No. 1021
Maximizing Your Co-op Direct Mail Efforts
Co-op direct mail offers marketers the benefits of direct mail but at a lower cost than solo direct mail. This article describes various co-op direct mail options, outlines the key steps in implementing a successful program, and lists resources that can provide information and assistance.
| T A B L E O F C O N T E N T S | |
OVERVIEW
The Direct Marketing Association (DMA) defines direct marketing as "any direct communication to a customer or business recipient that is designed to generate: 1) a response in the form of an order (direct order), 2) a request for further information (lead generation), and/or 3) a visit to a store or other place of business for the purchase of a specific product(s) or service(s) (traffic generation)."
Direct mail, which is one category of direct marketing, encompasses "all direct response advertising communications through mail or other delivery services." It has two main advantages:
Recipients like it. According to the Cox Direct 19th Survey of Promotional Practices (see Key Research), 56 percent of consumers rank mail as their second-favorite way to receive coupons for grocery products and health-and-beauty aids (exceeded only by color leaflets/Sunday newspapers, preferred by 65 percent). And 74 percent of consumers say that direct mail is their favorite way to receive samples of grocery products and health-and-beauty aids.
It offers options. You can do a broad-scale saturation mailing or a finely targeted mailing to the most likely prospects for a product or service. Prospects can be targeted by geographic area, demographics, lifestyle, buying behavior, or a combination of those factors. For a business-to-business mailing, prospects can be targeted by company size, job title, product ordered, or frequency of purchase.
In co-op direct mail, several marketers share the same envelope or other mailing piece and thus share costs. Co-op direct mail takes many forms:
- Coupon envelopes. In this, the most familiar form, special-offer coupons from several advertisers are mailed in a single envelope. Advertisers can range from packaged goods companies to restaurants to dentists to moving companies to carpet-cleaning services. The mailing can be sent to all households in a geographically defined area or to prospects who fit a specific demographic or lifestyle profile.
- Product samples. Usually these are samples of related, but noncompeting, products in a single carrying vehicle. The products are targeted to a defined group, such as new mothers, college students, or senior adults. A coupon, order form, or catalog often accompanies the product to encourage the first post-sample purchase.
- Bill stuffers. These range from the charity appeals enclosed with a utility bill to the magazine subscription forms and flyers for alarm clocks or stationery included with credit card statements.
- Package inserts. These inserts include ads, offers, brochures, or samples packed along with mail-ordered merchandise. This type of mailing is low-cost because the marketer pays no postage and doesn't have to create a mailing piece that fits a specified format. However, you cannot select the recipient (the mailing goes to whoever orders the merchandise), and response rates are generally low.
- Card packs or card decks. These are, for the most part, the business-to-business version of coupon envelopes, although some card packs are consumer-oriented. Card packs consist of anywhere from 30 to 100 postcards, usually postpaid, in a single envelope or polybag. The cards can present offers from several different advertisers or can showcase several items from one company's product line. Products and services range from books and periodicals to filing systems to trade show exhibit booths to audiovisual equipment to advertising specialties. Recipients return the cards to request a catalog or product sample or to order merchandise.
PROS AND CONS OF CO-OP DIRECT MAIL
There are three principal advantages in going the co-op route:
It enables marketers to share costs. The costs of solo direct mail include preparing or buying a mailing list, buying envelopes, designing and printing the promotional materials, inserting the materials, addressing the envelopes, postage, and redemption. With co-op direct mail, the advertiser shares everything except creation of the insert and redemption of the offer. A co-op mailing typically costs about 10 percent as much as solo mail. Costs vary so much from mailing to mailing, however, that it is not possible to quote meaningful ranges.
It levels the playing field. A small company looks just as important as the large companies included in the mailing.
It's an effective testing medium. A co-op mailing enables an advertiser to test an offer and decide if the response rate justifies investment in solo mail. Often the sponsor of the co-op mailing can split the mailing list to enable an advertiser to test more than one price or offer simultaneously.
There is one disadvantage of co-op direct mail: The response rate for consumer mailings is lower than that for solo direct mail. However, if the list is well targeted, the respondents are usually of higher quality. Note: Business-to-business co-op direct mail (card packs) usually has a better response rate than solo mail. Why? One possible explanation is pass-along readership.
STATISTICS
Direct marketing is expected to produce an estimated $730.5 billion in sales to consumers and $593.5 billion in sales to businesses in 1998, reports the DMA publication Economic Impact: U.S. Direct Marketing Today. Of those totals, direct mail is expected to reach $261.1 billion in sales to consumers and $160.2 billion in business-to-business sales.
In consumer direct marketing, direct mail is the highest-grossing sales category. It is expected to account for 35.7 percent of total direct marketing sales in 1998, up slightly from 1997. From 1997 to 2002, consumer direct mail sales are projected to increase by 7.6 percent per year.
In business-to-business direct marketing, direct mail is the second-highest-grossing medium (after telemarketing). In 1998, it is expected to account for 26.9 percent of total direct marketing sales, level with the 1997 percentage. However, a sharp rise is projected, with business-to-business direct mail sales growing 10.2 percent per year from 1997 to 2002.
In 1995, 25.3 percent of consumers participating in the United States Postal Service Household Diary Study (as reported in U.S. Direct Marketing Today) indicated that they would respond to third-class solicitations from consumer packaged goods companies. However, 24.9 percent indicated that they would respond to first-class solicitations from such companies. The difference in response rates is so slight as to suggest that it is not worth it for advertisers to incur the extra expense of mailing first class, unless timing is critical.
A study by NCH Promotional Services cited in U.S. Direct Marketing Today shows that 81.5 percent of coupons were distributed through free-standing inserts (FSIs) in newspapers in 1996, vs. 2.7 percent distributed via direct mail. The comparative percentages were 83.3 percent and 2.7 percent in 1995, and 82.3 percent and 3.2 percent in 1994. Clearly, consumers continue to be inundated with coupons in FSIs. Thus, if the mailing is done right, direct mail coupons should be better at capturing the attention of the target audience. That conclusion is supported by the coupon redemption rates reported in the NCH study: for direct mail, 3.7 percent; for Sunday newspaper FSIs, 1.6 percent.
CRITICAL ISSUES
Even though co-op mail is low-cost, it's still important to try to get the best possible return on investment. Also, because co-op response rates are relatively low, any tweaking that improves the rate even slightly will be statistically significant. Keep the following points in mind to boost response rates while holding costs down:
Your objectives. You'll need to clarify your objectives before deciding which list to use and what to offer. Do you want to increase usage of your product or service by your current customers? Convert users of competitive products or services? Increase usage of one element in your product line that is lagging behind the others? Introduce a new product or line extension?
The mailing list. This is perhaps the most important issue. "A weak offer to a well-targeted list will produce a better response rate than an excellent offer to a poorly targeted list," says Nat D. Bodian, author of Direct Marketing Rules of Thumb (see Books). What is the profile of the list you are considering? Does it match your current customers? Does it match a new market you want to penetrate? How is it compiled? How is it cleaned and updated? How often?
Your co-advertisers. Are the other participants in the mailing of a caliber that reflects well on your product or service? Are they offering products or services that don't compete with yours? Is it possible for you to get category exclusivity? How much more does it cost? Is it worth it to you?
References. If possible, find an advertiser with a product or service comparable to yours that has recently used this particular co-op vehicle. Perhaps your supplier will provide names of contacts. What kind of results did the previous advertiser achieve? What return on investment?
Your insert headline. Because there are other offers or products in the mailing along with yours, you need to grab the attention of the target customer the instant he or she sees your coupon, postcard, or other literature. To do this: 1) use targeted terms such as "Working Mothers," "Back to School," "Dog Owners," "Chief Financial Officer," or "Grandparents" and 2) mention benefits such as "save," "increase," "learn," or "protect." The headline is especially important in card packs, which busy executives typically skim more quickly than do consumers browsing through coupons at home.
Gear your copy to the audience. A generic message is appropriate for a mass mailing. But if the list is sharply targeted, you squander your opportunity unless you write to appeal to that target audience. Use appropriate vocabulary and style along with specific references to the group. Mention features and benefits that matter to the audience: convenience, quality, security, speed, style, taste, durability, value. The more focused and appealing the copy, the better your response rate will be.
Your offer. There are many possibilities for co-op direct mail offers: free or discounted merchandise or services, a trial period, special introductory offer, premiums, and unusual items not readily available elsewhere. Whatever your offer is, state it clearly and simply so that the recipient can respond quickly. Specify any restrictions (quantity limits, expiration date, etc.) in readable type. If you use repeat mailings, vary the offer periodically to keep it looking fresh.
Pricing. Use price points appropriate to your target audience. Some experts suggest that, for upscale offers, rounded numbers ($10, $20, $30) work best. When price itself is the appeal, however, a number like $9.95 is more effective. Another consideration: The product should appear to be priced below regular retail.
Graphics. Two key points. 1) It's preferable to show a product or service in use, rather than just a "beauty shot." 2) Be sure that the person in the photo or illustration matches your target audience.
Legalities. If your offer includes a sweepstakes, consult with an attorney. The laws pertaining to sweepstakes are complex and vary from state to state.
Keep your expectations realistic. Understand that response rates with co-op direct mail will be lower than with solo mail, but quality should be higher. Thus you will probably be building repeat business.
FINDING A SUPPLIER
A co-op program sponsor generally provides the mailing list and the envelope or other carrier package and handles insertion, addressing, and mailing. Some can even suggest copy layouts, ways to write inserts that get results, or ways to adapt existing materials to the format.
Business Publication Advertising Source lists more than 7,500 U.S. publications in 185 market classifications; includes more than 550 direct response opportunities for specific market segments. 12 issues. $579/yr. Call 800-851-7737.
Consumer Magazine Advertising Source gives detailed descriptions of more than 2,700 consumer magazines and card decks in 75 market classifications. 12 issues. $559/yr. Call 800-851-7737.
Direct Marketing List Source provides more than 19,000 lists in 212 market classifications. Includes information on more than 700 business and consumer co-op and package insert programs. Six issues, supplemented by six issues of the "Bullet" newsletter. $410/yr. Call 800-851-7737, ext. 5036.
Direct Marketing Marketplace includes listings of service firms and suppliers and direct marketing agencies, plus associations, events, and periodicals. 1,155 pp. $239.95 single order; $215.95 standing order. Call 800-521-8110.
The DMA 1998 Buyers' Guide lists suppliers that provide direct marketing goods and services in 30 business categories, including alternative media, direct marketing media, direct response packaging, and sales promotion agencies. 78 pp. $10. Call 212-768-7277, ext. 1155.
Promo magazine includes the "Resource Center," a guide to services and suppliers, in each regular issue (see Publications for subscription information).
Promotion Marketing Association Inc.'s annual membership directory includes an extensive listing of suppliers than can assist with co-op direct mail programs or provide turnkey programs. 164 pp. For sale to members only, $45. Call 212-420-1100; go to http://www.pmalink.org.
SourceBook '98 from Promo magazine includes listing of suppliers that can help with various types of co-op direct mail programs. Categories include Co-op Mailing Programs, Couponing Programs, In-Pack/On-Pack Programs, Sampling Programs. 228 pp. Free to subscribers, $49.95 to others. Call 888-892-3613. Also fully searchable online at http://www.promomagazine.com.
Trial and Conversion is a study published periodically by the Promotion Marketing Association's Product Sampling Council (PSC). Back issues list PSC members, some of whom sponsor co-op direct mail programs. Call 212-420-1100.
ASSOCIATIONS
Direct Marketing Association (DMA), with 3,600 member companies worldwide, is the primary association for companies involved with any aspect of direct marketing. Member benefits include an extensive range of seminars and conferences, use of the DMA Library and Resource Center, and access to the DirectLINK online information service (see Online Services). DMA members with specific interests can join one of the councils or segment groups that offer specialized learning opportunities. Two of the councils are Alternate Response Media (card decks, co-op programs, and nontraditional direct response marketing) and Business to Business (B-to-B marketing that includes a direct response component). Call 212-768-7277; go to http://www.the-dma.org.
Promotion Marketing Association, Inc. (PMA) has 700-plus member companies worldwide representing all aspects of the promotion marketing industry, including goods and services companies, promotion agencies, service supplier firms, and law firms that specialize in promotion and advertising law. Two special-interest groups, the Coupon Council and the Product Sampling Council, provide education and information on issues related to their respective promotion media. Call 212-420-1100; go to http://www.pmalink.org/.
CONFERENCES AND TRADE SHOWS
For a list of Industry Events, go to #9510, Calendar of Industry Events.
KEY RESEARCH
Cox Direct 19th Annual Survey of Promotional Practices (1997) is divided into three sections. The Consumers section reveals consumers' preferred sources of coupons and product samples and how their purchase decisions are influenced by those and other types of promotions. The Packaged Goods Manufacturers and Grocery Retailers sections analyze respondents' usage of various promotion types. 60 pp. $195. Call Cheryl Ingle at 800-213-9250.
Economic Impact: U.S. Direct Marketing Today, 1997 (third edition), a study commissioned by the DMA and conducted by the WEFA Group, measures the scope of direct marketing in America. Includes statistics for direct mail and comparisons of mail with other direct marketing media. 182 pp. $125 for DMA members, $165 nonmembers. Call 212-768-7277; go to http://www.the-dma.org.
Statistical Fact Book '98. Reports on consumer buying habits, industry projections, and cost comparisons, using statistics from many sources. Includes nearly 500 charts and graphs. 328 pp. $84.95 for DMA members, $119.95 nonmembers. Call 212-768-7277; go to http://www.the-dma.org.
The Second Annual Survey of Consumer Preferences for Product Sampling reports on consumers' preference for various sample-delivery channels. Results segmented by gender, lifestyle. 250 pp. $175. Target Marketing & Research, Inc. Call 516-271-1130.
The 1998 Annual Report of the Promotion Industry was published in the July 1998 issue of Promo magazine. It describes spending and trends in the 13 categories that make up the $79-billion promotion industry. 38 pp. $17.95. Call 888-892-3613.
BOOKS
Business to Business Direct Marketing: Proven Direct Response Methods to Generate More Leads and Sales, by Robert W. Bly. Reveals the secrets of the seven key strategies and tactics of business-to-business direct marketing. 272 pp. NTC Business Books. $44.95; through Amazon.com, $31.47.
The Complete Direct Marketing Sourcebook: A Step-by-Step Guide to Organizing and Managing a Successful Direct Marketing Program, by John Kremer. Topics include designing effective promotions, finding and testing lists, calculating costs and break-even points. Includes more than 70 templates, forms, and sample letters. 288 pp. John Wiley & Sons. $27.95; through Amazon.com, $22.36.
The Dartnell Sales Promotion Handbook, edited by Tamara Brezen Block and William Robinson. More than 30 of the world's leading sales promotion authorities share their marketing wisdom in this book, which is filled with sales promotion plans that prestigious companies have found successful. 910 pp. Dartnell Corp. $69.95;
Direct Marketing Rules of Thumb: 1,000 Practical and Profitable Ideas to Help You Improve Response, Save Money, and Increase Efficiency in Your Direct Program, by Nat G. Bodian. Succinct suggestions on all aspects of direct mail, including coupons; card packs; list brokers, compilers, and managers; writing effective copy and headlines, and designing forms. 404 pp. McGraw-Hill. $59.95; through Amazon.com, $41.97.
Do-It-Yourself Direct Marketing: Secrets for Small Business, by Mark S. Bacon. Tailored to the limited budget, this book tells how to use all direct marketing media, including mail order, telemarketing, radio and TV, newsletters, and print advertising. Includes strategies for identifying market niches and creating a direct mail database. 290 pp. John Wiley & Sons. $16.95; through Amazon.com, $13.56.
NTC's Dictionary of Direct Mail and Mailing List Terminology and Techniques, by Nat G. Bodian. Goes beyond basic definitions to give detailed explanations. Useful appendixes include questions to ask when seeking someone to build or maintain a list. 320 pp. NTC Business Books. $49.95; through Amazon.com, $49.95.
Profitable Direct Marketing, by Jim Kobs. A broad-scale book on all aspects of direct marketing. Includes examples of direct mail formats and a useful chapter on "Proven Direct Response Offers," which tells how to write what works. 396 pp. NTC Business Books. $49.95; through Amazon.com, $49.95.
Sales Promotion Essentials: The 10 Basic Sales Promotion Techniques . . . and How to Use Them, by Don E. Schultz, William A. Robinson, and Lisa A. Petrison. A comprehensive treatment of ten key sales promotion techniques, including product sampling: how each one works, pros and cons, how each can be used alone or as part of a long-term sales promotion or marketing plan. Especially useful is the description of the varying degrees of consumer loyalty and recommendations for which consumer groups are most responsive to which sales promotion techniques. 208 pp. NTC Business Books. $19.95; through Amazon.com, $15.96.
PUBLICATIONS
Brandweek, 47 issues per year, bills itself as being edited for marketers of America's top 2,000 brands. Includes information on marketer/retailer relationships, successful media strategies, agency/client relationships, global marketing, plus news briefs, consumer trends, new campaigns, promotion, and new product news. $130/yr. Call 800-722-6658; go to http://www.adweek.com.
DIRECT, 16x p/year. The authoritative resource for direct marketing professionals, DIRECT delivers detailed coverage of every aspect of successful direct marketing, and helps marketers find, reach and keep their customers. Free for qualified subscribers. Visit http://www.directmag.com.
Direct Marketing, monthly. The longest-running direct marketing publication. $60/yr. Call 800-229-6700.
Integrated Marketing and Promotion, eight issues per year. $56.95. Call 904-285-6020.
PROMO, monthly. PROMO defines promotion trends, presents critical "how-to" information and case studies about promotion, and serves as a meeting ground for companies and professionals in the industry. Free for qualified subscribers, or paid subscription is $65 p/year. Go to http://www.promomagazine.com.
Target Marketing, monthly. Covers extensive range of direct marketing topics. December 1998 issue will focus on alternative media, including co-ops, inserts, and card decks. Each issue includes a resource directory. Free to qualified subscribers; otherwise $65/yr. Call 215-238-5300; go to http://www.targetonline.com.
Trial and Conversion. A study published periodically under the auspices of the Promotion Marketing Association's Product Sampling Council (PSC). It is usually inserted in major industry magazines but is also offered for individual sale. Topics include guidelines for sampling success, case histories, glossary. It lists suppliers that sponsor co-op direct mail programs. Call 212-420-1100.
The following publications occasionally include articles on direct mail strategies:
Advertising Age. Weekly. $109/yr. Call 800-678-9595.
Sales & Marketing Management. Monthly. $48/yr. Call 800-821-6897.
Sales and Marketing Strategies and News. Nine issues. $49/yr. Call 815-963-4000.
ONLINE SERVICES
- Adweek/Brandweek/Mediaweek. All three publications can be accessed at this site. Subscribe here, search the Articles archive for all articles published since 1991, and download articles for a small fee. Go to http://www.adweek.com.
- DirectLINK Online, a reference database, provides marketers with immediate access to the extensive DMA database. Available to DMA members only. Call 212-768-7277; go to http://www.the-dma.org/.
RELATED SMN ARTICLES
For information related to co-op direct mail, see #1010 and #1011, a two-part Direct Marketing Overview, #3035, Promotion Law, and #6045, Co-op Sweepstakes.