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Customer responds by going to a Web microsite
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I am often asked what the typical response rates to a promotion are. There is, of course, no answer to this question. It depends on the audience, the offer, the package, the copy, the timing, and a host of other factors. Some promotions to customers have generated response rates of 40 percent or more. Most promotions to prospects are lucky to achieve a 1 percent response rate. An important aspect of promotion response is the method selected for receiving the response. Is it mail, phone, email or Web As this book demonstrates, Web response is the most cost-effective and powerful method. Let s take a look at a couple of cases to demonstrate this point.
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Direct-Mail Response
An automobile manufacturer designed a credit card for its automobile customers. It created two different cards: a Titanium card with a $100 annual fee and a Gold card with no annual fee. The Gold card included a $50 reward package and an initial APR of 3.9 percent. The direct-mail promotions were sent only to the owners of the company s cars, not to the general public. The automobiles were
T h e C u s t o m e r L o ya lt y S o l u t i o n
designed for and sold to an upper-income segment that appreciated their performance and style. The owners were loyal to the brand. The promotions took place at a time when the credit card market had been saturated with offerings for the previous four years. Few cards were generating signi cant response rates. Overall, there was a surprising difference in the response to the two cards, as shown in Table 7-2. From these numbers, it is clear that the Titanium card was a loser. The acquisition cost of $297 per account was really uneconomical. You can t subtract the $100 annual fee from this number because the fee will be paid only at renewal time, 1 year hence. At that time, if this card is like most cards, less than 50 percent will pay the $100 to renew. The Gold card, on the other hand, produced an unusually good response rate. Since the overall industry average acquisition cost for credit cards is well over $100, this automobile company made excellent use of its customer database to promote these cards, as its cost per account was only $57. The response to the cards was by phone or mail. No opportunity for Web response was offered. This could have been a serious mistake.
Direct Mail versus Email
A major manufacturer of business-to-business computer products created an innovative Web site that was designed to Teach IT managers about the value of the company s services Get them to register Pro le them for the sales force Table 7-2 Card Response
Titanium Low response High response Total response Cost/response Approval rate Cost/account 0.15% 0.40% 0.25% $317.50 107.00% $297.25 Gold 1.01% 4.71% 1.60% $49.96 87.22% $57.28
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A creative direct-mail piece was sent to 186,000 IT professionals drawn from lists of customers and rented lists of computer magazine subscribers. It directed people to go to the Web site. Parallel to this, an email campaign was launched to 56,000 IT professionals. The email lists were primarily lists of trade show attendees. The results comparing the various lists used, shown in Table 7-3, were quite interesting. What Table 7-3 shows is that the email promotion did very well against the direct-mail promotion. The response rates were lower and the percent registering was much lower, but the cost per registrant was almost half that of direct mail. What can we conclude from this Direct mail is not dead. It will continue to be a useful and effective direct marketing technique. Email gets lower response rates, but it produces results at far lower cost. There is one really powerful lesson from this case that does not show up in the numbers presented so far. That lesson concerns the responses that came from an unknown source, as shown in Table 7-4. This is where the company was a real winner. Table 7-3 Cost per Registrant
Direct mail Cost per piece Number sent Low response High response Total response Percent registering Cost per registrant $0.76 186,361 0.26% 4.03% 1.42% 1.01% $75.25 Email $ 0.14 53,250 0.00% 7.79% 1.04% 0.29% $48.28
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