Conventional wisdom has it that if you target market to prospects that look like your clients, you will have great success.  Conventional wisdom also has it that by doing something - anything - different you will likely see a change in performance - hopefully a positive change.  All of this is true and I have experienced it many times myself.  However, this approach merits a closer look to understand what the impact is on acquisition costs and therefore your return on marketing investment.

In a traditional marketing campaign, customer attributes such as demographics, lifestyles and behaviors are compared to the same attributes in the market.  If they see a high presence of prospects that share the attributes as their customers, they market to them. Ultimately this technique generates new customers as intended.  However, there may also be a higher number of nonresponders which, of course, they’d like to avoid.

If you consider that on a good day you may get a .5% response rate, then clearly 99.5% of the prospects will be non-responders.  Hence by merely comparing attributes of customers to a market - without regard to how those attributes are integrated to tell a fuller story - may inhibit your ability to gain an incrementally higher rate of  responders above the number of new customers that were acquired.

For example, let’s assume that your customers’ average age is between 35 and 45.  So, you buy a list of prospects that are age 35-45.  Unbeknownst to you, although that demographic likely contains many propsective responders, it may also have a higher ratio of nonresponders to responders.  The end result is that although you get many new customers, you may also get a higher number of nonresponders and consequently your acquisition cost increase.

How do you get around this?

A predictive response model considers how a full plate of customer attributes is integrated to better differentiate the potential responders from nonresponders.  By eliminating those that have a low probability of responding, you increase your overall average response rate thereby lowering your overall acquisition costs.

Although a predictive response model also adds incremental expense, your marketing campaigns may be large enough you need to carefully weigh the financial impact of the savings from not marketing to the low-probability-of-response prospects against the cost of the model.  You will be surprised at how cost-effective a predictive response model may be.

The economy is turning around. How do I know? My mail told me so. Maybe not in so many words but it certainly insinuated a recovery. Of course I won’t hold the mail or the mail carrier responsible if this prediction falls flat but yes, I do believe all signs point to better days ahead. So you may be asking, “What on earth could have brought about such an epiphany?” Was it a vision? A dream? Nah, it was a piece of direct mail. But not just any direct mail – it was a piece offering timeshares.

The direct mail in question, for The Hilton Grand Vacations Club, was beautifully done and very high quality. It showed – and spoke to – all of the right things and it certainly stood out amongst the mounds of mail I received.

So how does this signal a return to prosperity? Simply by the fact that the timeshare market, Hilton in particular, feels that some people are at a better place, a point where they may be willing to invest in a relatively expensive discretionary purchase.  Let’s not forget that timeshares, along with real estate in general, are big reminders of the banking and mortgage crisis. If a brand like Hilton is comfortable selling timeshares to audiences again, things must be getting better…even if just a little bit, right?

The other thing that stood out was the medium itself – direct mail. During a time when email and digital technology are heralded as the best bang for your direct marketing buck, it is proof once again that direct mail does have its advantages. When done properly, it informs and generates a positive emotional response, which makes a huge difference in prompting a buying decision or developing customer loyalty. Plus, direct mail is tangible – a piece can lay around a home or office for months, garnering numerous views from the recipient or passive viewers, making your messaging shelf-life a long one.

So, things are looking up. Let’s keep our minds moving forward and an eye on the future – in the meantime I’ve got a Hilton Mini-Vacation to book…