Self-Defense Tips for Your Budget
By Steve Cuno, CEO, RESPONSE Agency

Don’t look now, but budget cutters are greedily eyeing your department. And, in lean times, there is nothing quite like a marketing budget to set off their inner Pavlovian bell.

Good luck reasoning with them. You can try explaining that marketing creates sales, and that cutting back in a slow economy is like reducing insulin when a patient’s diabetes worsens. It’s a fair analogy but, in a recession, an analogy is no match for a red pen.
 
It’s tempting to dismiss undeterred budget cutters as myopic. But maybe there’s a deeper reason behind their seeming ruthlessness. Maybe they don’t believe that marketing pays.

Their skepticism may not be completely unwarranted. A good deal of today’s marketing reporting is based on indirect indicators, like recall, awareness, points, share, surveys, Web hits, tweets, awards, etc. Yet marketing campaigns scoring high in these areas routinely fail. Take awareness as an example. Can you name the fast food chain that featured a spokes-Chihuahua? (Extra credit if you recite the Spanish tagline.) Sales plummeted during the campaign, which was retired three years ago, yet people still have no trouble recalling it.

Admit it. If you controlled the purse strings, you wouldn’t settle for indirect evidence, either.

If you can prove that sales went up during your campaign, good for you. But since sales can rise and fall for reasons other than marketing, sales alone are also an indirect indicator. Consider firearms marketers in the United States, whose sales surged in early 2009. It would be difficult to know how much credit goes to marketing efforts, and how much goes to rumors of impending gun control legislation.

Clearly, fending off budget cutters requires a better argument than “Everyone knows marketing sells,” and also better than “Sales are up.” You’re going to need incontrovertible evidence that your marketing produces a positive Return On Investment. And you’re going to have to prove that the positive ROI would not have occurred on its own.

Thank goodness for direct response marketing. Effective direct response marketing comes with its own bulletproof, empirical evidence. Thus, a properly managed direct response program can stand you on solid ground before the fiercest budget cutter. Here are some tips for building such a program, and for ensuring that the ground under you remains firm:

1. Stay up on what works. Know what other direct marketers are testing and learning. Develop a peer network for sharing information. Read direct response books and periodicals. Then, when a budget cutter asks why you use envelopes even though self-mailers are cheaper, you’ll have an empirical leg to stand on.

2. Test before you bet the farm. Before risking all on a direct mail package, test variations on representative samples of your mailing list. Roll out the version that sells the most at the lowest cost.

3. Test after betting the farm, too. Once you have a winning direct mail package, keep testing variations in small quantities. You may stumble upon a new approach that works even better.

4. Track results responsibly. Do not stand for generalities like, “Response was over the top.” Know how much you sold, how much you spent selling it, and how much revenue it produced. Bean counters, who rarely encounter such precision from marketers, will be impressed.

5. Know the lifetime value of respondents. Most customers are worth more than one sale. Calculate ROI on the revenue a customer represents over time.

6. Use control groups. Sooner or later, someone will suggest that sales would have gone up on their own, without spending on marketing. Control groups — people who do not receive your mail — provide a rock-solid defense. When a control group buys at a lesser rate than those receiving your mail, it’s clear that direct mail made the difference.

7. Admit flops. When you do, management is more likely to believe reports of success.

8. Adapt fast. Don’t waste money giving failures another try. Change something — the list, the offer, the creative work — and try again.

9. Keep management sold. Find non-whiney ways to inform management about the scientific nature of direct response, and of your results. Invite a bean counter or two to lunch on occasion and do the same. Who knows? Next time there’s a crunch, maybe they’ll leave your budget alone and go after sensitivity training and ropes courses instead.

10. Know when to call a pro. Heroes know when to call for reinforcements. If you need outside help, seek it.

Direct response marketing came about as a way of creating sales. In a tough economy, it has become more than that. It has become a way of proving that your department and your budget are worthwhile investments. Make sure that they are. Then, by all means, make sure that management knows it.

---Source: Deliver® Magazine May 29, 2009 issue (www.delivermagazine.com). Deliver is a U.S. Postal Service® publication. Steve Cuno heads the RESPONSE Agency in Salt Lake City. He can be reached at Steve@ResponseAgency.com.