Too Few, Too Little, Too Much: Why Direct Marketers Fail . . . And Ten Ways To Make Sure You Don't
by Don Libey

Libey Incorporated is an investment banking firm located in Philadelphia, Pennsylvania and Haddon Heights, New Jersey providing mergers & acquisition, strategic and financial planning, capital raising and venture capital placement for the catalog, direct marketing and e- commerce industry. * * * Direct marketers throughout the industry must contend with increasing costs, increasing technologies, increasing customer demands, increasing regulatory pressures, and increasing margin erosion. For some, these are the seeds of failure; for others, they are the challenges of opportunity. After closely observing catalog and direct marketing businesses for many years, ten specific reasons for business failure keep reappearing. While there are many reasons why direct marketing businesses fail, these ten are often at the core of a business in trouble.

1. Too few customer selling contacts
2. Too few new products
3. Too few new employees
4. Too little variation of selling offers
5. Too little economy of scale
6. Too little customer talk
7. Too much missing, flawed or unreliable information
8. Too much money left on the table
9. Too much market constriction
10. Too much fulfillment

1. Too few customer selling contacts

The range is from one customer contact to twenty-six contacts annually. In general, direct marketers are not contacting their customers with compelling offers often enough. In case after case, we find another company of comparable size hiding inside the existing and undermarketed customer base. All that is necessary to materialize that company is to sell more often to existing customers in more innovative and more creative ways.

This does not mean simply sending another catalog, or another solo mailing, or making another sales call. Increasing customer selling contacts means developing access portals and interactive opportunities to demonstrate solutions to needs that have not even been identified yet. Internet and E-commerce capabilities are the first steps in interactive selling opportunity. There is no longer a question of whether a direct marketing company should be in e-commerce; it is now a question of how large you can grow this division and how best to use its capacity for streaming and flowing product sales to existing and prospective customers.

SOLUTIONS:

Define 10 new concepts and ideas for product applications and design 10 different ways--and reasons--to tell your story to your customers. Mail your customers one more time and keep mailing one more time until the last customer mailing is less profitable than your worst prospect mailing.

Define your customer to prospect mailing ratio and determine whether you are anemic or aggressive. A 60:40 ratio of customer to prospect mailings is a rule of thumb for business to business direct marketers.

2. Too few new products

If you are not developing new product introductions at the rate of 30% per year, you are lacking new product momentum. Direct marketers classically build product breadth first then product depth. The ability to implode product development to create a high rate of new product introduction is a cardinal requirement for product strategy success.

This concept of product implosion--which we first described eight years ago-- demands the creation of numerous logically related products from existing products using differentiation, applications, sizing, bundling, and other product creation strategies. For example, a fire extinguisher becomes a series of room or application fire extinguishers such as lunch room, warehouse, boiler room, truck, computer room, waste storage area, etc. By putting six "types" of extinguishers together, a business "bundle" is created that solves all needs for fire extinguishers within a business. From there, a logical size differentiation would be created for size of rooms, numbers of employees, square feet of warehouse, etc. Additionally, the product is then made available for differing types of combustibles as well as Halon, foam, and other types of extinguishing agents. Ultimately, one need and one product have given birth to multiple needs and multiple products to service those needs. That is product implosion.

Far too many direct marketers are mailing the same old thing month after month with little or no new product excitement. This only causes the advertising to be discarded without even a cursory glance. What is needed is the ability to create the excitement expressed in the mind of the customer who says, "Wow! I wonder what's new this time?"

SOLUTIONS:

1. Set a new product introduction target for quantity and time.
2. Set up new product teams who are responsible for concept, design, sourcing and sales and profitability.
3. Create 5 innovative ways to get new product ideas from customers.
4. Put customers on the new product teams.
5. Adopt the 30% per year new product objective.

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