© 2009 Purple Seven Ltd

+44(0)1926 483750

enquiries@purpleseven.co.uk

How To: Double your ROI

Stuart Nicolle, MD,  Purple Seven Ltd

Last month I looked at what Return on Investment means in mailing campaigns (if you missed it you can find it here).  This month I want to take a look at how easy it is to double the ROI on mailings.  

 

We've come across the same quandary from many a marketer "I know half of my brochure mailing is wasted, I just don't know which half".  So I thought I would share with you some of the theories that underpin our process of doubling ROI without jeopardising revenue potential.  

 

Step 1

So here's what to do.  Firstly, don't tell a soul what you are up to, it'll only raise expectations.  As far as everyone is concerned you are doing the brochure exactly as normal …and you will, with one exception.

 

Step 2

Before sending the mailing, split your list into 2.  You decide which criteria customers must meet in order to get into list 1 (the list that will generate the highest response rates), everyone else goes into list 2 (the list that we eventually won’t mail).

 

Step 3

Next, send the Brochure to everyone as normal and use my ROI monitoring form to evaluate your campaign and test the criteria you used to put people into list 1. If you find your selection criteria is really working, you may want to use those criteria again on the next brochure and make another change to see if you can improve it further.  When you are seeing consistent behaviour and list 1 is outperforming list 2 every time by some margin - go ahead and ditch list 2.

 

So what criteria should you use to define List 1?

 

Taking your own experience as an example: when you buy something from an online shop they often send you their brochure soon afterwards. The reason is because they KNOW that people who have just bought from them are more likely, by a statistically very, VERY long way, to buy from them again.  So when it comes to defining list 1, if all you do is select all customers who have booked more recently than the rest, you will see an immediate and significant improvement to your ROI.  

 

HOW TO: if you have 10k customers in your overall brochure mailing, simply export them to excel and order them by their last transaction date.  Then take the 5k customers with the most recent booking date, put them in list 1 and the rest into list 2.  Mail to both lists in the usual way and monitor the response rates to both lists by filling in my ROI Monitoring form.  

 

Results

You will see a staggering difference to your response rates from list 1 and realise that list 2 performs less well.  The great thing about this is that you've actually not changed anything, you're still sending out to your entire list (so you won’t be in trouble with the board if it doesn’t work out!) but you're creating 2 segments which you can monitor separately and test before you commit to it.

 

If you are feeling particularly adventurous you could add frequency and value to the mix, so that your list 1 contains all the people who have attended most recently, attended most regularly and spent the most.  Your list 1 would now be around 40% of your total brochure which should generate nearly all the revenue (somewhere between 90-95%).  The remaining people in list 2 (60% of your original list) should be costing you more money to communicate with than the revenue they give you back, which makes it a no brainer to stop sending them the brochure.

 

IN SUMMARY:  You have still mailed your entire brochure list but you have flagged 40% of those customers as list 1. You should find that list 1 is generating 90-95% of the income.  Consequently, the 60% of customers in list 2 are generating between 5 and 10% of the income.   If your brochure costs £1.05 per unit for design, print & mailing then this is what the ROI Monitoring Form might look like…

 

Click to enlarge

  

In this example, list 2 is making a loss - they are not bringing in enough income to even cover the cost of their mailing.  While you are getting 5 – 10% income from them – it’s costing you more to mail them than the revenue they are bringing in.

 

When you have completed this process you will have the evidence and confidence to remove list 2 from your brochure mailing, What’s more, you will have over half of your brochure budget left to spend on other marketing activities.  Perhaps you can use it to support that show that isn't selling so well, or put out a radio ad to get more first time customers or to nurture your first time attenders and implement a Loyalty Building strategy.

 

This risk free process shows you how to double your ROI while still generating the same amount of revenue  from your mailing

 

Sounds great – but I haven’t got the time…

Don’t miss out on significant cost savings because you are too busy. In the same way that you wouldn’t design the brochure yourself - we will happily do all the hard work for you.  That way, you can benefit from our segmentation techniques which are tailored to your customers’ behaviour and guarantee that your campaigns will be a success and save you money.

 

If you do choose to undertake the work yourself – here are Some Watchouts:

 

When segmenting your list by Recency alone you are effectively targeting the customers who have attended more recently, therefore if you do this for every campaign you could end up over communicating with the core of your best customers.  So be sure to do 2 things:

1.  Consider the frequency of communication in your list selections and

2.  Use the money that you save by investing in audience development and CRM.  

 

On it's own RFM is not a good CRM technique.  It will sell your tickets efficiently (which is important) but you will also need to nurture those customers who have the potential to become good and loyal customers, use the money you saved to do just this.

 

There is also no generic criteria you can apply to every organisation by which to segment customers and you cannot reapply the exact same criteria to each mailing.  The parameters and variables will change according to the behaviour of your customers - so I'm afraid you'll have to get your hands dirty with your data on every mailing (unless you get some rather clever people at Purple Seven to do it for you). The rewards will be well worth it.

 

Cautionary Note

Never apply any model without a live test.  Use the advice given above to send out your mailing as you normally would but split your list into 2.  For live tests change only one thing at a time and be sure you have in place the ability to monitor and compare both lists (use my Excel ROI Monitoring Form).  That way you can see if what you have done, worked.  If it did, great, you can apply it next time with out the safety net of List 2 and voila you have just doubled your ROI.

 

Finally, don’t forget that doubling your ROI in this particular way means you'll have spent less of your marketing budget (to the tune of more than half) so all that remains is to figure out how to spend it.  Happy Days!

____________________________

 

Purple Seven has become expert at increasing ROI without jeopardising sales potential. We have a careful program of activity which will prove (or not), beyond any doubt, whether you can cut out more than half of your brochure list and make significant savings.  If you are interested in this risk free and cost effective approach and haven't got the time to do the analysis - let us do it for you.