What if your CEO gave you 24 hours to produce figures proving this year's direct marketing programs were profitable? If the thought of this causes you to break into a cold sweat, you're not alone. Millions of marketers sweat with you; they belong to a sort of marketing "Don't Ask, Don't Tell" Club. If you qualify for this group because you don't track results, then read on. Because we're going to try to dissolve your club membership by making your direct marketing a profit center, rather than a cost center.
As a direct marketing user, you're in an enviable position. Unlike advertising and public relations specialists, direct marketing can consistently demonstrate success through return on investment (ROI).
Over the past decade, ROI has become a vital management device with the increased emphasis on shareholder return and measurable results. Yet most marketers continue to conduct direct marketing campaigns without tracking ROI. My company asked database marketing users at our recent marketing conference about their tracking habits. Nearly half of the 340 respondents said they track fewer than 25 percent of their campaigns; two-thirds track fewer than 50 percent.
Why is it essential to track campaigns and measure ROI? Three reasons: tracking demonstrates results, allows you to compare one marketing effort with another, and demonstrated results provide your department with further funding.
avoid marketing roadblocks
Zions Bank, located throughout the western United States, exemplifies the power of tracking. Harland produced a tax-time home equity loan campaign for Zions earlier this year. The promotion generated a 419 percent ROI-$300,000 for the institution. These compelling results motivated management to sanction two additional direct marketing campaigns. Documented results were also the great convincer used by Nancy Dreisinger, vice president of marketing at Central Bank, based in Jefferson City, MO. She had spent years trying to coax colleagues into supporting her direct marketing efforts. Tracking several campaigns finally gave her the sponsorship she'd unsuccessfully sought for more than a decade.
If ROI measurement is so meaningful, why aren't more financial marketers doing it? Three primary reasons.
n Insufficient time. Marketers often don't take the time to measure ROI because of deficient resources (i.e., adequate staff), or they are overwhelmed by seemingly more pressing responsibilities.
n Lack of knowledge. Marketers don't understand how to track campaign ROI.
n Inadequate technology. Many marketers still don't have a marketing customer information file (MCIF). If you're not tracking ROI because you don't have a MCIF, my advice is to make the purchase. These systems quickly pay for themselves by helping institutions make revenue-generating decisions.
By allowing the ROI calculation, MCIFs were made for tracking. A MCIF can accurately track results in minutes, while manually tracking may take days or even months, depending on the campaign's complexity. Additionally, a MCIF can rapidly store and process a wealth of customer information which simplifies account activation. To manually track results, an institution has to garner information directly from the customer, an arduous, time- consuming and inaccurate task.
Manually tracked results can also be skewed because the method only recognizes the account holder to whom a piece is mailed. For example, if one member of a household received your promotional piece and a different household member responds, you probably wouldn't manually attribute that response to the offer. A MCIF, on the other hand, would recognize that the household, rather than addressee, responded to the offer. Also, lost response coupons can result in inaccurate measurement and lower-than-actual ROIs. A MCIF allows you to track the details of those who respond.
step-by-step guide to track ROI
The objective, of course, is to have more income than expenses for a program or campaign-greater return than investment. Campaigns that break even aren't worth your effort; your finance department could have made money by simply investing those funds. If the operating income-or money earned by implementing the promotion-exceeds your costs from conducting the campaign, you're an ROI winner. The process is different for deposits and loans.
Remember, you don't have to wait until after the promotion is over for ROI measurement. By predicting ROI before mailing, you can determine the response rate necessary to break even. A predictive analysis allows you to predict ROI across various response rates (see chart).
The above table predicts the return on investment across different response rates for a marketing promotion. This analysis reveals the number of responses needed to break even on the campaign and how much net income is gained as accounts are opened. In this case, as long as the institution can solicit at least a 2.04 percent response rate, it will not lose money on the promotion.
Not too long ago, marketers were limited to basic campaigns because technology could support only a limited degree of complexity. Today's advanced MCIF systems overcome intricacies by allowing marketers to segment large promotions into many variables, while still managing and tracking their parts as one campaign. Today's MCIF gives you the power to concurrently run numerous promotions, tracking results to determine return on investment for each project.
If you've been a member of the "Don't Ask, Don't Tell" Marketing Club, you now have the ability to step forward with proven results. You can significantly shape your promotions and accurately measure the return on investment. And if the CEO does say, "Show me the money in 24 hours," you'll be ready. Just smile, power up your MCIF and think to yourself: "24 hours-who needs that much time?"
Rod Dillehay is a regional marketing consultant for Harland, an Atlanta- based company specializing in financial services database marketing, direct marketing and loan automation software.