The New Direct Marketing
Direct marketing. All marketers know what it is, but many of them treat direct marketing as a backwater inhabited by hucksters. Well, direct marketers are getting the last laugh because the rise of the Web means that we're all direct marketers now...or at least we all need to be. We need to emulate direct marketers. Emulate their experimentation and their attention to details. But most of all, we need to emulate a direct marketer's obsession with measurement. No longer is it enough to be creative. To succeed in marketing, you need to measure your success.
For some of you, measuring success is a daunting prospect. It's true that the many successful marketers know how to analyze market segments based on market research and build a mean spreadsheet. But too many brand marketers have entered this field as a refuge from numbers. (After all, English majors deserve to make a living, too.) Maybe you are one of them.
Some slick marketers might even shirk accountability. (Not you or me, of course.) If you're a fast enough talker, no one can tell whether what you are doing really works or not. Let's not sugarcoat it—most brand marketing has no measurable correlation to sales. But that won't last, according to Imran Khan, Chief Marketing Officer at Internet lender E-LOAN, who says that "accountability will become more and more important."
In our everyday marketing world, we know that your commercial ran on TV last night, but how do we know whether it was effective? Did sales go up today? If they did, do we know whether the commercial was the reason? The impact of most marketing spending can't be measured very easily.
Geoff Ramsey of eMarketer likes to tell a story about the accountability of marketing spending. When the CEO asks the heads of manufacturing or sales or R&D what will happen if their budgets are cut 10 percent, they each can give a crisp answer with quantifiable business impact. But when that CEO asks the Chief Marketing Officer the same question, the answer comes back, "Well, our brand awareness will sure take a hit." So then the CEO says, "I see. Let's cut marketing 20 percent."
Such is the fate of all marketers that cannot measure their success in the real currency of the corporation—sales. "Traditional marketers tend to shy away from measurements," says Devashish Saxena, Manager of Worldwide Internet Marketing at Texas Instruments, "or they measure things that don't mean anything, like ad recall." At the end of the day (or even at lunch time), brand awareness doesn't mean anything if your product doesn't sell. It's not enough for marketers to talk a good game and then let the sales department be accountable for the company's revenue.
We do have a model for merging marketing and sales—direct marketing. With direct marketing, everything is measurable, and marketing no longer exists in a vacuum without sales. Direct marketing lives and dies by metrics—response metrics.
Think about how direct marketers work. Let's consider a new credit card application in a direct mail offer. (Ever see one of those in your mailbox?) That mailing piece has been painstakingly crafted to evoke a response. Every word on the envelope is designed to get it opened. Every word in the letter has been tested to persuade. And some guy made the Direct Marketers Hall of Fame when he came up with the idea for the handwritten Post-It note that says, "Before you throw this offer away, just read this." That gambit increased response rates by 0.7 percent, so it is worth millions.
Direct marketers never design their mail and then send out millions of copies indiscriminately. They carefully select the recipients—that's their market segmentation. They buy mailing lists of prospective customers that match their target markets, and they send out a few thousand pieces to see what the response rate is. They then pare down the lists they use to just the ones that get the highest response rates.
Measurement isn't an afterthought in direct marketing. Duane Schultz, Vice President of Internet Marketing for Xerox, likes to say, "The old model was Build, then Measure, while the new model is Measure, then Improve."
Direct mail marketers know this "new" model well because it's always been the direct mail model. Every aspect of a mailing piece is tested. They send different variations of the piece to their test mailing recipients to see whether different words on the envelope, a different offer, or even a different color for the Post-It note raises response. Direct marketers throw a party when they can get a 0.1 percent rise in response rates.
Catalog marketers are no different than direct mail marketers in their need to test everything possible to raise response rates. Catalogs are even personalized with different products or prices to different target market segments. Anything is fair game if it can raise response rates.
This is all very well and good but what's it got to do with the Web? What's the big deal about direct marketing, anyway? Well, the Web is the biggest direct marketing opportunity the world has ever seen.
Direct marketers pore over their response rates, but they don't have much information about what caused the response rates. They don't know how many envelopes were thrown away without being opened, for example. If they did, they would work feverishly on the envelope to get it opened more frequently. They'd change the words on the front. They'd change the size of the words, the typeface, and the color of the printing. They might even change the size and color of the envelope itself. If they knew what was lowering response rates, they'd attack that problem.
But they can't always do that because they just don't know how many people open that envelope. Michael Petillo, e-business Leader at W.L. Gore & Associates, notes, "In marketing, you always want to say you've created value today, but you didn't have the tools to show it."
On the other hand, the Web allows you to measure everything—every tiny step in the process. You know whether they saw your paid search ad on Google and whether they clicked it. You know whether they abandoned your Web site on the first page or they bailed out during checkout. You can know your response rate for every blessed step in the process, and you can experiment and tweak your marketing with far greater impact on the Web than in any traditional direct marketing campaign.
Both direct mailers and catalog marketers follow the same process of experimenting and testing the results before executing the campaign by sending out a million pieces of mail or a million catalogs. But the Web changes this aspect of direct marketing, too. With the Web, the most granular part of marketing is not the campaign. In fact, you can be as granular as you can afford. You can change something three times every hour if you want and see whether response rates go up each time.
Maybe this seems like small potatoes to you. (Strangely, nothing ever seems like big potatoes.) Maybe raising response rates by fractional percentages sounds like small-time thinking. Guess again.
The Web allows an accelerated pace of experimentation that is turning the world on its ear. The accumulation of changes that can be made at Web pace raise your effectiveness at blinding speed. If you change the copy on your product's Web page, you might know whether the change was a good idea in a couple of hours. If it's a dumb idea, you change it back or change it to something else. By relentlessly experimenting time after time, you gradually fine-tune your marketing to have the highest possible response rates. Web sites often improve their response rates ten-fold with this attention to detail.
But this requires a huge change in the way we think. We are accustomed to spending months in meetings reaching consensus on every detail of "the plan" and reviewing everything with executives for approval. And then we execute the plan and declare victory.
We often don't measure whether it worked. We frequently don't find out what is wrong with what we did. And we rarely spend months tweaking and polishing it to make it better than what we launched in the first place. Our basic approach is to spend almost any amount of time and money to get it right the first time. We do it right, slowly.
The reason that we do things slowly is very rational. In the old marketing world, it is dangerous to make a mistake. You make big decisions, such as the wording of the new slogan for the next calendar year. You spend money up front to make TV commercials and design print ads. You commit to commercial time and ad space months in advance. Then you debut your campaign...and hold your breath.
If your campaign is lousy, if it was a dumb idea, if it is embarrassing, if people make fun of it, if people ignore it, if no one likes it, if it is criticized in the industry, if the government investigates the claim, if there was an error in wording—you get the idea—then it is a big problem because it can't be easily fixed and because you will live with that problem for days or weeks or longer while it continues to embarrass you. And even if you can get it off the air and out of print, you have nothing to replace it with. You have no Plan B. If it is wrong, it will be a disaster!
You'll get fired!
So because you are rational, you take steps to mitigate all of these very real risks. You check everything with other people, ranging from PR people to lawyers to scientists. You ask anyone you can think of to help, to make sure nothing is wrong. You do focus groups with customers to make sure they like it. You ask your friends. You triple-check everything. You get "buy-in" from your boss, and you fix every problem that you uncover in this process, which makes the process very slow and very expensive. And the fact that it is expensive gives you even one more reason to be careful that you aren't about to waste a ton of money.
So make no mistakes. At all costs, this must be done right.
Except that we really don't do it right. At least, not as right as it could be. We gather all the smart people in a room and argue about the plan, and we convince each other it is right, but that doesn't make it so. All of us have to admit that every campaign we've ever done could have been better. Some of them, despite all of our time and effort, turned out to be downright lousy.
It's hard to admit, but many times we start off doing it wrong. It is the rare marketing campaign that would not be improved by testing it and making changes. And by taking so long to finally agree on what to do, we are losing a lot of the impact. Unfortunately, most of us are doing it wrong, slowly.
Sometimes, no matter how carefully we plan, something goes wrong. In late 2006, Chrysler's marketers came up with a great idea: On Time magazine's Web site, during the week that Time names their Person of the Year, Chrysler planned an eye-catching ad that began, "You might not be the Person of the Year...," which went on to address you as an important customer anyway.
There was only one problem—Time as it turned out, did name "You" as Person of the Year. The magazine had jumped on the whole Web 2.0 trend and highlighted that everyone is a participant. Chrysler wasn't prepared for that and could not have been.
But the Web lets us break free. Web sites are infinitely malleable, so you can change them whenever you want. Chrysler could remove that ad or change it into a joke—whatever works—while they could never have recovered from a similar misfortune in the print version of the magazine. On the Internet, you aren't committed to running that failing ad for a year—or even a day. If it's not working in the morning, change it after lunch. Alter the offer or the words or the picture—even start from scratch if you have to. Above all, you must experiment and see what happens.
Just like direct marketers, we can test everything. We can see what our customers do. We can see if they respond. Whatever they respond to, we do more of it and cut out the stuff they don't respond to.
And just like direct marketers, we can test in small groups. We can show the test Web pages to a small group of customers and show the regular ones to everyone else. If the test goes well, then we can show the new ones to everyone.
Remember, the Web is the biggest direct marketing opportunity to ever come along. You can try anything. You can measure its impact. You can fix it and measure it again. The more things you try, the more you will eventually get right. The faster you experiment, the faster you'll get everything right—or at least get close enough or closer than you were.
These are big changes in direct marketing. Part 2, "That Newfangled Direct Marketing," is all about them. Don't try to get it perfect the first time. Do it wrong quickly.