Is It Possible To Reduce Direct Mail Spend Without Sacrificing Sales? The Answer is Yes. - Lift361

Our Thinking

Is It Possible To Reduce Direct Mail Spend Without Sacrificing Sales? The Answer is Yes.

By Ed Higdon. Posted in Analytics | Insight

October 23, 2017

Many marketers have a love-hate relationship with direct mail. You know you have to work with it, but it’s one of the most expensive forms of communication in your repertoire. Solving the puzzle of how to reduce direct mail frequency without decreasing sales has eluded stores for decades.

Until now.

With the right approach, you can intelligently reduce your direct mail spend without cutting into the bottom line.

Strategically Reducing Direct Mail: A Case Study

If you understand what moves your customers across different value levels, you can determine the best direct mail frequency for them. Ultimately, you’ll be able to reduce spend for some segments and focus those freed-up dollars on less costly channels all while growing customer value over time.

To illustrate how it’s done, let’s examine some actual data from a retailer who successfully figured out how to reduce direct mail spend.

The first test focused on the retailer’s highest value customers. The customers were divided into four groups. A control group, who received 0 direct mail touches over a quarterly period; and groups who received three touches, four touches and five touches.

You can see from the next table below, that the group who received five direct mail touches saw a 2.2% incremental lift in the percentage of people who shopped, and their incremental spend per name mailed was $6.27.

It would seem that the result was simple: the more touches, the better. However, this is not the full story. There is one more critical number to consider. The group that received three touches actually had the highest return per (marketing) dollar spent. That means for every $1.00 (Aggregate Cost Per Name Mailed) this retailer spent on advertising, they received $3.36, with fewer direct mail touches than the other test groups.

Reducing touches to three among this segment could have a significant positive impact on this company’s bottom line.

But you don’t have to stop with just high-value customers. To truly maximize direct mail, simply lather, rinse and repeat for mid-level customer values, low-level customer values and new customers. The results will vary from group to group and will be unique to your customer base, but the end result is an actionable game plan for optimizing the dollars spent on direct mail and funneling those “found” dollars into email or other channels.

What Comes Next?

So, the next logical question becomes: How do you then determine where to funnel those dollars? You can find the answer to that question here.