Author Archives: Michael Paladini

About Michael Paladini

Michael Paladini As the Director of Analytics for W.A. Wilde and The Wilde Agency, Michael has led assignments involving the strategic and quantitative aspects of direct marketing for both clients and agencies. His specialty is developing integrated communications channels that generate qualified leads and provide new revenue sources. His experience encompasses the software, telecom, travel, publishing, retail, dot-com, and financial services industries. Michael’s done direct response program management, where he has achieved very attractive response rates in mail and Internet-based campaigns to consumers and businesses across the U.S. and internationally. Early in his career, he acted as a consultant in a strategic marketing agency, where he designed marketing databases, developed numerous direct response campaigns and guided market research. He holds a BA summa cum laude from Bucknell, an MA from Brown University, and an MBA from Babson College’s Graduate School of Business, where he graduated first in his class. He has occasionally publishes articles on quantitative analysis in the direct marketing press. He is married with two sons, plays guitar in two bands, is a t’ai chi instructor, loves poetry, and grows African violets.

Targeting, Inference and Missing the Point

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If you notice how direct marketers are treating you, you can figure out how well they know you…and what techniques they’re using to try to get you to buy.  Sometimes marketers target you using previous transaction history or other available data. And that’s good.  It’s great to get a mailer from a nearby furniture store if you’re in the market for a new sofa because you just moved to a new home.  The store is renting a new movers list.  We know that new movers tend to buy a lot of furniture. So you get relevant information, the store perhaps gets a paying customer, and everyone’s happy.

But sometimes you can see that marketers aren’t targeting you, but only making an inference about you. Sometimes making that inference goes just fine…and sometimes it’s way off base.

The prime example of this is Amazon.  You purchase a book or a series of books, and the site recommends similar books you may like.  Or it tracks what other people who have purchased the same title you’ve just bought have also purchased, and recommend based on their tastes.  They don’t specifically know what books you want.  But they infer what you might want. In my own case, I see this working just fine at the site, as well as failing miserably. 

On the one hand, I like contemporary American novelists (e.g., DeLillo, Franzen, Kingsolver, McCarthy, Roth, Tyler).  So, sure, I’m in the market for Jonathan Franzen’s brand new novel Freedom, and Amazon is smart to offer me a deal on it. (Although I’ve already received it as a birthday gift.)  On the other hand, about 13 years ago, I bought one book at the site on a technical aspect of database marketing, relational algebra.  So I’m all set there. Yet, Amazon relentlessly and to this day still serves me up titles in that same narrow niche.  A failed inference about my needs, reasoning from too few data points.

Or take the Teaching Company (TTC).  I have a long commute, so I like to listen to courses on tape.  Having listened to 36 CDs on the Old Testament, I receive quite a few catalogs from TTC focusing on religious studies.  And it worked!  I recently bought a 12-CD series on the New Testament. (The New Testament is shorter than the old.)  But I also once bought a course on jazz music—my first purchase from the company, in fact.  Was I not in their database yet? They don’t seem to get that I might be interested in more on music, and particularly jazz.  A failure to make another inference that might just work.  

The direct marketing moral of the story is target wherever you can using as many data points as you reasonably can.  The right offer to the right person at the right time is the key to success. But when you have to resort to inferences, make sure those inferences are solid.

Oh, and don’t try to sell me any more books on algebra!

Direct Mail: Lessons from the Movies

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According to CSO Insights in a report published this past July, 39% of companies doing lead generation planned to reduce their direct mail spending in the next 12 months. Only 18% said they planned to spend more on mail. Mail had the worst showing of all the marketing channels surveyed.  (E-marketing, email, and social media marketing were the big winners, of course.)

At my company, we do a lot of direct mail.  So, are we in a dying business?  I don’t think so.

When television came along, everyone said the movies were dead.  Been to a movie lately?  Sure you have.  Indeed, movies are making more money than ever.  It’s not that TV killed the movies.  It’s that TV, as a new transformative technology, changed the movies. Movies became bigger: longer and packed with visual and auditory sensations and special effects—a trend that started as early as Lawrence of Arabia (1962), and continues right through to the otherworldliness of Avatar or Inception.

Today, direct mail faces all the transformative technologies of the digital age.  Digital is going to change direct mail, and force direct mail to do what it does best.  

Two key advantages that DM has over digital are that (1) it’s tangible, and (2) it lends itself to sustained narrative.

To Have and To Hold

You can hold a direct mail package in your hands. It lasts. You can display it.  Its strength is that it’s not the flickering of transient pixels on a screen, here today and gone–not tomorrow–but in a millisecond.  Accordingly, DM is going to work best in the digital age when it’s dimensional—ironically in the same way that TV forced the movies to bulk up. 

The new defining criterion of successful direct mail is going to be: the recipient does not want to throw it away.  Something about the physical piece of mail will compel the recipient to keep it.  Perhaps it’s a dodecahedron displaying your brand that pops into 3-D when you open the package.  Perhaps it includes an hysterical and infinitely repeatable recording like those insane Hoops & Yoyo cards that Hallmark’s making a fortune on.  Perhaps it has toy-like characteristics that will invite playing with it again and again. Perhaps it even has a pleasant scent. (Hmmm. What smell goes along with selling, say, mutual funds?)   But whatever the package is or does, you won’t want to just throw it away. 

Decades ago, I got a direct marketing piece that emits a wild round of applause every time you open it. I still have it. It still works. I still laugh.

Living to Tell the Tale    

In addition—and not precluded by being multi-dimensional—direct mail worth mailing will tell a good story.  It doesn’t have to be a long or complex story.  But it has to be compelling.  Again, we can take a lesson from the movies.  While movies have bulked up on special effects, if a movie is all and only special effects, it usually falls flat.  Special effects wedded to a damned good story—think Pixar—create movies that gross hundreds of millions.

Not for Everyone…

There are of course some people who never go to the movies.  And there are some (like yours truly) who rarely or never watch TV.  Similarly, our dimensional, engag­ing, compelling direct mail still needs to reach the right people.  The story of a worthy charity will fall on deaf ears if I would simply never give to that kind of cause.  I’ll ignore a mailer telling me why a particular technology will improve my life if I’m a technophobe$5,000 off on a new car is a non-starter if I just bought a car last week. There’s still a big role for targeting, careful list selection, and knowing your audience.

…But Not Dead Yet!

When a transformative technology comes along, the old techniques learn to play to their own strengths.  The following brief table contrasts DM with digital media to highlight the strengths of the old-fashioned way:

Table comparing digital and direct mail attributes

There’s just no getting around that we humans are physical, analog, narrative creatures, bound in time and space. We’re always going to like getting stuff. And we’ll always love a good story

Do You Know the Three Most Important Marketing Metrics?

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It’s no secret that all of us in marketing are under increasing pressure to show results. Every marketing effort and expense must be quantified and justified. However, sometimes the numbers aren’t what they seem. Higher response rates don’t always mean better results. Conversion rates don’t always tell the whole story. And average order value can be misleading. So how can you make sure your programs receive the credit they are due?

Let’s take two direct marketing campaigns in the same industry, selling the same kind of product or service, both with a target audience of 100,000 people. The first has a response rate of 1.2%, the second a response of 1.5%. The second one is better with the 1.5% response, right?

Not necessarily. Suppose the campaign is two-step. That means the initial responses are just leads that now must go through the sales process.

The 1,200 leads from the first campaign go into a process that converts a third of them to customers, while the 1,500 leads from the second see only a 20% conversion. So the first one produces 400 customers, while the second produces 300. Now the first campaign, the one wit the lower response rate, is in fact better because it delivered more qualified leads. Right?

Maybe not.  The 400 customers had an average order value, or AOV, of only $400. But the 300 had an AOV of $600. So it looks like the first mailing generated only $160,000 in revenue (400 x $400), while the second generated $180,000 (300 x $600). Okay, so now we’ve got it. The second campaign is better after all!

Ah, let’s not be too hasty. Because it turns out that those 400 sales in fact encompassed 450 products or about 1.13 products per customer. In fact, it was each product that had an AOV of $400. Meanwhile, the 300 customers from our second campaign indeed represented only 300 sales. So we really got $180,000 from the first mailing after all (450 items x $400). It turns out that both campaigns are the same!

Or are they? Because we haven’t even discussed the profit margin on the products or services sold, downstream purchases, any effects of non-payment on some customers’ part, the impact of referrals, the relative cost of the original campaigns, and so on.

In the end, it’s not a matter of response rate, conversion rate, AOV, or any one metric alone. It’s about the metric that wraps them all together, ROI: what did we earn in profits, for what we spent.

You’ve surely heard the famous remark that only three things matter in real estate: location, location, location. Similarly, in direct response, the three most important metrics are ROI, ROIand ROI. Marketing’s ultimate goal should be to deliver as much revenue as profitably as possible. And that involves managing a host of mathematical interactions that we must manage from start to finish.