In 1872 Aaron Montgomery Ward produced his first catalog and launched the modern era of direct marketing. One hundred thirty-six years later, many direct marketers still rely on Ward’s traditional model to promote their products and services despite the many facets of the unknown that exists with this approach. That’s not to say that direct marketing hasn’t gained sophistication through the years, because it has. Marketers have moved from blanket mailings to using increasingly sophisticated post-campaign analysis to understand which contacts lead to purchases. However, it has long been recognized that not all purchases from customers are a direct result of marketing outreach and therefore are not necessarily a true incremental purchase, i.e., some of the people contacted would have purchased anyway.
Traditional Response Modeling Wastes Money
All marketers struggle with equating marketing dollars spent to wallet share gained with targeted customers. This struggle ensues due to the fact that traditional modeling does not account for the people for which the marketing campaign does not elicit the desired response. That’s right. Not everyone appreciates your hard work and effort. In fact, your direct mail may actually incite a customer to flee!
The following represents the three major problem response categories associated with using traditional response models:
Why target them if they will buy anyway: This problem is simply money wasted targeting people who would buy even if you didn’t target them. These are your loyal customers and customers who planned to purchase the product in advance of receiving the incentive. Why send a coupon for 20 percent off when they were planning to purchase your product anyway?
The highly unlikely to buy issue: Money wasted on people who are highly unlikely to buy is a lost cause, hence the term. These people do not have a purchase pattern that indicates an incremental purchase is on the horizon.
Best left alone segment issue: Imagine this - you actually drive away business by targeting people best left alone. The people in this category do not want to hear from you and in some cases, your direct marketing, may actually push them to never purchase again. We will refer to this group as the “Do Not Disturbs.”
The inability to identify the negative impact a campaign may have on a customer results in wasted marketing dollars as well as customer defections. The bottom line is that the effect of focusing solely on the probability of purchase or traditional response modeling results in every campaign costing more than it needs to, achieving less than it could and annoying some customers unnecessarily.
The Must-Have Customer Segment: The Do Not Disturbs and The Persuadables
There are two groups of people that every marketer must be able to identify before launching a campaign - The Do Not Disturbs and The Persuadables. These groups are the difference between a successful campaign and a less-than-successful campaign. They make all the difference.
The Do Not Disturbs are the group of people for whom the campaign triggers a negative response. Imagine taking all that time and effort working to refine and finesse a marketing campaign only to send customers running in the opposite direction. Unfortunately, traditional response or attrition modeling only focuses on likelihood to respond and cannot identify The Do NotDisturbs.
On the flip side are The Persuadables. Marketers constantly find themselves in pursuit of this group. These are the people who respond in just the way a marketer hopes and makes the job of equating money spent on marketing to the bottom line more straightforward. The group of Persuadables are those that buy (or renew) but would not have done so had they not been recipients of a marketing campaign. Essentially, this is the only group a marketer should want to target because they provide the greatest return on marketing investment (ROMI).
