Beanies to Full Power!
There’s nothing like getting into a really good brainstorming session to get the mental juices flowing and the beanie propellers revving. I had a great little conversation with one of my favorite people, Andrew Jones, when I ran into him downtown today during lunch. Andrew’s one of these smart guys that always has a lot of ideas, a lot of information to draw upon, and a hoard of energy to back it all up.
We were talking about Andrew’s company, Zerendipity, which is working on a system for linking together entrepreneurs, experts, mentors, and venture capitalists in the BC area to help entrepreneurs find the people and resources they need to get started. It got me onto the topic of linking customers with companies and vice versa.
As I see it, companies are pretty clueless about their customers – this occurred to me while doing research for my business plan class. Try and find specific information about customers. Really specific information, beyond the broad brush strokes of age and income demographics, is hard to find, especially if you don’t yet have any customers. If you do have customers, you probably have some information about customers, but you’re not using it as well as you could be. Case in point: Safeway.
Last year, I noticed the inordinate amount of bulk unaddressed mail I was getting to my apartment. I decided to collect the mail for a year, just to see who was sending what, how much, and how often. It was pretty shocking: by the end of the year I had 20 pounds of junk mail from businesses that I either had never shopped at, or never would shop at in the future. Lots of these companies had essentially wasted their advertising dollars, and produced no value. Beyond the usual small business mail, realtors’ “I just sold a house!” proclamations, the major bulk of the mail came in the form of newspaper flyers from a limited number of businesses. Safeway came away as the worst offender, mailing a newspaper flyer roughly once a month.
Looking at the mass of flyers, something occurred to me: my wife and I shop at Safeway religiously, and we use our Safeway Club Card on all our purchases. Hadn’t anyone at Safeway realized this, and thought, “Hey, if we look at who currently shops with us already, maybe we could avoid wasting money on customers we already have!” I guess not. If I were them, I’d cull the Safeway Club purchase transaction database, note purchasing patterns, and directly mail customized offers to existing customers or new customers. Though it would cost more on a per-mail basis, the overall campaign could be designed to cost the same by reducing the physical size of the flyer and the number of customers targeted. Not only would it be more environmentally responsible, it would also maximize the “bang for the buck” businesses receive from their advertising budget.
Similarly, companies don’t seem to be too smart about asking their customers for information on what they’d like. For example, try to suggest to Sony a feature you’d like on their next camcorder. Or give feedback on why you didn’t buy a product because of a design feature you didn’t like. Go ahead, I dare you. Even if you manage to find some way to contact the company and give feedback, I guarantee all of the value you could have added to the company’s next product has just been relegated to the electronic wastebasket.
Who will help these companies?
But by definition this is bulk mail, meaning that the company spends tremendously less (I’m guessing) to send it because it doesn’t have to be routed to specific addresses and therefor it is handled only by the end mail carrier. Not only that, but the company doesn’t have to do any culling of data, rather, they just look at an area that needs a little boost and uses the shotgun approach.
I could be wrong, but I’d say that the direct mail avenues have been explored and probably appear to have less of a “bang for the buck” than the bulk system. Given a choice, people will likely choose the laziest method of doing something, which is unfortunate environmentally (and for the poor postal carriers in this case).
Right – this is bulk mail, so it does cost less to send on a per-item basis. However, a more effective campaign could be designed for the same cost, using smaller flyers customized for a smaller group of potential customers – resulting in campaign that costs the same, but is more effective.
This technique has been shown to work, most notably with those “pre-approved credit card” offers. Normally, those things are blasted at a geographic area with a particular demographic trait. “Success” rates, judged by number of signups, are low – less that a 1-2%. A credit union that used this technique to combine customer information with other mail databases to enable them to use addressed, rather than bulk, mail to target a smaller group of people. In the end, they achieved success rates of greater than 10% for about the same cost and less waste.
Then the postulate that the business world is efficiency or productivity driven would be wrong?
Arghhh… 🙂
No, not wrong – companies are still driven to lower costs while attempting to capture a premium for their product. It’s just not always clear to them where their costs come from or where more value can be captured.
In the case of junkmail, I think it’s simply a case of “it’s the way we’ve always done it”. The companies have chosen to look elsewhere for efficiencies. Often the most mundane and boring areas of the business are the ones that can be most improved – just look at Walmart. Walmart’s success comes from tuning the supply chain to squeeze every cent of value out of their inventory and store space. The difference between Walmart and other retailers in sales per square foot and other retail industry metrics is usually 1% or less. But that’s what makes all the difference.
Any idiot can spend a bunch of money on a lot of advertising to attract customers. The smart companies spend less money, and spend it in the right place.
Touchpoint, Inc, located in Emeryville CA is all about personalized direct mail. Through the use of our digital printers and middleware, companies such as Safeway can now send out highly targeted, highly personalized direct mail to their customers. Sending targeted mail has been very difficult in the past, and companies don’t seem to spend much time and effort to sell directly to their customer’s buying patterns. Things will be changing as the adoption of our solutions becomes wide-spread. Please call me if you have any questions. 510-595-6168.