You can help drive transactions and profit margins with direct mail.
The basic rap sheet on direct mail is a high cost/low response medium. And it certainly can be. It can also drive both transactions and margin if you analyze and optimize.
Here are 7 steps that will get you started:
1. Analyze and optimize.
Don’t forget, you have to continually analyze and optimize to reach maximum effectiveness.
2. Select a marriage mail service.
A mail service like Valassis will help keep your printing and production cost efficient. A mail service can also share their knowledge of direct mail with you.
3. Determine the coupons you will offer.
Based on your experience, combine a mix of high transaction, lower margin offers with lower transaction, higher margin offers. As you analyze and optimize, you’ll find the combinations that are most profitable.
Since you already know something about your customers, you’ll find that your initial guesstimates will be pretty accurate.
4. Determine the number of households you will mail from each store.
Depending on each store’s location, the mile radius you include to reach those households may have to change.
If a store is in a densely populated area, then the radius you mail will be tighter than an interstate location. So be careful not to mail more than 5 miles out unless you feel certain your store is in the traffic pattern.
5. Determine if you want to mail to all households or a select demographic.
This totally depends on the demo of your brand. Choosing a select demo may simply reduce the number of mailers without really increasing the odds of response. But if your brand’s demo is specialized, this step will be worth the extra cost.
6. Code your coupons to the greatest extent possible.
If they can be coded and tied to a transaction in your POS system, that’s ideal. If not, do what you can to tie each coupon to a store.
7. Set up your tracking metrics.
Here are a few initial items to track:
- The in-home date/date households received the mailers
- In-home dates vs. redemption dates (i.e., how long does it take to start seeing redemptions, and how long do you continue to see redemptions?)
- Redemption rate by coupon, by market, by store
- Cost per redemption by coupon, by market, by store
- Cost of the discount of each coupon
- Profitability of each coupon
- Incremental sales during the coupon period
- Average check per redeemed transaction—if possible—or average check during the coupon period.
With this information you can now start to determine the following:
Which stores or markets respond best to which coupons?
For instance, one of my clients dropped a series of breakfast coupons as well as lunch/dinner coupons. It then became easy to begin segmenting the stores based on coupon redemptions. As an example, there were not only “breakfast stores,” but also stores that significantly outperformed the chain on specific breakfast products.
How to start optimizing the coupon drops to increase the response and profitability?
Using the example above, you could choose to change the breakfast coupons in the mailings to stores that did not perform well with those coupons. The breakfast coupons could be replaced with offers that are similar to offers that did perform well against those stores, or replaced with other test offers.
As you analyze and optimize, you will continue to mine information about your stores that will not only help optimize your mailings, but also help optimize your total store marketing.