You know you need a solid contact strategy — it’s your roadmap for reaching out and communicating with your customers.
But in the current climate of climbing postal rates, low consumer confidence and muddled response data, the contact strategy has been taking a beating.
Marketers are pulling out of the mail left and right, replacing catalogs with e-mail campaigns or eliminating prospecting altogether. These are dangerous tactics.
Few companies have a firm understanding of the impact of e-acquisition — the use of pay-per-click advertising and other forms of low cost online acquisition that are often heavily promotional. And all evidence indicates that e-mail alone will not sustain a direct marketing business.
In practice, your e-mail and in-the-mail efforts must coordinate and support each another so that you produce incremental growth and sustain a healthy house file. When you’re planning your efforts, be sure to use the most accurate information available and include certain essential projections.
How do you make the best possible decisions? Consider these 10 components for your next contact strategy.
- CLEARLY DEFINED SEGMENTS
Yes, contacting your best customers more often is a good strategy. But determining the definition of “best customers” can be a challenge.
Getting your segmentation right (or model, if you’re scoring names) is essential to a solid contact strategy. As you look to maximize the return of each contact, it’s imperative that you’re getting to the right customers.
- INTENDED CONTACT FREQUENCY
You need to lay out, early in the process, the number of times you plan to contact customers and prospects. The truth is, most direct marketers fail to contact their customers often enough.
By looking at cumulative contact frequency for the time period (for instance, by season, quarter, promotional cycle), you can prepare for how your plan affects retention rates and overall reactivation. Offsetting any potential declines in retention with new acquisition is key to your long-term success.
- MAILABLE QUANTITIES
Remember that your contact strategy is going to lay the groundwork for printing, postage and freight costs. So your plan should reflect names you can actually get into the mail.
If you’re not including suppression adjustments in your counts, you may end up overprinting and investing in a number of catalogs or mail pieces that you wouldn’t have purchased otherwise.
And you should include e-mailable counts as well. We’re talking about contact strategies — not just mail plans. To make the most of the value of your contacts with customers and prospects, account for each channel as part of the overall program.
- TOTAL CIRCULATION
Changes in circulation from year to year will directly affect results. I’m amazed by how often mailers seem surprised by sharp drops in sales created by cuts in catalog circulation.
It’s true that online marketing vehicles drive incremental sales for most companies that use them correctly. But the catalog is still the big brother of all sales drivers. Understanding shifts in circulation will make justifying changes in sales much easier down the road.
- OFFERS OR PROMOTIONS
Your contact strategy should lay out your overall offer and promotion strategy by segment for all online and offline campaigns. By having all of the offer information in one place, you can quickly identify how, why and who you are using offers, and who is getting them.
Plus, by keeping the information for your Web efforts in the same location as your catalog efforts, you can quickly spot potential conflicts — for example, that free shipping offer that you’re about to inadvertently e-mail all of your best buyers.
- PROJECTED RESPONSE RATES
Projected response is essential to the projections process. As mentioned earlier, the contact strategy is a roadmap for a season — not just a map for mailings, but for all facets of the business. So to plan sales and inventory levels and fulfillment and customer service needs, you must accurately project response — ideally based on the same program last year.
Sure, response changes from season to season, as consumer confidence sways and you change the depth and frequency of your contacts. For this reason, add adjustments to each contact strategy to account for projected swings in response.
- PROJECTED AVERAGE ORDER VALUE
As with response rates, you need to include projections for average order value. But don’t just look at last year and pull the number forward.
Rather, review the merchandise assortment that’s planned for the coming season. What’s happened to average price offered? Did it go up? Are you planning an increase in AOV as a result? If so, you’ve hopefully taken response down slightly.
The bottom line is, response rates and AOV projections are both tied to the merchandise assortments. While both should be based on historical performance, smart marketers will make adjustments to produce better plans.
- GOOD FINANCIAL ASSUMPTIONS
Again, as a planning tool your contact strategy should include a grounded assessment of response and sales projections, but should also include the best financial assumptions you can provide.
For example, assuming that your in-the-mail costs will be the same this year as last isn’t smart planning. You must account for mailing expenses, printing and manufacturing expenses, changes in product costs and delivery. All of these will affect contribution projections.
- Contribution projections
Contribution per order, contribution per piece mailed and overall contribution to overhead and profit are the quintessential metrics for determining a campaign’s success or failure.
Use the financial assumptions available to you, as well as your adjusted projections for response, average order value and planned advertising costs. You should be able to build a solid estimate for overall and segment-level profitability for the campaign in each channel.
- BASELINE WEB BUSINESS
Each season I work on contact strategies for multichannel clients, and each season they come up short of prior year actuals — often to the company’s dismay. Invariably, there are baseline Web sales that are derived from a host of sources that aren’t accounted for. Often natural search, customer referrals and maybe some PR have driven traffic to the site that can’t be accounted for.
While these sales are appreciated, they are often overlooked in the planning stage. Don’t leave these out, however.
These sales should be accounted for in the response and AOV adjustments (if there appears to be a linear, historical relationship between these no-source sales and your tracked sales), or they should be accounted for as a base factor. Either way, your projections will be more accurate if you’re able to account for all order sources.
Your contact strategy drives the business. It will dictate your print plan, your creative plan, your order flow and operations, your inventory plan and your financial plan.
Given the current environment, you can’t afford to neglect your contact strategy. Putting together a plan that accounts for each channel and includes adjusted historical performance metrics is the best first step to getting control in an out-of-control environment.
Steve Trollinger ([email protected]) is executive vice president of J. Schmid & Associates, a Mission, KS-based consultancy.