Direct Marketing Manual: One-to-one economies

and talking to them directly.

This is the essence of direct marketing - a medium that combines an
intelligent use of data with communication via a range of channels, such
as mail, telephone, email, the web and even text messaging. British
businesses spend £37bn on direct activity every year, according to
the Direct Marketing Association (DMA), with nearly three-quarters of
all companies that post a turnover of more than £1m using it.

One reason for the medium's popularity is its ability to make an instant
impact on a firm's bottom line. A prime example of this effectiveness is
provided by the city of Stockton-on-Tees, which wanted to entice more
visitors to its free arts festival. Each year it sent event brochures to
local households, but only a fifth of the recipients attended the
festival, meaning the lion's share of the marketing budget for the event
was going to waste.

Two years ago, the city changed its strategy. Direct agency Rocket
Science began to target affluent people outside the area. This increased
visitor numbers by a third, bringing in an extra £800,000 of
custom for local businesses. 'We achieved that despite having the same
budget as previous years,' says Reuben Kench, head of arts and culture
at Stockton Council.

As well as acquiring new customers, direct marketing offers a powerful
method of creating loyalty - an especially valuable asset as consumers
become increasingly brand- promiscuous. By providing an effective
channel for regular communication between brand and customer, it helps
to strengthen the relationship.

'Direct marketing allows you to build a personal dialogue with consumers
one at a time. That helps you understand how a particular individual
thinks, feels and behaves,' says Marco Scognamiglio, chief executive of
WWAV Rapp Collins London, which has recently been working with the
NSPCC. The agency's activity for the charity has included sending donors
regular newsletters explaining how their money is helping.

Boots, too, has found direct marketing an important way to build
loyalty, as it fights to retain its share of female consumers. The
high-street retailer has been working with direct agency Craik Jones
Watson Mitchell Voelkel to send personally addressed communications
flagging up the value of health and beauty products appropriate to the
life-stage of each recipient. The initiative delivered a
return-on-investment of eight to one, stimulating incremental revenue of
between £4m and £9m.

Data management

In the past, the process of carrying out direct marketing consisted, in
essence, of companies buying a list of names and mailing everyone
therein, fuelling complaints about junk mail. However, there are now
strict rules about what marketers can do with information about
consumers.

'Collecting data without knowing what you are going to do with it is a
common mistake, and can lead to legal infringements,' warns James
Northway, head of Carat Data Planning.

The Data Protection Act, for example, imposes restraints on the
collection and use of data. Consumers can also sign up to the DMA's
Mailing Preference Service so that they can opt out of receiving
unsolicited direct mail. There are similar Preference Services for
telephone and electronic communications - and it is essential to remove
from your lists any names that are on those Preference Services. Getting
consumers' permission to contact them is not just a legal requirement,
it is also sound practice. The trick is to be relevant, targeting only
those people or businesses who have a potential interest in your
offer.

'You need to make sure that you're angling where the fattest fish are in
greatest quantity. That way you'll get a very healthy return on your
investment,' says Chris Freeland, client service director at Tullo
Marshall Warren (TMW).

Specialist suppliers can provide lists of prospects compiled from
sources such as subscribers to a particular magazine or website. Brokers
can help you source the right list for your needs - but it is important
to check that the data is recent. 'If you're marketing baby food, there
is no point targeting a mum who purchased baby clothes two years ago,'
says Claire Hart, director at Caspian Partnership.

Another problem to look out for is duplication, as it may be that the
same consumer details have been collected twice, but with slight
variations - for instance John Smith and J Smith. You should also use
special suppression files to weed out people who have died or moved
house.

Pinpointing targets

Once your lists have been compiled, the next step is to identify the
hottest prospects. Start by creating a profile of your typical customer
in terms of age, gender and level of income. Postcode data will provide
useful clues such as property values and socio-economic groups, whereas
lifestyle data will tell you things such as the car they drive and the
newspaper they read.

With this information to hand, you can then analyse your prospect file
to identify the people who look most like your existing customers. The
data can be further segmented to ensure that different types of consumer
are approached in the most appropriate way for their age, gender and
background. Personalising direct messages heightens their impact, and
can be done cost-effectively through digital-printing techniques
allowing letters and brochures to be varied by recipient.

TMW, for example, developed distinct direct mail creatives for Nissan to
promote three car ranges, with an accompanying letter compiled from no
fewer than 250 variations.

'People have many different reasons for wanting to buy,' says Sara
Field, database controller at Nissan GB. 'This is an effective way to
reach them without the expense of creating many different communication
pieces.' Cold-calling prospects on the telephone is another variant of
direct marketing, but one that is tricky to do well. The number of
people blocking such calls is rising rapidly, but there is nothing to
stop you calling existing customers, as long as it is related to the
product or service already bought. A courtesy call to check that a
product was received or that a service is working will engender goodwill
and could mean a more receptive welcome to a sales offer in the
future.

Email newsletters are another useful medium for keeping in touch with
customers and prospects, as long as they have opted to receive them.
Last year Citroen used the method to drive traffic to its website. Its
agency, Syzygy, spent 12 months analysing the behaviour of visitors to
the site, such as the point at which they logged out and the brochures
they requested. It then developed a set of tailored emails which could
be sent to opted-in visitors at each of these key stages. As a result of
the emails, the recipients' group was found to have made significantly
more purchases than a control group and were twice as likely to complete
a dealer search and visit the offers section.

Marked response

DRTV is another much-used direct marketing tool for capturing data and
starting a dialogue. An execution run last year by MC&C on behalf of
Asthma UK led to 26,000 calls, with most callers opting in to receive
further communications and 2300 making donations over the telephone.

Combining direct with other types of advertising is also an effective
strategy. Draft recently carried out a campaign for Oxfam that combined
direct mail with other media such as TV and press ads, as well as
inserts, posters and internet advertising. 'Direct marketing is no
longer just about stuff you receive through the letterbox,' says Erminia
Blackden, joint head of planning at Draft London. 'It is much more an
attitude of keeping in touch, which means you can use a variety of
channels.'

In a similar vein, Proximity London ran a campaign for the BBC to
persuade students to buy a TV licence. It sent a mailing to university
students who did not have a licence, but also distributed posters,
leaflets and application forms on campuses.

Evaluation has shown that campaigns of this type generate nearly twice
the sales of advertising alone, and are 50% better than just advertising
and direct mail running together. 'The increase in sales was almost
triple that forecasted,' says Louise Houba, campaign manager at BBC TV
Licensing.

Direct marketing requires a certain level of expertise to be carried out
well, and can require specialist help, particularly in the use of data.
Its advantage is that it is guaranteed to raise sales, making it an
essential tool for almost any business.

CASE STUDY - DUDLEY COLLEGE OF FURTHER EDUCATION

In order to make its marketing budget go further, Dudley College of
Further Education dropped the blanket marketing approach used by most of
its peers and adopted analysis techniques to achieve precise
targeting.

Consultancy Rocket Science cleaned and de-duplicated the college's adult
student database, whittling down the 34,000 records by almost half. It
then segmented students by demographic and lifestyle characteristics.
The analysis showed that its students tend to be young, of average
affluence, and married with 2.4 children. They also work in craft or
trade occupations and enjoy practical activities such as DIY and home
computing.

The next step was to create a matrix of local post-code clusters with
the greatest proportion of people matching this profile. By focusing on
these, the college achieved an increase of 19% in enrolment levels
across all targeted areas. It also reduced the number of brochures it
distributed, knocking 23% off its budget.

'This was a radical departure, but by taking a leap of faith we achieved
a higher enrolment level while spending less,' says Hilary Jakovlevs,
assistant principal marketing at the college. 'There is no doubt that
adopting a targeted approach has had a significant impact on the
effectiveness of our marketing.'

DIRECT MARKETING - DOS AND DON'TS
DO segment your data and target those who are most likely to respond

DO test a sample of your data, perhaps comparing different lists to see
which generates the highest number of responses

DO integrate direct marketing with other media to help reinforce your
message

DO evaluate the campaign to ensure you are getting good return on
investment

DON'T incur penalties by contacting people who have signed up to a
service to block marketing communications

DON'T waste money sending mail to the same person twice, or to people
who have died or moved house

DON'T use a one-size-fits-all creative, but modify your message to
appeal to different segments

DON'T forget to analyse your responses and use the information to
improve future campaigns.