Techniques for maximizing ad dollars with direct mail.
John Wanamaker, a retail legend, once said, "I know half the money I spend on advertising is wasted... but I can never find out which half."
Mr. Wanamaker's predicament is not uncommon. We often meet with furniture marketers who aren't sure if their advertising is reaching and impacting the right consumers. Many have continued their existing advertising program, however, because "it is what we have always done," or "it is what our competitor is doing." Unfortunately, this historic approach can result in precious advertising funds being wasted. In today's highly competitive furniture industry, retailers simply cannot afford to waste money or to under-leverage the power of advertising.
For furniture retailers looking to get a better return on their advertising investment, direct mail is becoming an increasingly key part of their media mix. It is now a $37 billion industry, representing about 20 percent of all advertising spending in the U.S., according to McCann-Erickson's 1997 annual advertising expenditure survey. Direct mail is virtually the only advertising medium that allows retailers to efficiently and affordably target relevant ads to those consumers who are most likely to shop in their stores, while avoiding those who are not.
In fact, the Direct Marketing Association reports that the single greatest decision an advertiser can make to generate a desired response is to select the right consumer. This key decision far outweighs choosing the right offer, the right words and pictures, or the right overall look - although each of these factors is important and should not be discounted.
This is the first in a series of articles that will explore opportunities to leverage direct mail to maximize the effectiveness of your advertising program. To get started, let's review the basics.
Solo vs. "Shared" Mail: There are two general types of direct mail advertising - solo and shared mail. Solo mail, as its name implies, is a stand-alone advertising piece generally distributed to a name-specific address list. The list may have been purchased from an outside supplier or derived from a retailers' database. Solo mail is often best used when you have a narrowly-defined marketing objective that requires targeting specific individuals. For example, you may want to send a special offer or announcement to your preferred customers. Or, you may want to promote your new bedroom collection to customers who have just bought new homes.
While solo mail can be a highly effective means of reaching consumers with targeted messages, it can also be quite costly. Alternatively, shared mail represents a less expensive option that also offers impressive targeting capabilities. Not only does it produce sales, but shared mail can generate a significantly lower cost per response.
With shared mail, advertisements of several companies are combined into one package so that postage costs are distributed among the advertisers, resulting in substantial savings. Unlike solo mail, shared mail is typically sent to every household within a certain geographic area. Due to technological advances, however, shared mail can now be targeted to niche consumer segments in ever-smaller geographies.
For example, ADVO recently introduced a new distribution system - ADVO Targeting Zones ("ATZ"s) - which are consumer units of about 3,500 households. Consumers within each ATZ share similar demographic, lifestyle and even purchase behavior characteristics, and are thus quite likely to shop at the same stores and buy similar products.
Shared mail is best used when you want to reach groups of consumers who likely live near each other. For example, within shared mail, a furniture retailer may distribute ads to all households around its store, or it might target specific neighborhoods based on their demographic and lifestyle characteristics. The retailer may even analyze its own database to determine what its customers "look" like so that it can find and target neighborhoods with similar characteristics.
In deciding whether to use shared or solo mail, you should consider a number of criteria, including the degree of targeting required to meet your advertising objectives, the availability of specific customer information, such as a database or a purchased list, your budget, and the desired return on your investment.
A Bit More on Targeting With Shared Mail: Shared mail is highly flexible when it comes to targeting. Geographic targeting is the most basic form and allows you to enhance your advertising's cost-effectiveness by restricting distribution to your unique trading area - the area around your store(s) where most of your customers and prospects live. This area is defined largely by proximity to your store; however, other factors should also be taken into account, including the location of your competitors and structural barriers, such as a bridge that is too time-consuming to cross.
Demographic targeting, based on such characteristics as age, race, income, education, and presence of children, can further refine your marketing approach. If you know the general demographics of your customers, or want to reach a new consumer segment, you can target your shared mail advertising piece to appropriate neighborhoods within your trading area. For example, if you are a high-end furniture retailer, you might distribute your ads to high-income ZIP codes or sub-ZIP codes around your store. Or, if you carry nursery or juvenile furniture, you could target neighborhoods with young couples in their childbearing years for special promotions on these items.
You may also target consumers based upon lifestyle. One company, Claritas, has defined 62 lifestyle "clusters," such as Pools & Patios and Blue Blood Estates, into which consumers with similar buying behavior are grouped. These clusters may be reached via shared mail. Purchase potential is another way to target consumers. For example, research that identifies those consumers with a high propensity to purchase furniture is available and can be used for targeting.
Finally, your targeting plan can be further refined by using a combination of these variables that can be weighted as appropriate for your specific marketing needs. Using such an approach, you can identify and target those ZIP codes or sub-ZIP codes that best match your unique customer profile.
By enabling you to select the targeting variables that will most impact your business, shared mail can deliver a truly customized consumer targeting solution at an affordable price.
Consumers Read and Respond to Direct Mail
Direct mail is the most ideal advertising medium for targeting to ensure that you reach the right people with the right messages. But the critical question remains, "Does it work?"
The answer is a resounding "Yes." NFO Research, Inc. regularly measures the degree to which consumers read and respond to direct mail advertising. Based on their panel of 49,000 consumers in 1997, NFO determined the following:
- 91 percent of consumers read direct mail advertising.
- 45 percent of households report making a purchase as a result of direct mail advertising they received over a 7-day period.
Further NFO research has shown that consumers find direct mail advertising useful and enjoy using it in the shopping process:
- 80 percent of households describe circulars and flyers received via direct mail as "useful."
- 83 percent of consumers enjoy looking through the special offers and coupons they receive in the mail.
We have discussed the critical role that direct mail can play in ensuring a strong return on your advertising investment. But the key to any effective advertising program is a sound strategic plan and solid follow-through on the execution. Next month's article will highlight the key elements to a winning direct mail campaign.
Sheila McCusker is Director, Strategic Business Development for ADVO, Inc., the nation's largest direct mail marketing company. In this capacity, she leads the Company's efforts to identify and leverage strategic growth opportunities within the media industry and the many retail and service industries ADVO serves. Questions on any aspect of direct mail marketing can be addressed to Ms. Mccusker care of FURNITURE WORLD at editor@furninfo.com.