Direct Mail Modeling Case Study

Client: Upscale, off-price fashion retailer

Highlights

  • $70 million improvement in direct mail top line sales
  • 250-fold increase in incremental sales per piece
  • 136% ROI
  • Reduced direct mail costs $1.2 million annually
  • Improved best customer retention

Background

With nearly 300 locations throughout the country, this upscale, off-price retailer relies heavily on direct mail as a primary marketing channel. Prior to working with Lift361, any purchase made by a direct mail recipient was attributed to the channel, making it – in the retailer’s eyes – a very successful effort. However, control groups showed that while the topline sales were high to mail recipients, there was little incremental sales driven by the channel. In fact, the 30+ million pieces delivered in the 12 months prior to Lift361’s involvement drove approximately $300,000 in incremental sales – roughly $0.01 per piece mailed.

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Objective

The goals of the initiative were to:

  • Leverage the direct mail budget to increase incremental sales, not just top-line sales
  • Optimize the spend by touch, ensuring acceptable ROI for each touchpoint
  • Continue to drive sales to existing customers

Strategy

Lift361 deployed a three point strategy to meet the objectives. First, Lift361 implemented statistical lift models to identify the customers whose behavior could be driven incrementally by direct mail touches. This meant reducing mailing to those customers likely to shop regardless of receiving mail and eliminating those customers who were not likely to visit either way.

Second, mail quantities were reviewed based on the statistical models, historical results and industry best practices. Based on the analyses, the mail plan was adjusted for optimal quantities, improving overall performance.

Finally, Lift361 implemented a contact strategy to ensure customer segments were each receiving sufficient communications to maintain their spend levels. For example, the models would often indicate best customers would shop without a direct mail touch. While this is true, significantly reducing touches throughout the season to the most valuable group of customers could have detrimental long term consequences.

Results

The sales impact was clear. Over the 12 months following the implementation of the strategy, the direct mail channel drove an incremental $71 million to the topline. The channel moved from losing money to returning a 136% ROI, and equally important, best customer retention improved over historical averages. All of the results were achieved during the worst economic downturn in the US in nearly a century.

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