Does creative matter?

Evidence from the UK that personalization drive incremental response.

Management summary of a research report from Lloyd James Group plc. As reported CRM Community:

Over the last decade the direct mail industry has more than doubled in size and value, with expenditure up by over £1.5billion and volumes climbing by over 3 billion items. Economic instability has forced marketers to demonstrate stronger return on investment and greater measurability, and this has had a knock-on effect on the proportion of marketing spend being channelled into responsive marketing. However pressure is mounting on DM practitioners to reduce mailing volumes and refine their targeting. The stigma attached to direct mail (or, as many see unfortunately see it, junk mail) was highlighted most publicly in the BBC’s recent Brassed Off Britain series. The government has also implemented legislation designed to protect individual privacy, and has set strict environmental standards for DM printers to reduce wastage.

Despite the continuing poor practices of the few, the vast majority of direct mailers are becoming more scrupulous in their attention to data quality and more targeted in their communications. In a bid to obtain a single customer view, UK plc has invested heavily in customer relationship management and database marketing systems. Yet, recent research points to a gulf between the sophisticated customer segmentation activity carried out by database marketers and the physical delivery of personalised messages. Recent advancements in digital printing technology are starting to close this gap, and the direct marketer’s vision of one-to-one marketing is finally achievable. Now, refined segmentation can be reflected in the finished mail-pack, with the text and accompanying images matching the information held about the recipient. In view of the greater emphasis being placed on linking customer and prospect data with the creative and printing processes, Lloyd James Group commissioned opinion research in order to understand the impact that variable creative has on campaign success.

Key Findings

On average, a 33.4% uplift in direct marketing campaign response is achieved when the mail-pack incorporates variable creative
Industry sectors benefiting most from targeted creative imagery are those which have a strong emotional and/or aspirational element
Sectors that have a rich, solid data basis are also those most able to extract bottom-line value from targeted variable imagery
Companies offering distress, commodity purchases are least able to obtain value from linking sophisticated database segmentation in with the creative print production process
These sectors tend also to suffer from a legacy of inattention to data management routines and strategic customer development

Methodology

Field work: Marketing UK
Research base: Senior marketers amongst top 1000 companies in the Banking, Charity, Credit card, Hotel, Insurance, Retail, Telecoms, Travel and Utility sectors
Research period: September/October 2004
Research method: Telephone and email questionnaire

Marketers were asked to quantify

The percentage uplift that inserting variable creative based on database segmentation has on response to direct mail campaigns
How much benefit each of the following sectors sees from using the variable creative: Banking, Charity, Credit card, Hotel, Insurance, Retail, Telecoms, Travel and Utility sectors

Research findings
Our respondents believed that inserting images based on knowledge about the recipients would boost campaign response rates by 33.4% – a massive increase in what has traditionally been a very high wastage medium. Figures from the Direct Mail Information Service (DMIS) put response rates (rather than conversion) to consumer mailings at 7.1% and just 6.4% for business mailings. When you consider that the current average mailing pack price is 43p for consumer and 66p for business[1], the impact of a response rate increase of a third is sizeable.

The extent to which response is affected will vary, naturally, according to the type and depth of information feeding the output. The creative possibilities are endless, limited only by the data available and the marketer’s imagination. The range of data held on prospects might include lifestyle and preference data, geo-demographic, transactional (through a data sharing initiative), psychographic profile information, and more. Customer data could incorporate all of the above, but could also incorporate detailed information about buying behaviour and service history.

The travel industry has most to gain from using variable creative. Hotels also rank highly. These are both industries that have the advantage of having desirable products. People look forward to booking a holiday, travel inspires positive emotions and recipients of clever, well targeted travel marketing messages tend consequently to be more receptive and responsive. Travel companies and hotels are under intense pressure to encourage repeat business from past customers. It is likely, therefore, that the majority of the benefit that travel and hotel companies are seeing is accounted for by using variable creative in campaigns to win repeat business from existing and past customers. Some travel companies are now sending new customers highly personalised mail-packs featuring a photograph of the hotel/resort they are staying at accompanied by a detailed map of the location in order to imbue an image of professionalism and quality, personal service This information is then stored and used to mail the same people the following season, with images to remind them of the holiday, and hopefully nudge them towards a repeat booking!

Similarly retailers often sell aspirational products. They, more than any other sector, know exactly who their customers are and what makes them tick. Retailers are the kings of loyalty and they use the rich transactional data they hold on their customer base to great effect.

These three sectors, all well above average in the benefit they see from variable creative, share two characteristics: desirable, emotional products, and a rich data basis.

Charities, below average but still with the fourth most to gain, again inspire emotion. A year-on-year decline in the number of households making charitable gifts has pushed the third sector to up the ante in the sophistication of their marketing activity. Charities have been working tirelessly to move away from the ‘spare change’ culture of giving that traditionally characterised them towards organised giving, and long-term relationship building with existing donors, while establishing a new base of younger donors. In fact, the not-for-profit sector was quick to get involved in data sharing initiatives with other charities in order to spot highly responsive individuals. Similarly, charities have embraced the idea of conducting campaigns using information on the psychographic profile of recipients, in order to vary the tone of the message, or indeed the creative, in order to appeal to the psychological make-up of different target segments.

At the other end of the scale lies the utility sector, seeing very little uplift from using variable imagery to boost campaign response. The core energy product is just about as commoditised as they come, so it is highly questionable whether variable imagery would be enough to sway the consumer’s choice of supplier in such a price sensitive market. And, with the regulator actively encouraging consumers to switch supplier to obtain the most competitive deal, this sector has significant data management issues arising from difficulty tracking serial switchers and bad debtors, compounded by a legacy of general inattention to data quality. If utilities do realise their a

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itions to stretch the brand from energy out towards the bundled home services market, variable creative could play an important role in effective cross-selling campaigns. For the meantime at least, utilities do not yet appear to be ready to take advantage of the possibilities of variable creative.

Insurance, telecoms and credit card companies offer distress, commodity purchases; consumer purchase is driven by need rather than desire, and consequently tend to be viewed as a necessary evil. Credit cards are highly price-driven, and the switching phenomenon that utilities are struggling to shake off is hitting the credit card sector, as consumers chase low introductory APR offers. As a highly intermediated industry, insurers are neither making enough use of marketing communications directly with the consumer, nor are the providing their intermediaries with sufficient support. They are attempting to differentiate on the basis of service in an essentially price-driven market, and so, with their attention focused on getting the fundamentals right, and are possibly not yet at the stage of using digital print to mirror the database segmentation activity. Nevertheless, the possibility exists for insurers to make use of variable creative, for instance by using psychographic profiling segmentation to inform variable creative to target the risk-averse.

Conclusion
Our research findings clearly demonstrate that by incorporating different images for different target segments direct mailers can produce outstanding uplift in direct marketing campaign response, provided that this is underpinned by a robust and rich a data basis.

As digital printing enters the mainstream, it is likely that multi-service printers will establish themselves as the ‘hosts’ of client electronic print documents. In maintaining a database of images, the printer would be able to update or amend creative, merge customer or prospect data with a creative library to quickly create personalised full-colour mailings on-demand, and variably insert collateral according to the customer or prospect’s profile.

Direct mail is becoming inexorably more targeted, and as we move away from the blanket culture towards the one-to-one marketing ideal, it will be imperative to find innovative means of increasing responsiveness. Variable creative will play a pivotal role in ensuring that mail-shots stand out from the crowd and elicit maximise response by appealing directly to the sensibilities of the recipient.

Source: Direct Mail Information Service (DMIS), Response Rates Survey 2003