Direct response: new numbers, new trends.Is the direct response business in trouble? That's the buzz among software marketers these days, who increasingly complain about erratic er·rat·ic
1. Having no fixed or regular course; wandering.
2. Lacking consistency, regularity, or uniformity: an erratic heartbeat.
3. response rates, worn out mailing lists An automated e-mail system on the Internet, which is maintained by subject matter. There are thousands of such lists that reach millions of individuals and businesses. New users generally subscribe by sending an e-mail with the word "subscribe" in it and subsequently receive all new , and lemming-like migrations of buyers back to the retail channel. Upgrade campaigns were once the industry's most predictable cash cow Cash Cow
1. One of the four categories (quadrants) in the BCG growth-share matrix that represents the division within a company that has a large market share within a mature industry.
2. , they say; today, some upgrade promotions actually manage to lose money.
But there are still millions of software buyers who do respond to direct campaigns--for new product offers as well as for upgrades. The root problem, we suspect, is that the behavior of these buyers has changed enough to make traditional forecasting models and benchmarks obsolete OBSOLETE. This term is applied to those laws which have lost their efficacy, without being repealed,
2. A positive statute, unrepealed, can never be repealed by non-user alone. 4 Yeates, Rep. 181; Id. 215; 1 Browne's Rep. Appx. 28; 13 Serg. & Rawle, 447. . The feeding frenzy feed·ing frenzy
1. A period of intense or excited feeding, as by sharks.
2. Excited activity by a group, especially around a focal point: is over; the challenge now is to find new ways to predict direct response customer behavior.
And that's exactly the job that UCA&L, the industry's largest fulfillment ful·fill also ful·fil
tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils
1. To bring into actuality; effect: fulfilled their promises.
2. organization, has just undertaken. UCA&L (formerly Upgrade Corp. of America) recently took a close look at statistical data from several hundred direct campaigns that its clients conducted during the past 24 months, and also polled 2,000 telephone customers about their buying habits and future plans.
The results--which UCA&L co-chairman Jordan Levy Jordan Levy is a Jewish American politician and talk show host from Worcester, Massachusetts. He has served as the Mayor of Worcester on two occasions, first from 1981 to '82 and the second time from 1988-93. shared at last week's OpCon conference--are full of fascinating nuggets Nuggets can refer to several branches of interest:
* Upgrade direct response rates are in decline: "In 1991, when we first collected this kind of data, the average upgrade response rate was 33%," says Levy. "That number has been declining steadily ever since: The average today is about 8% for consumer titles and 7% for business applications. And it's easy to see why this is happening. In 1991, no major retailer sold upgrades, and today everyone does."
* But upgrade buyers still like the direct channel's fast response: Despite competition from retail, UCA&L's data shows that upgrade response rates are typically four times higher than the average 2% response rate that direct campaigns now produce for new titles. Moreover, "upgrade customers have more sense of urgency," says Levy: 66% place their orders by telephone, while only 41% of buyers of new products use the phone (55% respond by mail and 4% send a fax). And UCA&L's telemarketers have a much easier time converting upgrade inquiries into sales, he notes. UCA&L's closing rate for upgrade calls is 65%, compared to a more modest 41% for inquiries about new products.
Buyers (usually) won't spend more than $50 for an upgrade: Levy's data shows that upgrades priced below $50 produce dramatically higher response rates--as high as 20% in some categories. Above the $50 price point, he says, most response rates drop off rapidly. "But business users will absolutely pay $110-$129 for an upgrade, if the product is valuable enough."
Credit cards are by far the preferred payment vehicle: Levy reports that credit card transactions now represent 75% of UCA&L's sales volume, compared to 23% of customers who pay by check and 2% by purchase order. "Even among customers who order by mail, 47% use a credit card instead of sending a check," Levy notes. One significant change in transaction patterns, Levy adds, is that American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. usage is declining rapidly. In 1993, AmEx transactions accounted for 33% of UCA&L's sales volume; now, Visa has become the most popular credit card, with 51% of transaction volume, followed by MasterCard at 29%, AmEx at 16%, and 4% for all others.
Returns aren't a problem in the direct channel: UCA&L tracks the return rates for the software it sells, and Levy says he's seen an "amazing a·maze
v. a·mazed, a·maz·ing, a·maz·es
1. To affect with great wonder; astonish. See Synonyms at surprise.
2. Obsolete To bewilder; perplex.
v.intr. " decline in rejection rates for new products in the past few years. Currently, consumers send back about 4% of the upgrades they order, the same ratio that prevailed in 1993. But only 2% of new products now get returned, compared to 7% in 1993. One reason, he says, is that direct marketers in 1993 were experimenting with "time-release" free-trial offers that are now less common. "And people today are simply more careful about what they're buying."
* Direct response customers are multi-channel buyers: In addition to looking at historical data on direct marketing campaigns, Levy says UCA&L has just conducted in-depth interviews with 2,000 of its recent direct response buyers. One of the striking conclusions of this data is that the typical buyer actually spends more money (64%) in retail software outlets than on direct mail, catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. , and phone transactions (which together account for 42% of software dollars). But Levy says the data also suggests that direct response buyers are becoming increasingly committed to the direct channel: 62% expect their retail purchases will diminish over the next year or two; 73% think phone sales will play a larger role in their purchasing patterns.
Direct response buyers are optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op about online delivery: According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the same survey, UCA&L'S customers now buy only 3% of their software through the Internet and other online channels, but 62% say they'd buy electronically "if modem speeds were fast enough." Moreover, 68% are convinced that online channels will grow in importance in the near future, and many are pretty open-minded about alternatives to buying traditional shrink-wrapped software Refers to store-bought software, implying a standard platform that is widely supported. : 55% find software rental attractive, and 74% like the idea of buying "subscription" products. "When we asked them what they meant, they usually described something like a monthly or quarterly magazine," says Levy.
Jordan Levy, president, UCA&L, 699 Hertel Ave., Buffalo, N.Y. 14207-2398; 716/8716444.