Ray worked with B-2-B and Consumer clients throughout the world ... including USA, Canada, Mexico, Asia, the South Pacific, Europe, the Middle-East, Central & South America, Africa.

This website is a compilation of Ray's 10 years on the Web.


Power Direct Marketing: The Book

What Direct Response Does

People stop buying from people for five primary reasons:

  • 4% aren't there any more. They move, get promoted, quit, transfer, die. They are no longer in a position to make a buying decision. There is little you can do about this.
  • 5% change to another supplier on the recommendation of a friend or business associate. The brother-in-law syndrome. (Stay in touch here. Many times you'll get back in-sometimes even quickly.)
  • 9% change to the competition because there is a true, competitive advantage, an honest benefit offered over your product or service. You can sell against this, but only for so long.
  • 14% change because they are unhappy with the results of the service or product you are providing. They are dissatisfied and want to try something new. And,
  • 68% change because of lack of caring expressed by some one person inside your company! Little or no contact, indifference, missed dates, budgets off target, a lack of caring expressed by sales, service, shipping, accounting, management-someone or anyone.

Direct marketing has become an accepted and important part of many companies' plans. It isn't the cure to every sales and marketing ill. But as a discipline this is what it can do: get and keep your prospects and customers buying from you. There are five primary functions of direct response marketing:

  • To get new customers,
  • To keep the customers you already have,
  • To upgrade your current customers,
  • To cross-sell your customer base, and
  • To keep 'em all coming back for more!

Let's talk about these five points one by one.

1. Get new customers

All companies want new customers. If you don’t chase new customers you soon go out of business. Why? Just look at those numbers on the previous page. Even if you don’t have the 68% problems in your organization, you do or will have one or more of the other problems. It can’t be helped. You MUST look for new business.

Teleconnect, a telecommunications publication, produced this dramatic chart. Here’s what happens financially when you lose a customer—no matter the reason why you lose them:

Your annual revenue loss is . . .

Customers lost per day Amount customer spends per week
$5 $50 $100 $200 $300
1 $94,900 $949,000 $1,898,000 $3,796,000 $5,694,000
2 189,800 1,898,000 3,796,000 7,592,000 11,388,000
5 474,500 4,745,000 9,490,000 18,980,000 28,470,000
10 949,000 9,490,000 18,890,000 37,960,000 56,940,000
20 1,898,000 18,980,000 37,960,000 75,920,000 113,880,000
50 4,745,000 47,450,000 94,900,000 189,800,000 284,700,000
100 9,490,000 94,900,000 189,800,000 379,600,000 569,400,000

Shocking, isn’t it! You MUST look for new business!

Please do not let what happened to me happen to you. It was my own fault. I was not looking for new business because I was so busy "handling" the three major clients that were my responsibility.

The year was 1972. I was an account executive with Smith & Hemmings, a direct mail agency. And as it is easy to do, I got busy with "activity." I was doing "things"—probably all justifiable—working with my clients.

Then two major events occurred which drastically changed the situation. First, one of these three key accounts went belly-up. Bankrupt. With no warning. It happened overnight. Literally. One third of my business gone.

Next, within 60 days, a second client walked out the door. They made a business decision they didn’t want to deal with me or the agency anymore. This was also a sudden move—no warning—it happened one afternoon. The second third of my business disappeared.

Within 60 days I lost two thirds of my business. And because I had not been prospecting for new business, it took over nine months just to get even again. A lesson I’ve never forgotten. To this day, every week I spend some time prospecting for new business.

San Francisco Embroidery Works seeks new business each month in airline magazines by running a free catalog offer in small-space ads with an 800 number. This reaches the sales and marketing professionals who order high quality, personalized, corporate wearing apparel.

Sometimes SFEW uses postcard decks and small classified ads in business and advertising publications. Every month they are in the marketplace, visible, looking for new business.

Gordon & Schwenkmeyer, a telemarketing company, wanted to expand their business-to-business business. First they selected a tight list both geographically and by Standard Industrial Classification (SIC) code. Next they telephoned each firm on the list to verify the name, title, and address. And third, they did a three-part direct mail lead generation program. All of this to get new business.

Charles Schwab, the discount broker, uses television, radio, newspaper, selected magazines, and more on a continuing basis, month after month, seeking new customers for their services.

The National Swimming Foundation put together a select mailing list of prospects and from them sought donations to support the amateur swimming program in the United States.

The Pizza Man, a local eatery in my neighborhood, uses cooperative or marriage mail on a regular basis. Each time with a discount coupon, to gain new business.

Getting new business is one effective way you can use the techniques of direct response marketing.

2. Keep the customers you already have

Everyone wants to keep all their good customers. It is hard work to find and get them. It is important to keep them. Keeping customers sold is almost a full-time job. Direct response offers many opportunities for you to do this; after all, they are your customers. You know them—they know you. Your message to them will most probably be heard or read, and understood.

Those in fund-raising and mailorder seem to do the best job at working to keep their customers. The Company Store, from La Crosse, Wisconsin, frequently sends me a new catalog. In the recent past I bought from them and was very satisfied (They know that because I told them so), so they chase me for more.

The Winn Corporation of Seattle, Washington, offering original art for corporations, uses a series of catalogs, special mailings, and local art shows to constantly stay in touch with their customers.

Contact Lumber Company of Portland, Oregon, uses mail and an intensive telephone campaign to service their clients. Likewise, HydaBaths, a specialty plumbing and fixture supplier in southern California, services their customer base of 800 firms nationwide via direct mail and phone.

KPMG Peat Marwick Main & Co. offer a continuing series of educational programs to their customers—to keep them up to date on all tax and financial law needs. By being seen as in the forefront of "knowledge" in their field, they are keeping their good customers happy.

The Braille Institute produces a quarterly magazine (with a nonintrusive reply envelope nested inside) which it mails to their major donors. Just "staying in touch."

3. Upgrade your current customers

Murray Raphel calls it the "Loyalty Ladder." It looks like this:

pdm008.gif (4574 bytes)

The bottom rung of the ladder is suspects. Suspects are those folks who, on paper, look as if they can buy what you sell. Prospects are suspects who have received your message, raised their hand, and said: "Sure, I’ll consider what you have to offer—talk to me."

Customers are new buyers: those that buy from you for the first time. Probably a small financial commitment. They dip their toe into your water and find it satisfying.

Clients are your best customers. You know, the 80/20 rule. Where 80% of your business comes from 20% of your customers. Those people are called clients.

And then you have advocates: your very best clients. At the top of the ladder. Those that buy from you and only from you. They recommend you, they give you testimonials, and they become case histories of your success.

All of us want more advocates. Also, all of us are advocates for some products and services. We have our favorite restaurant. A laundry or dry cleaner. A shopping center we particularly enjoy. A mail-order house we feel takes care of us better than any other. A resort or holiday destination. Even a garage mechanic—if you can find a good one!

How do you get your customers to become clients and then move to the advocate level of the loyalty ladder? One thing you do is upgrade. You move them up from one level to another. You offer an opportunity to make an increased buying decision.

When you decide you need a new car you usually have some idea what you want. Maybe not exactly, but you’ve decided the style, very likely the make, maybe even the model. You know what you’re looking for, what options you want, and what you’re willing to pay.

What happens when you visit the dealership? The sales rep tries to upgrade you to the next model, a fancier version of what you picked. Leather seats. More push buttons. Extra trim. Even four-wheel drive. And more.

You open something as simple as a checking account at your bank or S&L. Options? Many. You may elect designer checks. Are they worth more than those without the nice pictures? No—but they sure do look good. And make you feel better. They say something about you. They upgrade your image.

What about credit cards? Is gold that much better than something non-gold? There are additional benefits; which is why it is relatively easy for American Express to upgrade you from green to gold.

The telephone companies in North America are as good at doing upgrades as anyone. British Columbia Telephone Company of Vancouver, B.C., Canada, does mailings, followed up with outbound telemarketing, to their business customers offering enhanced services. They upgrade. The Stash Tea Company of Tigard, Oregon, has upgraded their catalog with many new offerings, new packaging, additional products. All in an effort to gain new business from current customers.

Companies in commodities and supplies offer you upgrade specials when you call in your regular order. Many mail-order firms have upgrades based on the dollar amount you spend with them, or seasonal upgrades. If you make a certain level of commitment, or agree to buy at a certain time, you’ll "automatically" earn an upgrade. At no additional charge.

Direct response tools, and particularly the telephone, give you an excellent opportunity to upgrade your customers.

4. Cross sell your customer base

Your best source of new business is your current customer. The easiest group to cross sell to another level of business with you is your customer base.

If you already are doing business with a firm, you are likely to do more. The Bank Marketing Association offers some interesting statistics from the financial marketplace. They have found the odds on keeping your customer increases with the number of services that customer has bought from you. If a bank customer has a:

Checking account only 1/1
Savings account only 2/1
Checking and savings 10/1
Checking, savings, and a loan 18/1
Checking, savings, loan, and a safe deposit box 100/1

Checking accounts are available everywhere—they are not hard to open or change or close. If that is a bank’s total relationship with a customer, they have no better than a 50/50 chance of keeping them.

Savings accounts are a little more of a commitment, so the odds increase to 2 to 1 that you will keep that customer. When you combine checking with savings, the odds go up dramatically that that customer will stay with the bank—10 to 1.

Add a loan of any type, and the odds take another quantum leap: 18 to 1. Include an inexpensive, nevertheless a personal-commitment decision, safe deposit box, and the odds jump to 100 to 1 that that customer will stay with you.

Almost every financial institution I’ve worked with knows these numbers are true. Citibank around the world uses direct mail and telemarketing to cross sell their customers. They may use broadcast and print to get new customers, but they then make heavy use of mail and phone to sell them more.

Ditto for Ameritrust of Cleveland, Ohio. A bank that for decades was considered "old and stodgy" is storming into the 21st century with a series of integrated multimedia advertising and direct marketing programs offering new products to their current customers. And, it’s working!

Many others can also use direct response to cross sell. Open any department store or oil company bill, your American Express or AT&T bill, and what, besides the financial greeting, falls out? A bill insert, of course, making you an offer. Selling you something. Cross selling you another service or product.

The last time you sailed through a fast-food drive through you were probably asked: "Would you like an apple turnover today?" The last time you visited your favorite specialty men’s or women’s shop you were undoubtedly asked if you didn’t want a nice scarf or sharp necktie to go with that new outfit you just purchased. That is cross selling.

In direct response, particularly if you have an 800 number, you have a marvelous opportunity to cross sell. You ask your customer if they wouldn’t like to buy more—now—while they’re on the phone with you. Wouldn’t they like to take advantage of this telephone-only special offer.

What this all says is use direct response marketing to cross sell your customers.

5. Keep ’em all coming back for more!

You get your new customers, you keep them, you cross sell and upgrade them . . . and then you keep them coming back for more. And more!

The frequent flyer promotions of the airlines are designed to do just that. They offer you benefits for loyalty. My seminar and consulting business takes me around the world several times every year. And guess what—I’m loyal to United and all their tie-in carriers. Why? Because it is to my benefit.

United stays in close touch with me with monthly mailings of my mileage status, with a newsletter, and special offers. They have an 800 number I can call for reservations or assistance. They are doing this to keep me coming back for more.

Only your imagination limits how you might make use of the frequent user program concept. For example, a most innovative Dallas, Texas, parking lot owner has a frequent parking program!

Traffic building for retail stores, with direct mail messages aimed at their special customers, encourages them to come back for more. They get notice of a sale a day or two ahead of the "general public." Good friend and top marketer Murray Raphel, founder and owner of Gordon’s Alley in Atlantic City, New Jersey, uses direct mail to bring his best customers into his shops.

Leasametric, an instrument and computer equipment leasing firm of Foster City, California, uses direct response to keep in touch with their best customers. Mail supports the sales staff. Their in-depth catalog is offered to those who qualify. And the telemarketing group stays in touch.

Relational Technology, a software company headquartered in Alameda, California, uses direct mail and phone to communicate with their best customers. Constantly talking "with" them, making new offers, discovering new applications—getting them to come back for more.

The Heritage Capital Corporation of Dallas, Paris, Dusseldorf, and Geneva uses direct response to stay in touch with their audience of numismatic enthusiasts. Inviting them to their auctions, special conventions, and other events. Giving them special mail-order-only opportunities. A constant flow of direct mail, catalogs, even cassette tape messages. Recently I got on their list and can testify they truly keep you coming back for more!

Any organization with an outside dealer or distribution network will find that direct response tools will help keep you in the forefront with your audience. You have to . . . most of these independent dealers are just that—independent. They probably rep you and two or three others with a similar product line. Direct mail and phone, especially these two tools, allow you to reach them with your message. And, to keep them coming back for more.

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