Making a List

I just read John Hall’s editorial [“The Cost of Attracting and Retaining Customers”] in the October 9, 2000 issue ofThe News, and wanted to share some insights about direct mail that can easily apply to our industry:

  • Response rates drop with a corresponding rise in acquisition or item cost. Thus a clean and check promotion will pull in a higher percentage of responses than a replacement sale.
  • Response rates drop with lower applicability and/or list segmentation. This just means that a broad, generic application on a mailing list such as “lose weight” will have a higher response rate than a tighter target like “safe weight loss for diabetics.”
  • These rules suggest that the most important aspect is the list to whom you’re mailing. Most hvacr companies use geographic segmentation (zip codes and the like) and/or customer base mailings (which have advantages and disadvantages you don’t have time to read about), yet the list remains king of the mailing.

    In plumbing, one can expect that a broad “cold list” offer for a replacement sale (the lowest response rates overall) will only be in the 0.75% to 1.2% range for a good offer. You can make serious money at this rate, but the letter had better be good to pull these rates. That same offer to a customer base can easily triple reponse. Call behind with a good telemarketer, and it triples response again.

    However, for a tune-up or mainten-ance agreement, the response rate had better be in the 2.5% to 4% range or you’ll lose money on the broad market. Once again, this mailing to your customer base should triple response.

    Again, these examples support the necessity of outstanding list selection practices and customer list manage-ment. A “blind” mailing of a poor, unprofessional offer is why so many contractors lose money on — and understandably hate — direct mail.

    The best replacement letter I ever wrote had an 11% sale rate to a fantastic, well-culled list. The same letter only pulled 2.4% to the broader list. This was a very specific offer and had an exceptionally high close rate.

    The magic combination is, of course, a great list and a great letter. Either one alone will do no better than standing on a street corner handing out business cards. The list should be fairly easy to get if you know what to ask of your list broker. The letter is something better left to a professional.

    Adams Hudson

    Hudson, Ink

    Montgomery, AL

    Invest a Dollar, Save a Penny

    Am I missing something, or is this the dumbest investment I’ve ever seen (“Landscaper to the Rescue,” Sept. 4, 2000) with $1.4 million invested to save maybe $4,000 per year. Something seems out of whack. Being sensitive to the environment is one thing, but the $1.4 million could have helped the environment a lot more somewhere else. Maybe the Europeans aren’t always right.

    Joe Ranck Ranck Inc. Lancaster,PA