How to Achieve High Direct Marketing Response Rates: Here Are Some Common Direct Marketing Errors That, If Avoided, Can Help Boost Responses

By Rizzo, Tony | ABA Bank Marketing, June 2011 | Go to article overview

How to Achieve High Direct Marketing Response Rates: Here Are Some Common Direct Marketing Errors That, If Avoided, Can Help Boost Responses


Rizzo, Tony, ABA Bank Marketing


WITH SO MANY marketers getting caught up in the trends of the moment, such as social media, it's easy for them to overlook a traditional communications strategy that has proven its ability to encourage people to take action. This strategy has also been successful in the areas of attrition reduction, cross-selling and customer acquisition. I am talking about direct marketing.

Successful direct marketing campaigns, however, do not happen by accident. They are a result of careful planning and elimination of the most common direct marketing mistakes. One financial institution, located in Dallas, Texas (assets: $1.6 billion) wanted to enhance its mortgage portfolio while concentrating on highly qualified borrowers. One common direct marketing error is to ignore customer data such as demographics, psychographics, balance, credit score and transactions. The financial institution avoided this mistake by using credit data to identify credit-worthy prospects and customers within a defined market area who were currently shopping for a mortgage.

Designing direct marketing pieces only for the sake of personal aesthetics, changing the brand image and tone, and creating unclear and hidden messages in direct marketing pieces are other common mistakes. Additionally, many marketers simply ignore the tried and true acronym "AIDA" (attention, interest, desire, action) model that has worked successfully for decades. In particular, this institution designed a series of two postcards highlighting the financial institution's outstanding rates and offering zero origination fee home loans for purchase or refinance and sent them to all its borrowers--obvious messages tied into the institution's goals. Over an eight-week period the program brought in new mortgage balances exceeding $2.1 million. The financial institution gained 19 new mortgages, with direct and indirect profits totaling more than $70,000 in a very narrowly defined segment.

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Debunking the myths

There are several misconceptions about direct marketing. One of the most common is that these campaigns only generate a 1 percent or less response rate. However, in many cases after the data has been analyzed, banks discover that the response rates were actually three to four times that amount.

Another myth is that direct marketing should only be used for seasonal campaigns to support larger media purchases. In reality, the best use of direct marketing is ongoing--quarterly, bimonthly, even monthly. By examining customer data, institutions can discover events such as birth dates, product maturity dates, new household relationships and transactions that can be used to create direct marketing communications from the institution.

Another financial institution located in Houston, Texas (assets: $401 million) recognized the value of shifting from mass marketing to highly targeted, measurable direct marketing. Their managers created a detailed calendar of customer programs based on marketing analysis recommendations and implemented several programs including a preapproved auto loan recapture program and a thank-you letter cross-selling products to existing customers. In nine months the institution achieved an aggregate 1,230 percent return on marketing investment for all programs implemented, with a net profit of over $1 million. The targeted households increased their cross-sell by 26 percent, attrition dropped by almost 9 percent and 23 percent of the loans booked were attributed to responses from the direct marketing strategies.

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Increase response rates

Increasing response rates by as little as 0.25 percent can mean millions in profit by cross-selling existing customers. Here are five steps to accomplish this:

1. Link customer data and financial institution's goals to marketing strategies. …

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