Direct Marketing Quantified: The Knowledge is in the Numbers

MarketingSherpa's Review:
We love this step-by-step manual because it helps even math-challenged executives understand quickly and easily how to calculate:

• How much you can (really) afford to spend to acquire new customers
• What's an allowable cost for sales lead generation campaigns
• How to forecast when a campaign will break-even
• Which customer segments are the most profitable (and which customers you should fire)
• How to measure results even for sales that are "impossible" to measure because multiple media are involved, or the sale doesn't come attached to any response code (aka "white mail".)
• How to avoid "ego overhead" in budget season, and the best ways to allocate marketing costs in your budget. More helpful of all, this manual is packed with 47 illustrations showing precisely how to create Excel spreadsheets to accurately measure and forecast campaign results. (Great tool to hand to a junior to create the charts for you.) Yes, these dozens of sample spreadsheets include actual data along with calculation instructions so you can see what your data should look like in the end.

Table of Contents:

Chapter 1: Marketing Portfolio Management
Sets the stage for the importance of marketing to provide a reasonable Return on Investment (ROI) and lays the groundwork for understanding low, medium, and high risk marketing investments.

Chapter 2: Allocating Your Sales Dollar
Establishes cost categories and profit a sales dollar must cover: cost of goods sold (COGS), fulfillment, overhead, marketing, and contribution to profit. Marketing expense definitions and considerations for how you look at marketing costs are outlined.

Chapter 3: Defining and Establishing Breakeven Tolerance
Defines four ways to view breakeven; guidelines for what length of time you should define as an acceptable point to breakeven.

Chapter 4: Allowable Marketing Cost
How to establish what response rate must be achieved to meet profit objectives if you must make money from your first sale.

Chapter 5: Lead Generation Allowable Marketing Cost
Understanding the response rate you must achieve when using a two-step marketing program to first generate leads and convert those leads in the second step. Also described is a step-by-step allowable marketing cost guide for use when developing a lead generation program for sales people.

Chapter 6: Forecasting Long-Term Sales
An essential model to create if you bring new customers on at a loss and expect those customers will become profitable at a future date.

Chapter 7: Forecasting Future Breakeven
How to use your Long-Term Sales model to project at what future customer contact you will breakeven.

Chapter 8: Allocating Orders from Unknown Sources
Virtually every marketer has orders from unknown sources. This chapter explains how to allocate unassigned orders back to marketing programs for more comprehensive analysis.

Chapter 9: Drawing Lines in the Sand of Circulation Analysis
How to “draw the line” in prospecting circulation analysis when using weighted averages of cumulative sales, cumulative circulation and an allocation of unknown orders.

Chapter 10: ZIP Code Model Process and Methodology
After you have determined where to draw the line in your circulation plan, this chapter tells you how you can create a ZIP code model and apply it to lift response to under-performing lists, moving those lists “above the line” so you can mail them and achieve your profit goals.

Chapter 11: Building Response Projection Curves
A step-by-step guide to building a model that projects response rates based on the number of days after a program has been mailed. It also explains how to determine the date that is the midpoint in your response curve.

Chapter 12: Reading Test Results With Confidence
A description of how to use statistical confidence intervals to compare test results against each other and reliably know if the “winning” package beat another package. This chapter provides the formulas to calculate confidence intervals.

Chapter13: Customer Segmentation and Analysis
Does the Pareto Principle rule — that 80 percent of your profits come from 20 percent of your customers — apply to your business? Learn how to segment customers into deciles and quintiles to determine which customers are most important to you.

Chapter14: Square-Inch Analysis
Bonus chapter for catalog marketers: The hows and whys of developing an effective square-inch analysis for catalogs and multi-product brochures. Use this information to allocate space for your next catalog as well as to help paginate your catalog for better profitability.

Chapter15: Taking Action
Final reflections on taking action to use these tools to devise and execute profitable direct marketing initiatives.

Complete List of Charts and Graphs
Illus. 1.1: Marketing Portfolio: Fixed and Variable Costs
Illus. 2.1: Allocating Your Sales Dollar
Illus. 2.2: Chart of Formulas for Key Metrics (Measurement & Definition)
Illus. 4.1: First-Time Sale Value
Illus. 4.2: First-Time Sale Value and Cost of Goods Sold
Illus. 4.3: First-Time Sale Value, Cost of Goods Sold and Fulfillment
Illus. 4.4: First-Time Sale Value, Cost of Goods Sold, Fulfillment and Overhead
Illus 4.5: First-Time Sale Value, Cost of Goods Sold, Fulfillment and Overhead, Different Overhead and Profit Scenario
Illus. 5.1: Allowable Marketing Costs
Illus. 5.2: Allowable Marketing Costs, Including Customer's One-Time Purchase and Long-Term Value, and Sales Call Costs
Illus. 6.1: Forecasting Long-Term Sales, New Customer Performance
Illus. 6.2: New Customer Long-Term Sales, Including First Contact with First-Time Buyers
Illus. 6.3: New Customer Long-Term Sales, Divided into Two-Time Buyers and Non-Active Buyers
Illus. 6.4 - 6.5: New Customer Long-Term Sales, Step-by-Step Contact
Illus. 7.1: Long-Term Sales Value
Illus. 7.2: Long-Term Sales Value, Other Scenario
Illus. 7.3: Long-Term Sales Value, Including Results from Second Contact
Illus. 7.4: Continuation of Long-Term Sales Value, Including Results from Second Contact
Illus. 7.5 - 7.8: Long-Term Sales Value, Including Breakeven Point
Illus. 8.1: Allocating Orders from Unknown Sources
Illus. 8.2 - 8.4: Allocating Orders from Unknown Sources, Revealing Impact of Adjusting the Orders & Sales through Redistribution
Illus. 9.1: Circulation Analysis without Miscellaneous and Unknown Sales Allocated, Sorted by Key Code
Illus. 9.2: Conservative Approach: Circulation Analysis
Illus. 9.3: Moderate: Circulation Analysis
Illus. 9.4: Aggressive: Circulation Analysis
Illus. 9.5: Summary of Three Circulation Analysis Scenarios (Conservative, Moderate, Aggressive)
Illus. 9.6: Effect of Miscellaneous/Unknown Sales and Using Cumulative Results
Illus. 10.1: Zip Code Model
Illus. 10.2: Percent Response Rates by Decile
Illus. 10.3: Average Sales/M by Decile
Illus. 10.4: Sales by Decile
Illus. 10.5: Impact of Non-Responsive ZIP Codes
Illus. 11.1: Detailed Response Data for Building Response Projection Curves
Illus. 11.2: Visualizing a Response Curve (Derived from Data Spreadsheet)
Illus. 12.1: Distribution of Future Response Rates, Package A (Bell Curve)
Illus. 12.2: Distribution of Future Response Rates, Package B (Bell Curve)
Illus. 12.3: Mathematical Formula for Arriving at Example A & B Bell Curve
Illus. 13.1: Customer Segmentation & Analysis (How to Segment 100 Customers)
Illus. 13.2: Visualizing the Importance of Certain Customers (Dollars by Decile)
Illus 13.3: Visualizing the Importance of Certain Customers (Percent Sales by Decile)
Illus. 14.1: Catalog/Brochure Marketing Cost Square Inch Calculations
Illus. 14.2: Catalog/Brochure Marketing Cost, How to Adjust Your Space Allocation

About the Author:
Gary Hennerberg has been a direct marketing professional since 1978 and an independent direct mail consultant since 1992. He is also a catalog consultant and his firm is a direct marketing agency to one of Catalog Success Magazine’s Top 200 Catalogers.

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