Use testing to improve response. (Direct Mail Essentials).
Just as you would not spend thousands of dollars extra by using an inefficient printer, you should not send a mailing without ensuring you are presenting the best offer to the right audience in the most efficient format.
Testing can improve profitability in several important ways. It can:
1. Increase the response rate and get more customers to respond for each dollar spent.
2. Improve the quality of respondents and produce a higher balance, for example, for loans or deposits per respondent.
3. Lower the cost of your mailing and enable you to spend less for printing, list, postage or processing.
The key variables for testing that affect response are the list of prospects you mail to, the offer you make to them (such as the rate, term or balance requirement) and the way you present the mailing (postcard, letter, self-mailer, for example). And, for some products, such as loans and deposits, timing also is a factor.
Direct marketers generally agree that the list is the variable with the most impact, followed closely by the offer you make and finally, by how or when you present the material.
For example, sending a mailing for certificates of deposit to younger, lower-income households is not likely to produce good results. So, if the mailing costs $500 per thousand pieces mailed, you will save $0.50 for each unqualified prospect you eliminate.
Different kinds of tests
Track the results from your lists by coding the reply cards or account application or assign unique telephone response numbers for each list you use. For deposit promotions, the most revealing tests typically are based on list selections for income, age or net worth. For loans, income and home value selections are useful.
For home-equity credit mailings, you might test offers featuring a variable rate line of credit versus a fixed-rate loan. Or, test a teaser rate for a limited term against a single rate. Or, test apply-by-mail versus a telephone application.
You also can test offers for various interest rates, for example, for money market accounts or home-equity credit. But interest-rate testing by mail has a limited time horizon, and, when rates change significantly over time, your old data will be less useful. So you might consider first testing rate offers in other media, such as newspapers.
For example, you could test a 2.5 percent APY, 7-month certificate of deposit against a 3 percent APY, 18-month certificate in a newspaper ad. You will know which has more appeal in just a few days, then roll out the mailing with the one most likely to succeed. This method is not as "pure" as testing by mail, but if you don't have the time available, it can help guide you as to where to start with your mailing in a short time.
You can also test the format of your mailings, for example, a postcard versus a standard letter format. Or, two-color versus four-color printing.
Not every bank will get the same results in a specific test. A large, long-established bank might get good results with a simple postcard promoting certificates of deposit. But a smaller, less well-known bank might do better with a letter explaining more about who the bank is, its approach to customer service and in what other ways the institution can serve the reader.
Each time you learn something from testing, you can add that knowledge to your future mailings and continually improve your response rate. With planning, testing in direct mail often can be done with little or no additional expense. And, the more you do it, the more your profitability will improve.
Jim Turner is President of Etra Corp., Naperville, Ill. The company provides advertising and research services. He can be reached at (630) 369-1510 or at email@example.com.
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|Comment:||Use testing to improve response. (Direct Mail Essentials).|
|Publication:||ABA Bank Marketing|
|Date:||Apr 1, 2003|
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