding targeting almost always provide a return on investment. Any additional intelligence you can bring to your targeting efforts is already better than random.

If you don’t know anything about your customers, there are various workable options, from using geo-demographic clustering systems, to data enhancement companies that can provide all the missing pieces. These resources will enable you to segment, target, and reach your goal more efficiently.

8. Early birds stay in business
If you’re in a highly competitive market, be assured that if you’re not engaged with your prospects and/or customers, someone else is.

While timing is not everything, making sure that you are engaging customers in a timely fashion is key. Approach your service providers to decrease turnaround times. This will ensure two things: the freshness of your data, and a competitive advantage you will need in hard economic times.
Be reasonable. You should not expect to ride out tough economic times on the backs of your suppliers. There should be a collaborative effort in which both parties receive benefits. Some of the best vendor relationships are developed when you are working together to meet a tough objective.
Another method is to establish service level agreements with each vendor, although this may ultimately cost more. I know, you’re probably thinking this is counter-intuitive during times of budget cuts. But remember, the goal here is to stay ahead of your competitors.

9. Optimize your assets
Many companies will ignore their database in the scramble to achieve goals. There are hundreds, if not thousands of companies out there that have myriad customer data that is just not used. In “good times,” it is stored in a neglected database somewhere because who needs to spend the dough? Then, when the dark days hit, we don’t have the budget to use that data..

While sophisticated companies have disparate information over multiple systems; smaller companies tuck data away in everything from computers to shoe boxes.

While it is always good practice to manage your company’s life blood (the customer database) properly, now might be a good time to spend some time making sure it is still supplying what you need. There is information here that can be used to up-sell, cross-sell, and retain customers. There is also information about customers that are no longer your customers.

You already own the data, so use it. Contact old customers and try to re-engage them. If someone is already familiar with your brands or products, there is a better chance they will respond to your offer. It also requires a lot more work and resources to find a new customer versus getting one to return or trying to retain and sell to an existing customer. Remember, reach out and use tried, tested and true methods of contact. So brush off that shoebox and start learning about your customers.

10. Change it up… a little
This is not the time for wholesale change but it might be a good time to look at changing some of the elements within your offer.

An empathetic voice will garner approval from prospects in these times. Coupons are making a comeback. A nationwide survey conducted in May 2008 identified that seven out of ten Canadians plan to use more coupons.

Incentives that show a value proposition to your prospects and/or customers will also drive new business as bargains begin to hold greater appeal.

Kevin Klein is a council member on the Direct Marketing Council of the Canadian Marketing Association. He is also director, Product and Data Performance, DR Canada, ICOM Information & Communications L.P.