Archives for category: Informative Ramblings
Newer Entries »

Optimizing The Offer

January 13, 2013 //

Do you BOGO (Buy One Get One Free) or give a different item away as the freebee?  Every DRTV offer needs to be tested to find the optimal approach and the economics of the item can effect how you create your offer.  As a starting point, for short form mass market $20 or under items, BOGO has proven strongest as it gives the TV viewer psychologically the best price, while giving maximum retail flexibility.  For child items, I stay away from the BOGO, as a BOGO cuts down on multiples, thereby hurting your RPO (Revenue Per Order) as parents typically buy one item per child.

For collectible or niche products, I have found that a second similar item as the freebee works best, rather than a BOGO.  This is stronger than simply doubling the original offer, as the similar bonus item decreases the customer’s cost per item, but does not cheapen or lessen the exclusivity of the original item.  This also allows for the depiction of a second strong visual image of the event.  For Horticulture I have had success with buy 2 get 1 free as well as giving away a second similar item.  Both approaches have achieved a higher RPO than the BOGO, due to upsell multiples.  As always, the answer is to test, test, test.

Categories DRTV, Informative Ramblings, Uncategorized

More Isn’t Always Better

December 24, 2012 //

It’s easy to make the mistake that more is always better.  If we add in an extra freebee, of course response will increase, but in reality the freebee can be detrimental if it takes focus away from the main item offered.  When creating your offer, you need to watch out that your amazing offer doesn’t turn into ‘the kitchen sink’.  This is one occasion were more can actually hurt rather than help response.

We created a beautiful 6*9 mail package for a die-cast car offer.  The offer consisted of a free die-cast car with the purchase of two other cars.  Each car also came with a free glossy trading card.  The offer was successful and rolled-out.  On an expansion mailing we decided to test adding in an extra freebee.  For the program, we had produced a leather display wallet to show off the trading cards.  It sold well inshipment, as well as an upsell to phone orders, so it seemed like a logical freebee to test.  For the mailing we A/B split, with 2/3 getting the original offer, and 1/3 getting the free display wallet in addition to the original offer.  Normally the test portion of the mailing would be much smaller, but we went with a larger test size because the response to the second offer had to be better, as the customer was receiving everything from the original offer, plus more.

Response from the test group dropped by 20%, while the control group continued to perform the same as prior mailings.  The original offer was great and focused overwhelmingly on the free car.  The test offer, distracted some of the customer’s focus away from the free car and shifted it to the less impressive free display wallet.  In hindsight, the results made sense.  When we created the offer we fell into the trap of more is always better, but the math proved sometimes less is more.

Categories DRTV, Informative Ramblings, Marketing, Uncategorized

Niche DRTV

December 16, 2012 //

A collectible is a niche product; this has its advantages and disadvantages.  I have found a success rate for collectible television spots of better than 1 in 4 while successful mass market spots range from 1 in 20 to 1 in 40+.  Collectibles will never do the overall sales of a mass market product, however, product niches can often be targeted very successfully.  For the Obama Presidential Coins, one individual station accounted for 50,000 customers.

Programming also is more impactful on a niche product.  On a recent campaign, spots airing on a profitable station did 2.5x to 3x when the spot ran on a program that was related to the genre of the collectible and over 7x when the programming concerned the actual subject matter of the product.  Typically it was only an additional 10% expense to make sure that we aired during specific shows.

Niche products require more of an exacting pinpoint rather than shotgun approach.  They do not offer the retail opportunity, however niche product customers have a higher lifetime value, as they often continue to purchase similar products in the future.  Niche products do not offer the home-run potential of a mass market product, but they definitely offer a better batting average.

Categories Collectibles, DRTV, Informative Ramblings, Marketing

Optimizing Your Bottom Line – Fulfillment

December 6, 2012 //

Once the order is placed through the IVR or Web, the second portion of the back-end is the fulfillment.  This is an area that is not focused on enough, as it is often outsourced.  You have spent tremendous efforts to lower you CPO (Cost Per Order) and increase your RPO.  But are you maximizing the efficiencies of your fulfillment?

The piecemeal billing of fulfillment companies is relatively straightforward, but marketers often leave costs out of their forecasted economics.  Are you truly counting all of your fulfillment expenses in your economics?  Do you know what your true shipping costs are for each customer shipment combination, including split package charges, gas surcharges, etc.  I realize how simple this sounds, but speaking from previous experience, accurate data is often difficult to obtain.

Companies are often using antiquated computer systems that were created when the company was much smaller.   Over time, they have continuously built additional modules that were not thought of when the computer systems were originally designed.  This can lead to portions of the computer system not correctly interpreting information from other portions, thereby producing bad data.  There is nothing worse than making a ‘correct decision’ off of incorrect data.  Does your internal system communicate efficiently with your front-end (orders coming in from IVR, web and affiliates) as well as with your fulfillment house?  Are you able to produce the proper reports to accurately analyze all aspects of your programs?  Accurate data is the lifeline of direct response marketing; you should never feel like you are flying blind.

Another issue to look at is inventory.  Are you shipping product as soon as orders are received?  Any delay causes increased credit card decline rates that can have a detrimental effect on the bottom line (even though the front-end CPOs looked fantastic).  Do you have inventory of all of your upsells in stock, or are you unnecessarily splitting shipments to customers?

The front-end of DRTV is what most marketers view as the fun part, but it’s the ‘boring’ back-end that can have the biggest impact to profitability, as back-end improvements drop directly to the bottom line.

Tags
Categories DRTV, Informative Ramblings, Marketing

Optimizing The Back-End – Upsells

November 30, 2012 //

Most companies focus on customer acquisition, because it determines the viability of a campaign, but it’s the back-end of a successful campaign that truly determines your bottom line.  Optimizing the back-end can be the single most important aspect to increase a company’s profitability.  The back-end is broken into two parts.  The first consists of the upsells (to the TV product) offered during the IVR/web order.  The customer is calling because he/she is excited about the TV offer, therefore, sell her more of what she wants.  Deluxe versions typically work best and offer additionals at a discount with free shipping.  Other upsells should be tightly connected to the TV offer.

The target RPO (Revenue Per Order) from a $10 TV offer should be about $60, much higher than that will likely cause significant problems with credit card charge back and returns.  Each upsell takes away from the response of future upsell offers as the customer’s attention span wanes; too many upsells causes the IVR length to lengthen unacceptably.  I have listened to IVRs that can run 18 minutes.  This causes significant frustrations for the customer and can easily lead to customer input errors that again lead to increased charge backs and returns.  It is important to A/B test upsell position order as well as price points to optimize your upsell stream.

The second portion of back-end optimization concerns fulfillment which I will address in a future post.

Tags
Categories DRTV, Informative Ramblings, Uncategorized

Think Different

November 18, 2012 //

Think Different

Years ago I oversaw a very successful continuity program.  It was the company’s most profitable program, but it had been in steady decline for many years, with the annual enrollment of members shrinking each year.  The overall annual margin for the program was $X, which was one of the higher margin amounts of any of the company’s programs.  Margin had been calculated using the same basic formula each year, However, by looking at the margin with a slightly longer viewpoint I was able to justified an increased margin of $1.5X.

Once enrolled in the program, the retention rate for the program was extremely high.  In addition, 40% of customers in one year would enroll the next year, and 8% of customers would skip one year but enroll the following.  Obviously the lifetime value of customers once they enrolled in the program was extremely high and once enrolled, it was relatively inexpensive to enroll them in future editions.

The 50% increase in the allowable, permitted us to mail deeper on internal lists, as well as deeper on outside lists, for an incremental investment that was recouped in less than an additional year.  The enrollment in the program, which had been shrinking each year for the prior several years, was increased by 40% and overall profitability of the program was increased for years to come.

Now, years later, the program still is ongoing.  Just because something has always been done a certain way, does not mean a program cannot be improved.  Often a fresh perspective can prove to be very valuable.

Tags
Categories Informative Ramblings
Newer Entries »