Case Study - Honda

As the company lavished attention on its above-the-line advertising, its relationship with direct mail was suffering. "We were spending four times as much on direct mail as we do now, but were getting few tangible returns," says Simon Thompson, marketing director at Honda UK. "Like many car manufacturers we'd buy cold lists, but from a return-on-investment perspective it just wasn't working."

Yet the channel was still considered vital in Honda's drive to boost UK sales. "Advertising will acquire customers in the medium and long term," says Thompson. "But in terms of getting customers today, direct mail is the acquisition tool."

In early 2003 Honda's new DM agency, Hicklin Slade & Partners, came on board to manage a prospect relationship management programme. It first proposed a re-engineering of the company's data acquisition strategy.

"Honda's use of cold lists was considerable and we made it our first task to dissuade them from this," says Alex Lamb, Hicklin Slade's senior data planner. "Before we arrived Honda was using the best possible criteria in choosing cold data, such as drivers of a certain sector of car, or replacement dates. But all the car companies were doing that and response rates were falling over time."

Steering away from cold data

The new philosophy would involve a swing away from buying volumes of third-party data to creating a file of quality leads generated through inserts in relevant magazines, data collection at special events and sponsorship of questions in postal and telephone surveys.

More than 250,000 records were generated through the various activities to add to Honda's ageing pool to give a total of 560,000 prospects. The new data's test came with a welcome/re-qualification or PRM (prospect relationship management) pack mailing in October 2003. The target was to re-qualify 18,000 prospects, but there were few common variables for modelling that would help Lamb and her team to prioritise those prospects with a higher propensity to respond.

Instead a seven-group Mosaic geodemographic segmentation of Honda's customers was overlaid onto the data to create a data prioritisation pyramid (see Clever Stuff). The top prospect group of 5.6 per cent of the records comprised the traditional heartland of Honda customers: affluent empty nesters looking for luxury car marques. Crucial for Honda's strategy to attract younger drivers were the second and third groups of aspiring families - more than 20 per cent of the data and representing the affluent customers of tomorrow. These were designated as having a high propensity to purchase and were targeted for mailing.

Packs were dispatched in November 2003 and after 90 days, the target of 18,000 responders was exceeded by more than 5,600. This represented a response rate of more than 8.25 per cent, the highest-ever rate Honda had achieved in a prospect campaign. Campaign evaluation showed that 208 car sales were made to recipients of the pack, equating to more than £3.3 million in revenue for Honda.

The success of the data strategy work has meant the car maker is now boosting funds to direct mail again - its faith in the medium restored.

Thompson says the 2005 budget for direct mail has risen by 50 per cent on the year before. "We're scaling up," he says. "We receive a lot of interest from customers over the internet, but what we haven't done is keep in touch with them. We see a big benefit from developing a rapport with them using direct mail."

Hicklin Slade's evaluation of the PRM pack mailing challenged some long-held shibboleths of automotive direct mail. Intended replacement dates or replacement periods (that is, within the next six months) gathered from consumers seemed to perform less well than the cell where prospects were driving specific makes of car.

Successful campaigning

The data capture is ongoing, with new insert campaigns and surveys planned for 2005, while the internet is generating an increasing amount of data. New records and older data are being loaded into Honda's marketing database, launched this month. Hicklin Slade has asked for certain business rules to be added to the new database, and more fields are now able to be captured.

At the same time, Honda has set about fostering a data-sharing relationship with its network of dealers, to generate yet more data. "In the car world there has always been a reluctance to share data," Thompson admits. "We don't force the dealers to co-operate, but instead persuade them there's a benefit in it for them." For an event called Breakfast with Honda, dealers passed Honda their data for cleaning and a mailing to invite customers.

"We're in the early stages, but what pleases me is that dealers are seeing the benefits," says Thompson.

CLEVER STUFF

The prospect data was selected using hierarchical criteria to form mutually exclusive mailing cells.

The criteria included prospects with a replacement period within the next two years, those classified as one of the four key Honda groups who either drove a competitor marque, or had registered their car within the past 2-5 years, or were below the age of 55, or whose records were 12 months old or less. Geodemographic profiling and TGI data also indicated that married households with an income of more than £35,000 were indicative characteristics of Honda drivers, so postal and telephone survey data matching this was selected. The best performing Mosaic types for Honda were tested as the only criteria in the last cell.

All selected records were enhanced and deduped to provide cells for mailing in late 2003. The remaining 260,000 records were excluded for re-contact later.

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