Why Effective and Efficient does not always make sense

dma response rates

Despite the perception in the marketing industry that direct mail and telemarketing are less effective than digital channels, the Direct Marketing Association (DMA) has found that direct mail boasts a 4.4% response rate, compared to email's average response rate of 0.12%, says Yory Wurmser, director of marketing and media insights at the DMA.

  • Depending on how one crunches the numbers, direct mail has a response rate of up to 10 to 30 times that of email — and even higher when compared to online display ads.
  • Using transactional data from Bizo and Epsilon, the DMA analyzed more than 29 billion emails and 2 billion online display impressions to track consumer actions both immediately following a click and in the days and weeks after being exposed to an online ad.
  • Overall for display, only 6% converted as a result of the immediate action of the click, Wurmser says, meaning that 94% of conversions happen at a later date — an important finding, considering that the success of display's impact is generally judged by its click-through rate.

Despite this news, Wurmser notes that in the nine years the DMA has been doing its response rate report, the rate for direct mail, while still “the better channel than any other out there right now,” has gone down 25% overall.

“Yes, there has been a reduction in the response rate level from a direct mail perspective,” he says. “But, looking at it strictly in terms of response rate, direct mail still outperforms digital.”

However, from an ROI point of view, email is more cost-effective than direct mail or telemarketing. The report found email had the highest ROI, at $28.50, compared the $7 for direct mail.

  • And because it’s more “cost-effective” most clients and agencies judge it to be the better media alternative.
  • Ironically the media is often purchased to promote brands – which technically are not “cost-effective”. Think Maserati vs. Ford.

While direct mail remains a strong medium, overall response rates are declining. My experience says the culprit is “all media”. Ostensibly we can only consume so much information before we’re full. Every year we are offered more product, service and media choices – but no one’s offered any more time.

So while the proliferation of emails and display ads makes direct mail, on a per capita basis comparison, less cluttered, the time the average person has to devote to any given medium is down.

This report overview is based on data collected through an April 2012 email survey and an analysis of transactional data provided by Bizo™ and Epsilon™.


Moving TV dollars to digital

A recent IAB study has found that moving TV ad dollars to digital advertising can increase reach while lowering overall costs.

IAB officials say that moving 15 percent of a firm's TV spending dollars to digital ads can increase the reach of consumer-packaged goods (CPG) by over 3 percent in the 18 and over demographic. In non-CPG categories, the study found that incremental reach grew by over 6 percent on average in the same demo.

"This study documents that brands need both online media, especially digital video, and TV to reach consumers effectively," says SVP of research, analytics, and measurement at IAB Sherrill Mane.

"It's eye-opening to discover that viewers actually have an easier time naming the brand behind a TV commercial if they have had the opportunity to be introduced to the creative first on a digital screen. Marketers and media planners clearly need to start thinking about their digital buys - whether video or display - before they forge ahead with a traditional television buy, in order to optimize reach and effectiveness."

According to IAB's study, TV-only schedules for CPGs reach over 61 percent of the 18 and over demographic. While TV-only schedules for non-CPGs reach roughly 48 percent of the same demo.

When reallocating 15 percent of TV ad spend to digital platforms, CPG reach reportedly grew to over 64 percent for the 18 and over demographic. Non-CPGs that performed the 15 percent switch saw reach jump to over 54 percent with the 18 and over crowd.

In comparison, the IAB also found that reach in the aforementioned demographic only stands at over 6 percent for CPGs using an online-only campaign. While reach for online-only non-CPGs was measured at around 10 percent for the 18 and over set.

IAB's study found that launching campaign video ads online first is a good way to generate buzz. According to the group's research, an online-first strategy for video-based ads is the way to go for TV campaigns.

Statistics showed that online video had a stronger impact on consumers' general recall, brand recall, message recall, and ad likeability metrics when compared to TV ads. On average, the study found that consumers streaming 20 second video ads watched the full ad 87 percent of the time.

The study's outlook comes from research performed by Nielsen. Nielsen's numbers came from research performed over the course of 2011 to 2012. Data gathered by Nielsen research platforms was cross-examined with Census data to uncover demographic statistics.


Valentines’ Day and Brand Leverage

I learned about leverage early on in life with pop bottle openers, diving boards and a wooden 12-inch ruler that could catapult my little wet paper balls onto the ceiling of my grade 5 classroom. Today hedge fund managers leverage Billions in assets by using derivatives to multiply their funds’ market gains and losses.

Fast forward to February 14th 2013.

Chocolate manufacturers, florists, card shop owners and owners of dimly lit restaurants the world over will help you make the most of this very special day’s accumulated brand equity – which includes a healthy dose of peer pressure that directly or obliquely encourages you to participate. If you don’t – odds are you’re some sort of romantic Scrooge.

How to leverage Valentine’s Day’s established brand equity for a greater good:

What most people the world over don’t know yet is that the accumulated brand equity of Valentine’s Day is being used to bring greater awareness and attention to sexual violence.

February 14th is V-Day, a global movement to end violence against women and girls inspired by Eve Ensler's play, The Vagina Monologues. The movement was started in 1998 by author, playwright and activist Eve Ensler who has been quoted as saying that it was women's reactions to the play that launched V-Day. After seeing The Vagina Monologues, women would line up after to tell Eve their personal experiences, most often of sexual violence.

The challenge here is as regrettable as it is obvious: ignorant and disturbed men. The men that this movement needs to reach and change the most are those men who are least likely to notice, let alone respond to the original Valentines’ Day message unless it is seen to further their own misguided objectives.

Combining the leverage of moral outrage and Valentine’s Day to effect change:

At its core, brand leadership is not about getting you to buy more, it’s about getting you to think differently. And like any healthy relationship, a healthy brand relationship with change your behaviour for the better.

On February 14th I would like you to join me and make a change for the better. Take a stand and find a way to teach others that violence against women and girls is wrong, and that it must stop now because people are not for hurting.

Dignity and self-respect are just a thought away. This is not rocket science. This is common sense.

Price versus Value

For year I’ve been teaching and preaching: “price is what you talk about when you have nothing else to say.” Unfortunately some of my friends still want to get out their rate-card and talk price because some of their prospects have told them that price is an important consideration.

Convinced he should publish his rates, one of my friends drew up a service rate-card that also explained how he would bill for his services. Then he sent it around to some of his trusted clients to get their point of view.

Fascinating results! I’ve edited the comments for brevity and anonymity. That’s all.

#1.   I like it.  Very clear explanation. My only concern is in the Hourly Rate section.

#2.   I'd remove hourly rate and discounts.

#3.   I agree with #2. Don't publish a rate.

#4.   I like #2's suggestion.  I think a positive approach that emphasizes the team approach and your strengths is best.  Customers will use price to qualify the service.  You need to make the conversation about something other than price.  It should be about quality, service and other factors that make you the best choice.  Price should be the last concern.

#5.   I agree with all of the others on staying away from talking about the hourly rates.  The one thing that stands out about you and your company to me is that you have a genuine interest in what is right for the customer.  Do whatever you can to try and get that message out to the potential customer. I would do business with you in a heart-beat because of that.

#6.   I like paying contractors by the hour. I say keep it in. It shows you're flexible.

#7.   I think this is of little consequence.  I know how agencies bill (by the hour) and I know that it will be more than if I do it myself and that the rates are subject to volume discounts. I don't care to read a page like this about the rates.  I am interested in the supplier because I know they can do the type of work I am interested in - a high level overview of the idea.  I also know that I will negotiate a price in the end for what I want, but I also know they need to make some money too.

# 8.   I like the flexibility of the pricing options - which I think should be the focus of the overall section. On a different note, I'm not sure I would include the Discount area. I don't know how others in the space approach pricing, but again the flexible approach speaks to how the customer can expect to be treated - based on their preferences.

My take away from this survey is this: work out your rate-card, use it when assembling a quote, present your submission and your price with confidence, and sell the overall value proposition.

Do justify each line item.

By focusing on the hours and rates you client loses sight of the big picture and your USP.


The Smart Farmer

Last year my friend bought and launched a new business.

He’s an optimist: so he bought into the ambitious “business potential estimates” with-out doing any home-work.

While he wants to make his short term sales numbers, he forgets that the products and services he’s selling have VERY long purchase cycles.

Each month he has a “sale”: Grand Opening Sale, Spring Sale, Summer Sale, Fall Sale, etc. to teach his prospects and customers that they should shop for the best price; not the best quality or relationship.

The discounts he offers leave him with paper thin margins that are too low to sustain his business with.

He’s open to trying any media that knocks on his door, but is not willing to put some pre and post sales event performance measures in place to help him determine which ads and media are working for him and which are not in the short and long term.

Because these tactics have not been thought through and are not working, my friend is starting to panic. I can’t blame him. I would too if all I did, did not appear to work.

This morning I was walking Charlie through an old apple orchard in my neighborhood and I was reminded of a more sustainable business cycle that goes something like this.

  • The smart farmer does homework to see what’s thriving in the area and what’s just barely hanging on in order to determine what the land’s yield potential is & profits might be.
  • Current supply and demand for the produce or livestock options are taken into account – as are changes in how his community lives.
  • The smart farmer doubles the estimated expenses and reduces the estimated profits by ½ to determine if an option is viable.
  • Given the cyclical nature of crop and livestock growth – as well as the barriers to a successful harvest, sorting out a steady short term cash flow is critical to the smart farmer.

The smart farmer develops a sustainable business model that enables the operation to weather the tough times and grow the business over the long term.

  • The smart farmer is no different than the smart retailer – she does her homework 1st.


Some context regarding the old apple orchard:

My guess is that this orchard was planted around 1918 when the land was part of the Scarboro Mission (which was founded to send Catholic Missionaries to China). For the last 30 years this orchard and some adjoining lands have been part of the Metropolitan Toronto Parks Network but continue to bear fruit which is enjoyed by the local residents and wildlife.