For many years companies have managed to grow their customer bases and portfolios using traditional direct marketing techniques, and measuring the cost of each sales lead. But times have changed with growing economic pressure and marketing accountability, according to Paul Shortridge of South African marketing firm Incline Marketing Solutions.
The basic process involved in direct marketing has always been the same. Leads are sourced, various 'exclusion rules' are applied (for example, removing clients who have previously asked not to be contacted, or who have recently been contacted), and prospects are contacted with an offer.
The typical channels used for direct marketing include postal mail, call centres, text messages, and email.
The problem today, Shortridge argues, is that when direct prospecting started, companies were getting such good returns that there was no need to focus on the true cost of the approach.
But, as financial accountability increases, so does the need to understand the fundamental profit and loss drivers of the process. In other words, it's not about the cost per lead: it's about the cost per sale.
For example, Shortridge's latest case study examines the results of a test across three campaigns. Assumptions included that an agent can work on 2,200 leads per month; an agent costs R17,500 (approx. US$2,250) per month excluding lead costs; the cost to work a lead is approximately R8. List provider A charges R1.80 per lead; list provider B charges R1.50 per lead; and list provider C charges R2.00 per lead.
In these three campaigns the results were very different, despite traditional metrics suggesting that all three were approximately as cost effective as each other: