When times seem a little tougher -- and at the moment they do for many companies -- marketing directors look to cut costs in order to improve profitability.
Whatever the key business metric it will generally respond well to a prudent "fat-trimming" exercise in the short term -- print costs here, new creative there, even reducing the spend on data acquisition or manipulation -- all can make an instant difference.
But are we in danger of seeing the trend taken to extremes with the focus on costs becoming out of balance with developing the other key performance drivers?
Business success is affected by factors over and above marketing spend -- response, conversion and sales values are just three examples of these additional measures.
Although costs are an easy target with a speedy payback, cuts will not inevitably lead to more profitable campaigns. On the contrary, we are at risk of seeing the DM sector steadily undermined and eventually being reduced to lowest common denominator campaigns. Differentiation, the lifeblood of response generation and branding, will be squeezed out and DM will be pushed into a downward spiral from which it will be hard to recover.
So if continual cost-cutting is not the answer, how can brands fight back against stiffer market conditions?
One way forward is through investment in data although for many companies this will come as something as a culture shock.
The strategy of "highest volume for lowest cost" has traditionally dominated and it may seem anathema to suggest otherwise. However, data holds the key to maximising budgets and achieving cost-savings, as well as protecting a brand's values and public perception.
In order to do this, companies and their agencies need to have an approach to campaign planning and implementation that is driven by analysis of potential rather than simply fiscal or volume targets.
The more precisely an audience can be targeted, the greater the commercial benefit and this will ultimately always depend on the quality of data and the way in which it is managed.
Greater segmentation and targeting is not just about who is mailed but also what they are mailed and when. It means that the best prospects can be identified for specific products, services and propositions; and it allows the creative, offer and message to all be carefully tailored to the recipients.
All of these factors will have a far better and far more sustainable effect on the bottom line than simple, repeated cost-cutting.
Yet the stumbling block is the ability to amass the right sort of information on customers or prospects. In order to obtain this, companies need to have access to relevant, detailed, accurate, and recently updated data.
This flies in the face of current attitudes, thinking and legislation around data protection. Consumers are increasingly reluctant to provide detailed information about themselves to companies -- and when they do, there are strict rules governing how it should be collected and what it can be used for.
There is the option of traditional list-broking, but these are too volume driven, mass market and limited in their targeting to fit the bill. A marketing director who is prepared to use data to improve profitability therefore needs to look elsewhere.
A proven and increasingly popular solution for a company is to build its own prospect database. This will open the door to greater knowledge and control over who is mailed and when.
Promotional history can be built up over time and the frequency of promotion to an individual and/or household can be proactively managed. It also allows the data to be selected and segmented in a much more targeted way. Data appends can be bought with the names and addresses from the original supplier and these can be enhanced with other derived data and in time specific promotional history. Together, all this information can then be used to make more intelligent and informed selections from the database.
Companies will have to accept that greater targeting may lead to lower volumes, and many organisations will find this hard since they build their business plans around ever-increasing volume. However, those that are far-sighted enough to appreciate the advantages of a different approach will soon win out over the serial cost-cutters.
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