Sharing our Secrets: Part 2 New Customer Recruitment Rent? Swap? or Hitch a Ride?

In part 1 of this series, I identified personalised mailings as ‘Top of the chart’ for New Customer Recruitment. In our experience, direct mail is by far the most cost-effective of all advertising channels for practically all direct retailers, not just catalogue retailers. When orders are correctly attributed to the advertising source which triggered the response and when lifetime value is taken into account, direct mail wins hands down every time. Customers acquired through direct mail register higher order values and are more loyal. Their lifetime value is often twice as high as a new customer acquired online.

The next question for any direct retailer is should I rent prospect data, should I swap buyer data with other direct retailers, or should I hitch a ride by inserting in a third-party’s customer mailing?

List rental of prospect data Ð The traditional route

Before the arrival of the data co-ops in the UK (Abacus, Transactis and Experian’s Club Canvasse), list rental via any one of 20 or so list brokers was the default option for a direct mail campaign. But with rental costs running at between £120 per ‘000 and £150 per ‘000, it didn’t take long for most catalogue mailers to realise that the co-ops offered a more attractive solution, with multi-buyers available at £70 per ‘000 or even less.

With access to these co-ops restricted to catalogue retailers, those in financial services, charities and other verticals still had few options other than to rent prospect data. Charities continued to rent prospect data heavily, but most were then completely unnerved by the introduction of the EU GDPR directive. Only now are the charities rediscovering the value of direct mail, with a major uptick in list rental by charities in the last six months. By contrast, most financial service operators have simply migrated their spend to online channels or have forged ‘white-label’ alliances with large owners of customer data.

Data swaps Ð The original raison d’tre of the Direct Commerce Association (DCA)

Why pay list rental charges when you can swap buyer data with your industry colleagues at practically no cost at all? That was the question posed in a closed session of senior client-side executives at an ECMOD conference at the Wembley conference centre in 2003. Six months later, at a grand luncheon at the Berkeley Hotel in Knightsbridge, 12 catalogue industry CEOs, owners and senior directors met to sanction the launch of The Catalogue Exchange and agree the guiding principles that would govern its operation.

With the Direct Marketing Association acting against the interests of the catalogue industry at that time, the Catalogue Exchange was established as a new trade association to fully represent the interests of the catalogue industry. It went on to become a strong lobby group on all issues of interest to catalogue retailers. Formed with the specific objective of promoting close co-operation and sharing of best practice between catalogue publishers, the original desire to promote data swaps as a cost-effective means of sourcing prospect data underpinned the fledgling association. The Catalogue Exchange was later renamed the Direct Commerce Association, to reflect the growing importance of the web as a channel for all direct retailers.

Why might I want to consider data swaps and how should I go about it?

Apart from the obvious advantage that data swaps cost much less than any other source of prospect data, the swap process is transparent. Unlike prospect data supplied by the co-ops, you get to know which selection parameters work on each partner’s list. At Scotts & Co., we find that our best data swaps out-perform the top segments of co-op multi buyers – perhaps because we are able to identify a clear affinity between our brands and the customers of our chosen partner brands.

The mechanism for arranging swaps adopted by most catalogue retailers is to approach one of the three industry brokers who specialise in such swaps. For a fee of between £10 per ‘000 and £30 per ‘000, agencies such as Mokrynski, Accent Direct Marketing or Black Kite Media will propose and manage a programme of data swaps with any one of the 25 or so catalogue sector operators who engage in swap arrangements. There are plenty of other advantages though to using a broker:

  • A broker is aware of all of the active buyer lists that are available and will often share their experience of how responsive an individual file has been for their clients.
  • A broker is a one-stop shop. If you are swapping data with 5 or ten different data owners, it can generate a fair amount of administration. It can also be a bit of a headache to keep track of swap balances – how much data does your swap partner owe you or vice versa.
  • A broker is in a position to ensure that your data swap partner is fully compliant with the terms of the GDPR.

The option always exists, of course, to contact prospective data partners direct. If you don’t mind the additional administration, you save the brokerage fee and can discuss directly with your data partner the profile of your target customer. This will enable larger data owners to propose specific selection parameters likely to improve your response rate.

What are the pros and cons of advertising inserts in third-party mailings?

The idea of ‘hitching a ride’ with a fully personalised customer mailing that has been sent to a group of customers who are known to be responsive to direct mail has its attractions. This is particularly relevant in the current environment, where so many purchase decisions are now being made in the home.

Nevertheless, this is not pure solus direct mail and there are limitations. For example, your customer recruitment message needs to be accommodated on a leaflet weighing no more than about 8g to qualify for the standard mailing insert fee. That’s fine if you are simply offering a voucher or if your brand proposition is simple, but this format does not permit you to propose a full range of products or services. Heavier inserts can be carried, but the price of access tends to rise in proportion to the weight of your advertising piece.

The advantage of an inserts programme however is that your total advertising cost is much lower as standard 8g inserts normally cost no more than £27 per ‘000. The cost of testing is tiny too, with many mailers offering free tests of up to 50,000 inserts. Scalability is good too as a successful test of 100,000 or 200,000 inserts can be quickly scaled to many millions.

Most catalogue mailers accept inserts in outgoing mailings and just as with data swaps, there are specialist agencies and insert brokers who will assist in proposing and arranging a full programme of insert advertising. Amongst the largest of these brokers are UKLPS, The Specialist Works, Griffin Media, DM Focus, Medialab, EDIT and Media in Mind. Alternatively, you can contact catalogue mailers or their media divisions direct, to arrange inserts. There’s no rate saving in going direct as mailers honour their relationship with the agencies but speaking to the catalogue owner direct does sometimes help to get a better picture of what inserts availability looks like over the coming months.

The pandemic is causing major shifts in the tectonic plates of the media market. Newspapers and magazines have suffered badly during lockdown and sadly, many of the most reliable insert publications such as the Telegraph Group have chosen to increase their rates aggressively in order to compensate for their loss of advertising revenue. This is likely to have the opposite effect as media inserts are very marginal as a recruitment channel at the best of times and advertisers are now voting with their feet against the new rates being proposed as they are simply not affordable.

But across all new customer recruitment channels, there are developments which are immensely positive. The co-ops are having their best year for a long time and are ready to bend over backwards to help new clients. Royal Mail has declared that it is ready to give a sympathetic hearing to any direct mailer who can set out a plan for a substantial increase in their mailing volumes. Bear in mind though that incentive support is only likely to be available on incremental volumes. But it’s on these marginal volume decisions that mailers need a helping hand with costs. Royal Mail is ready to provide support where it is most needed.

Response rates to direct mail remain high too, as customers seem to have settled into a new habit of buying direct for the sheer choice and convenience that home delivery can offer. The evidence for this is very close to home for us at Scotts & Co. We chose to double our mailing volumes as we went into the pandemic and as a consequence, sales have risen by 40 per cent over the past year and the size of our customer database has increased by over 50 per cent. We emerge from this pandemic with renewed faith in direct mail as the most powerful and effective channel for new customer recruitment.

By Nigel Swabey, President Emeritus, DCA; CEO Scotts & Co

Leave a Comment

Your email address will not be published. Required fields are marked *

Related Posts

X
X