Like all direct marketing practitioners, I’ve been dismayed to watch the U.S. Postal Service struggle for survival. As the organization tries to right its ship by cutting costs, it’s also trying to grow revenue by drumming up new business from mailers.

That’s the right thing to do, but perhaps not the way the USPS is doing it.

Case in point: The latest USPS direct mail campaign mailed to my marketing firm this week. Here’s where the USPS went wrong and how to avoid this mistake in your smart marketing strategy.

Nice Mailing, Terrible List Prep

The USPS is using direct mail to promote its shipping services to businesses and they’ve done a lot of things right with their latest direct marketing campaign. They’ve selected the right target market and the right service, created an attractive, three-panel selfmailer, and made a good offer: a free shipping kit. There’s a strong call to action, a personalized URL (PURL), and a QR code, many of the elements of effective business-to-business (B2B) direct mail.

So what’s wrong with the mailing? The addressing.

Our marketing agency got five copies of this promotion and all were addressed to us at our old office suite number, though we moved three years ago.

Even worse, only two are correctly addressed to individuals who still work here. Two were sent to me, one correctly addressed and one to Gean Gianfagna, an erroneous spelling of my name from an old, compiled B2B list that never seems to go away.

Two others are addressed to former employees who moved on more than five years ago. One of these former staff members got the mailing in her maiden name and she’s been married for 10 years.

Yes, we received all the mail, so they effectively delivered it, and that’s to their credit. But how effective is the message when it’s sent to the wrong people? Especially people who are no longer at the address?

The Shoemaker’s Children?

What’s most ironic about this direct marketing campaign is that the mailer with the list problem is the organization whose job is to deliver the mail.

Why didn’t their merge/purge pick up the likely duplication between Jean and Gean with the same last name at the exact same address? Why is the suite number wrong on all the mail? And how did they end up using a B2B mailing list with data that’s at least five years out of date – and in our case, 10 years?

Unfortunately, much of their investment in good creative and the postage they spent to send it to us, five times over, is wasted on an outdated list and a bad merge/purge.

The Key Lesson for Your Smart Marketing Strategy

As a marketing consultant, I strongly believe in the value of direct mail in a marketing plan. I also know that every mailing list has errors and B2B lists are notoriously difficult to keep current.

But that’s what list hygiene is for—to correct mistakes and get as much of the mail as possible delivered to the right people at the right place. To achieve this, you need to start with the highest quality mailing lists and follow the industry’s best practices for data management.

The most important lesson direct marketers can learn from this example is that no matter how creative your direct marketing campaign is or how valuable your offer, if you mail to the wrong people at the wrong addresses, you’ve wasted your money.

I hope the Postal Service will be able to apply this lesson to future direct mail campaigns with better list selection and preparation. Direct marketers like me are counting on their success.

Here’s how a regional painting business in Cleveland, Ohio nailed a prospect direct mail campaign with a simple postcard, while Dell, a huge business-to-business marketer, committed several cardinal sins of direct marketing in a B2B direct mail promotion.

A Simple Message, Driven by Simple Data

Curb Appeal Painting does interior and exterior commercial and residential painting. To get new residential business in Northeast Ohio, the company mails postcards to neighborhoods near its painting projects.

This little mailing works for several reasons. The postcard invites prospects to “come by and see the quality” of a project the company is about to start at a neighbor’s house. The jobsite address is prominently displayed. The call to action is big and bold. The company’s credentials – Better Business Bureau approved, Angie’s List, etc. – help build trust.

The reverse side of the postcard has a photo of a home they’ve painted and their website. The message is short and sweet, and it’s personalized with information relevant to the prospect.

Dell Delivers a Direct Mail Dud

Dell, on the other hand, needs to reboot its B2B direct marketing.

Our marketing agency recently received three identical mailings from Dell on the same day, addressed to three different people. One addressee was our former office manager, who left eight years ago. Another was addressed to a vice president of our firm, but with the wrong suite number. The third mailing was sent to “Geane Gianfagna,” whom I’m assuming is me.

Most of our office PCs are Dells. We are Dell customers. But Dell clearly doesn’t know who we are, or indicate we’re receiving any special treatment as valued business clients, which might be a natural expectation on our part.

The offer is weak and vague. The teaser copy promises “savings inside,” but all you see inside is pricing. Are these discount prices?  It’s hard to tell, because there are no comparisons to the regular prices.

Worst of all, this “savings” offer is for a limited time – and the expiration date expired two weeks before we received the mailings.

4 Lessons for Direct Mailers

What can direct marketers learn from these examples? Four lessons:

1. Address your mail correctly. This rule is so basic, but it’s absolutely essential to get the addressee’s information right and de-dupe your lists before you mail. When a customer gets multiple copies of the same direct mail campaign with multiple addressing errors, it’s highly likely that all the mail will be discarded and the marketer’s investment will be wasted.
2. Simple formats can make a big impact. Direct mail postcards can be highly effective in delivering a marketer’s message, especially if the marketer can boil the copy down to a few key points and use graphics to get attention. Granted, selling a business PC isn’t as simple as selling painting services, but if the goal of a mailing is to generate web traffic and calls, direct marketers should avoid the temptation to over-complicate the mailing and test simple formats.
3. Use data to deliver a relevant message.  Use your prospect data to personalize the message to prospects’ interests. The painting company has two types of simple data: the location of its painting jobs and rented name and address files of nearby residents. They used this data to highlight the local job with closest proximity to the prospect, creating a personal, “in your neighborhood” feeling.  Meanwhile, Dell, which must have years’ worth of rich customer data on our company’s IT purchases, used none of it to deliver a message targeted to us.
4. Get time-sensitive deadlines right. There’s no excuse for mailing a time-sensitive offer with a due date that occurs BEFORE the mailing lands. Deadlines are great for incenting action, but plan your production schedule to give the respondent time to respond.

More Direct Mail Recommendations

As a marketing consultant who often recommends direct mail, I might suggest a few tweaks to the painter’s direct mail campaign. The postal bar code obscures their website on the address panel. Their free estimate offer could be more attention-getting. And the offer and the phone number should be on both sides of the mailing.

But all in all, especially compared to Dell, this little guy showed the big guys how to use direct mail effectively in a smart marketing strategy.

One of the best ways to gauge the value of a customer is to perform a recency, frequency, and monetary value (RFM) analysis of your customer data.

Here’s how RFM analysis works and seven ways you can use insights from RFM for a smart marketing strategy.

How RFM Analysis is Done

RFM analysis looks at all the transactions in your customer database in a specific time period, usually the last two to three years. The purpose of the database analysis is to determine the value of your customers based on how much they buy from you, how often they buy, and how recently they’ve made a purchase.

With RFM, you assign a value to the recency of the transaction (the more recent, the better); the frequency of transactions in the analysis time period (the more frequent, the better); and the monetary value of those transactions (the higher the monetary value, the better).

Once the analysis is complete, you have a measure of each customer’s profitability, so you can rank cusotmers from most profitable to least. You can then divide this ranked list into ten equal customer groups (deciles).

The top two deciles (top 20%) are your best, most profitable customers, the ones who have bought from you most recently, who buy from you most often, and who purchase at the highest dollar amounts. Deciles 3-7 are your next best customers. Deciles 8-10 are your least valuable customers.

7 Ways to Use RFM for a Smart Marketing Strategy

Here are seven ways to use RFM to target your marketing campaigns more precisely and utilize your marketing resources more effectively:

1. Understand your best customers. Once you’ve identified your best customers, you can create demographic profiles to gain insights into the characteristics they share. You also can append data to their records, such as company size or NAICS code, for an even fuller picture.
2. Find the low-hanging fruit among your next-best customers. Take a careful look at the customers in deciles 3-7 whose demographic profiles are similar to your best customers. This is likely to be your best upselling opportunity.
3. Target the right prospects on rented mailing lists. Armed with information about the characteristics of your best customers, you can be extremely selective about the names you rent on commercial mailing lists, which can cut your costs and increase response.
4. Reallocate sales support. RFM can help you reassess the level of sales support appropriate for each customer based on their value and potential. Your goal should be to deploy your most expensive sales resource – your sales team – on customers who already generate the most profit or have the highest potential to buy more.
5. Develop tiered direct marketing campaigns. Focus high-end direct marketing campaigns on your highest-value customers and mail less expensive campaigns to lower-value customers. You might send best customers a personalized direct mail package with a product sample, for example, while others get a simple selfmailer offering a free product sample on request.
6. Test a high-end marketing campaign to high potential customers. Once you’ve identified customers in deciles 3-7 with the same demographics as your best customers, test a more elaborate direct marketing campaign to these customers to try to increase their profitability.
7. Decide which customers to drop from marketing. Customers in deciles 8-10 probably should be dropped from your mailing lists and marketing campaigns because of their low value. It may be costing you more to sell to them than they’re worth.

Why Marketing Strategists Can’t Live by RFM Alone

Knowing your best (and worst) customers can give you important insights for a smart marketing strategy. As a marketing consultant, I’ve used RFM analysis for several business-to-business marketing clients, including a large bank in Ohio and a major retail merchandising company near Cleveland.

But although RFM is a great tool, smart marketers know not to rely on RFM alone when developing a marketing plan. You also need to consider input from your sales team, feedback from your customers, and the results of prior marketing initiatives to decide how best to market to your current customers and targeted prospects.

But when a direct marketer gets it right, with a highly personalized, data-driven message, a compelling offer, and a warm invitation to re-engage, it’s a thing of marketing beauty.

Here’s how a major women’s retailer – Chico’s – nailed it with their customer win-back direct mail campaign, and six lessons from their direct marketing success story that you can apply to your smart marketing strategy.

Come On Back!

Chico’s is a specialty retailer that sells sophisticated, casual-to-dressy clothing to women via catalogs, the web, and more than 1,000 retail stores. Like most retailers, Chico’s has a customer loyalty program to track buying behavior and spur additional sales.

I’ve shopped a lot at Chico’s, but not much lately. To win me back, Chico’s sent me this direct mail package.

It’s an 8-3/8”x 10-7/8” package with simple mail panel copy: We’ve missed you. On the back of the envelope is a short message that succeeds both in positioning Chico’s as a fashion leader and acknowledging my absence from their store: 

“We’ve been seen in Harper’s Bazaar, Redbook, Real Simple. We’ve been seen online at Vogue.com. But we haven’t seen you in awhile. Look inside for a few welcome-back offers…and come back to see us soon.”

A Friendly, Flattering Message Driven by Customer Data

Inside the envelope are the latest catalog and a brief letter from Cinny Murray, the company president.

This letter is a case study in how to use a customer’s purchasing data to create a high-impact, one-to-one message. Here’s the friendly, engaging lead sentence:

“I love our new spring collection and thought it was the perfect time to connect with you.”

The letter then pivots brilliantly to my individual interests by talking about what I’ve purchased at Chico’s in the past:

“I remember that you love our Travelers collection,” the letter reads, describing the current Travelers line as being “reinvented as a chicer-than-ever collection.”

The letter invites me to meet with a “Style Expert” who is “always on hand to help you look and feel fabulous” and concludes with an invitation to come back: “Please come back into our boutique soon to see our latest Travelers styles and the rest of the new spring collection…”  The president also provides her email address and “personal customer hotline.”

The Icing on the Cake: Customized Offers

This is a great letter: Brief, sincere, and highly personal. But where this direct mail package really shines is the offer.

Attached to the letter is a second page with three lasered coupons: 15-30% off on the Travelers collection, $10 off on a necklace, and 50% off the highest price item when I spend over $100.

This offer is exactly what smart direct marketing is about:

• It’s tailored specifically to my previous purchases (the Travelers collection and jewelry);
• It’s designed to get me to spend at least $100;
• And it has a short deadline to get me to act now.

Six Lessons for Your Smart Marketing Strategy

Here are six takeaways from this direct marketing success story that you can use to reactivate your lapsed customers with direct mail.

1. Write warm, engaging copy with a sincere, “me-to-you” message from a real person.
2. Show the customer what they’ve been missing and get them excited about what they’ll experience when they return to you.
3. Tailor the copy to the customer’s buying habits by using transactional data.
4. Treat the customer like someone special by making multiple, high-value offers, including offers tailored to their prior purchases.
5. Place a deadline on the offer to spur the customer to act now.
6. Make the customer feel important by using the company president as the letter author.

My Free Marketing Advice to Chico’s

Since I often advise clients of my marketing consulting firm on how to create effective direct mail, I’d advise Chico’s to add two things to this package: A reminder of the location of my local store in Cleveland, Ohio, with a map, and a P.S. The P.S. is still one of the most-read parts of any direct mail package and they missed an opportunity to remind me that the offers expire soon.

But these are minor quibbles. Compared to most retail direct mail, which is written for the masses with generic coupons full of redemption restrictions, Chico’s and its marketing agency deserve praise for a smart marketing strategy and direct marketing effectiveness.

Reactivating lapsed customers is a smart marketing strategy for every business. It’s easier to reengage a former customer than create a new one.

If you’re using direct marketing to win former customers back, however, you’d better do it right.

Here’s how a major marketer blew a customer win-back opportunity with poor direct mail, and five lessons for more effective win-back direct marketing.

Why It’s Smart to Target Lapsed Customers

It’s an axiom of marketing that it’s easier to sell to a customer than a prospect. Customers know you, and if you deliver a quality product or service, they’re likely to buy again.

It also can be easier to reactivate a former customer than find a new one.  There’s less education needed during the sales process. Even more important, you can use the demographic and transactional data you have on former customers to create highly targeted reactivation messages and offers. That’s why data-driven direct marketing is so commonly used in reactivation marketing campaigns.

But Watch What You Mail

But direct marketing to former customers is a tricky business.

Like active customers, inactive customers expect you to know them. When you clearly don’t, you can end up squandering a sales opportunity and reminding people why they left you.

Case in point: Verizon Wireless.  We cancelled our family accounts with Verizon last year when we got iPhones from AT&T.  But we didn’t leave Verizon just for the iPhone. We consistently had bad experiences with their retail customer service staff and I silently celebrated when I walked out of my local Verizon store for the last time.

Now Verizon has sent me this direct mail package asking me to come back. It’s true to their new “Rule the Air” marketing campaign, but it breaks several cardinal rules of successful direct marketing:

• No personalization: The only direct message to me – rather than every other recipient of this campaign – is the address on the envelope, which they had to use to get this promotion to my mailbox. There’s no letter to me and no reference to the number of lines I used to have or the number of years I was a customer.
• No offer: The copy notes their selection of Android smart phones and an insert touts the Droid X. There’s an 877 number I should “call today.” But why? There’s no special deal or price and no deadline, thus no reason for me to come back right now.
• No reference to my local retail store: There’s a Verizon store across the street from my office in Cleveland, Ohio, but there’s no mention of my proximity to this store, no map, and no personal invitation suggesting I come in and meet the unnamed store manager or salesperson who should be waiting to re-engage me.
• Copy that’s irrelevant: The copy says, “You’re right-you deserve more calling plan options, with more 3G coverage, at a budget-friendly price.” But that has nothing to do with why I left Verizon, so there’s a big disconnect between their message and my interests.
• Design that obscures the message: The copy on the inside of the invitation is printed on a patterned image that significantly reduces readability and the insert text is hard to read because it’s reversed out of red.

5 Lessons for Your Smart Marketing Strategy

Here are five marketing lessons from Verizon’s direct marketing mistakes that you can apply to your next win-back direct marketing campaign and your smart marketing strategy:

1. Use data to personalize the message. Take advantage of the data you have on former customers to deliver a message tailored to their needs and their experience with you. Use what you know about them to relate to them as only you can.
2. Make a compelling offer. Give people a powerful reason to return to you by making an offer they can’t resist.
3. Create a deadline for response. Put a timeframe on your offer so respondents have a reason to act now.
4. Show former customers they have special status. Give lapsed customers something extra, like a bonus, a premium, a gift, or a special price to which only they are entitled because of their relationship with you.
5. Never let design overpower the message. Graphic design always should make it easier, not harder, for people to read, understand, and respond to your message. Your goal is to get a response, not win design awards.

Beyond Bad News: Bad Customer Relationship Management

After a tough few months, Toyota is trying to regain the confidence of car buyers with a massive advertising campaign.  In such a difficult sales environment, you’d think Toyota would see the value of retaining relationships with its most loyal customers.

But the mailing we just received for the 2011 Toyota Avalon is a giant disappointment.

By any measure, we are Toyota loyalists. In the past 25 years, our family has bought five Toyotas, including a 2000 Avalon that we still drive. We are the prime target for a new Avalon.

But instead of treating us like best customers, lavishing us with personal attention and a high-end marketing campaign that acknowledges our special customer status, here’s the cheesy selfmailer we got from Toyota about the 2011 Avalon. It’s a classic example of a poor direct marketing strategy.

Breaking the Rules of Good Direct Mail

This little four-panel selfmailer breaks many of the rules of effective direct mail marketing:

• Target your best customers with your best promotion. By sending us the same generic mailing it sent every prospect on a rented mailing list, Toyota dismissed the value of our 25-year, multi-buyer relationship.
• Match the mailing’s quality to the product. The base price for a 2011 Avalon is over $32,000. A 4.25” x 6.5” selfmailer printed on the lightest possible stock falls far short of the direct mail you’d expect for a company’s most expensive vehicle.
• Select a format that showcases the product. Since the mailing is postcard-sized, the images are small, too. Instead of spotlighting the fabulous details of this new car, the format makes it hard for the driver to see them.
• Make a compelling offer with a reason to act now. You can “build and price” your car at Toyota’s website and get free maintenance for two years under certain conditions, but the free maintenance offer is not well detailed and the deadline for the offer is buried beside an asterisk in the smallest possible typeface.
• Personalize the mailing to the recipient. The local dealer’s name is the only personalization on this piece. Our name appears only in the address. There isn’t even a PURL (personalized URL) for a web response.

A Smarter, “Best Customer” Marketing Strategy

A smarter marketing strategy for Toyota would be to communicate very personally with current Avalon owners like us.

Imagine if they had sent us a multi-piece, “best customer” direct marketing campaign with very high-end mailings on beautiful stock that showcased the car’s details, so we could picture ourselves behind the wheel. They could even have sent us an invitation for an exclusive first look at the new model, to be sure we were among the first to see it.

Suppose they’d offered us a generous trade-in on our current Avalon and the call to action had been personalized just to us, with the name, photo, and direct phone number of a salesperson at our local dealer.  A special financial incentive could have been included to get us to act now, with a PURL to streamline an online appointment.

And most important, imagine how differently the campaign would have made us feel if Toyota had mined their customer database to identify us as multi-buyers and thank us for 25 years of customer loyalty.

We might have overcome our concerns about their safety record, reminded ourselves of the reasons we bought so many Toyotas in the past, and headed off to our local dealer.

Instead, our relationship with Toyota is probably over. We’re shopping for a Honda.

A final note:

The current advertising campaign for the new Toyota Avalon is a muddled waste of marketing resources. In this spot, the product is nearly lost in a dreamy cloudscape populated by pilots and flight attendants from a bygone era, all set to the tune of Theme from a Summer Place, which won the Grammy for Record of the Year in 1961. You’d have to be at least 60 to remember that song on the radio. Is this the demographic for the new Avalon? Or is Toyota trying to evoke the Mad Men era?

Chances are, you’re already capturing transaction data and contact information every time your customer makes a purchase. You may even have demographic and lifestyle data on your files.

Using that customer data can help you create high-impact mailings that generate better results.

When it’s time to produce your next direct mail campaign, ask yourself this key question: “What do I know about the people I’m mailing to and how can I use that knowledge to develop a more effective creative approach?” 

Here are five ways to use data to develop great direct mail creative:

Idea #1: Use Data to Allocate Creative Resources

Conduct pre-campaign data analysis to determine each customer’s value or potential. This measurement should drive format selection for your direct mail pieces and the allocation of creative resources. Higher value customers – and high-potential prospects — should get a more elaborate and personalized mailing; less valuable customers and prospects should get a simpler, less expensive piece.

Idea #2: Use Data for Better Targeting & Personalization

Append demographic or lifestyle data to your customer files, then use this data to segment customers into smaller, more targeted groups of individuals with similar characteristics. Develop creative approaches and marketing messages that more accurately target the specific interests of these smaller groups.

Idea #3: Use Data to Get Attention and Engage

Grab attention on the direct mail carrier envelope and engage readers throughout the mailing with data-driven messages. Even simple geographic and demographic references in copy can have a big impact. Printing technology now enables you to customize almost every element of your mailing.

Idea #4: Use Data to Strengthen Relationships

Customers know their value to your organization and they expect YOU to know it. Use data from your customer database or CRM system (such as the length of time they’ve done business with you, the types of products they purchase, or information on their last transaction) to speak to customers more personally in your mailing about their relationship with you and its value.

Idea #5: Use Data to Facilitate a Response

To make it easier for prospects to say yes, pre-populate customer data on response forms and create personalized URLs (PURLS) with the customer’s name that link to pre-populated forms on your website.

One of the most powerful applications of data-driven marketing is targeting specific individuals with direct mail and e-mail campaigns based on their previous relationship with you or their similarity to your best customers.

Marketers who do it right are able to:

• Craft messages with extremely high relevance, which boosts the open rate and strengthens the company’s relationships with its customers;
• Up-sell and cross-sell additional products and services;
• Generate a higher return on their marketing investment by targeting their marketing campaigns to individuals with the highest propensity to respond.

But there’s another crucial reason to make data-driven marketing part of your marketing strategy. If you DON’T use the data you have when you’re selling to a current or past customer, you risk your entire customer relationship by looking like you don’t know who your customers are.

Case in point: The Disney VISA card from Chase.

I once had a deep relationship with Disney. When my children were in elementary school, we watched the Disney Channel, shopped at the Disney Store, bought Disney Princess Halloween costumes, visited DisneyWorld, and even took the Disney Cruise.

When Disney launched its co-branded VISA card with Bank One (now Chase), we became Charter Cardmembers. Our credit cards showed “Day 1” as the start date for our cardmember relationship.  We earned points on every purchase and used those points to buy more Disney products. We proudly wore our “Charter Cardmember” pins on our hats as we enjoyed Epcot and the Magic Kingdom.

Then the kids grew up, and we moved on to other types of entertainment. Eventually we closed our Disney VISA accounts.

Since then, Chase and Disney have sent us frequent mailings inviting us to become cardmembers again. But their most recent direct mail package is a classic example of the poor use of data in communicating with lapsed customers.

Here’s the letter and here’s what’s wrong with it:

• There’s no reference anywhere to our prior relationship with Disney and Chase. Remember, we were Charter Cardmembers from Day 1; we were among their earliest adopters and we redeemed points from our card at multiple Disney venues. They must have this data, but they didn’t use it.
• There’s no appeal to a family whose children are now in their late teens or early twenties. They know this, too, because they surely have this data on our family as well as nearly every household in America.
• They didn’t even get our name right. Gianfagna isn’t the easiest name to spell, but if they’d run their mail file against their own customer file, or through any data cleanup process that uses commercially available U.S. household information for address correction, they’d have learned pretty quickly that there’s no “j” in “Gianfagna.”

So what could Chase and Disney have done instead? Here’s my unsolicited advice:

Dig deeper into the customer file and find all the Charter Cardmembers who are lapsed customers. Append those records with current demographic data to see how many are families with grown children or adults who are now grandparents. Send these empty-nesters a direct mail package promoting the fun and value of the Disney experience for adults, or a package targeting grandparents with grandkids for that segment of the mailing list. Most important, acknowledge and celebrate the customer’s prior relationship with Disney and demonstrate — in a way that’s relevant and real — why restarting that relationship now, at a new point in the customer’s lifecycle, is an unbeatable offer.

That’s a direct mail package I’d read, and maybe even say yes to.