Plan for the Future With Basic Direct Mail Analysis

Where are you going next year? What direction do you want to take your business? Before you sit down to put together next year's direct marketing plan, take a look at where you have been and what you have done.

You don't necessarily need a CRM system or a team of data analysts to set up your planning process. What you need most is the information you already have about your business to tell you where you have been and a few simple calculations to focus your planning.

Here are four steps to take that will give you hindsight and foresight about your direct marketing.

1. Collect your records for the last two years. How many customers have you had—new, old and lost? Similarly, how much have you spent retaining the old customers, acquiring the new ones and how much in sales did you get from each type? Start with your accounting software and the orders, shipments and returns from your order entry system. Then collect your direct mail records, the number of mailings you did, the circulation of each mailing, and the costs for the prospect lists you rented and for the data hygiene and merge/purge processing. Enter or export the records to a spreadsheet to summarize them.

2. Summarize all the records you have found. Use the "report by customer" function in your accounting software or the subtotal function in your spreadsheet package to roll up each customer's transactions to a single customer record to count how many customers you have had. Sort them by the date of their first purchase so you can group them into 'old' customers who first bought from you more than a year ago and 'new' customers who first bought in the last twelve months. Then take the 'old' group and sort them by their most recent purchase date. If their last purchase was within the last 12 months they are old and retained. The old customers whose most recent purchase is more than twelve months ago are old and lost.

Then, add up everything you spent on getting and keeping your customers. Your list brokers, service bureau and printer can probably supply most of these costs to help you account for your list rental, prospect and customer data processing and print/production costs. Now, put the customer numbers with your expenses and you should have a single small table that will tell you:

· Total sales this year and last year
· Total old and retained, old and lost and brand new customers
· Total prospects
· Total direct mail costs this year and last year

3. Analyze and understand how to apply this data to the planning process. For example:

· Divide your total new customers by your total prospects for each year to figure out your conversion rate. For example: Total new customers ¸ Total prospects = Conversion rate

· Divide your customer direct mail costs by the number of old and retained customers to see how much you spent to keep a customer. Do the same for your total prospecting direct mail costs and your new customers. You'll likely see that keeping a customer costs a fraction of your expense to get a new customer. For example: Customer direct mail costs ¸ old/retained customers = Expenditure per customer

· Then compare your figures year over year.

4. Decide whether you are going to be reactive and do nothing else, or be proactive and plan your business's future. If you choose proactive, you will want to develop a plan to improve your direct mail marketing efficiency and productivity. If your prospect expenses went up 20% but you did not get 20% growth in new customers you need to brainstorm with your marketing team and with your brokers and service bureau to see why this occurred. Which catalogs and mailings gave you the best results last year? Did they do as well or better this year? Did you change your prospect list buys, your drop dates or your number of customer mailings? The data you have compiled and the simple calculations you can perform can direct you to the answers you need.

Find and collect your data, summarize it, calculate it and finally—analyze it and use it for planning. If you have never done this type of analysis before you will see that the impact of being proactive instead of reactive can be huge. You will have done more than just put together some numbers. Following these four simple steps will give you an approach to understanding your direct marketing performance. Keep repeating the four steps and you will also have a method to follow to measure if your plans work out in the new year.

Bill Singleton is a manager of analytic services with the Allant Group in Naperville, IL.