Direct marketing is a powerful way to grow your business – it presents the best opportunity to segment, test, and personalize due to the depth of data available and ability to track the impact. It is not without drawbacks however.
The nature of most direct campaigns is that they need to be funded up front – and they can be expensive! In addition to the burden of finding and securing the budget for these campaigns, marketers end up taking on all the risk for the campaign’s performance.
This is one of the reasons for the growing interest in digital marketing, specifically pay-per-click (PPC) campaigns. Forbes shares some great reasons why PPC campaigns have become so appealing for marketers:
- It’s as simple as flicking a switch. You trust digital experts to put your content in front of the right people and the results can be almost immediate.
- You only pay when consumers actually see your content. Impressions are important, but in the end you want people to engage with your organization. The result is that you waste less money on audiences who aren’t interested in what your company is offering.
- You can target the right people, at the right time, in the right place. It allows you to target by time of day, location, and much more so you can get to people intelligently. Best of all, some partners will manage this for you so you just tell them what you want and they make it happen.
Everyone is trying to maximize the value of every marketing dollar they spend, so it’s understandable that many financial marketers (and their leadership) would gravitate toward marketing tactics where you only pay for the results you see. The PPC model has really shown marketers that they don’t have to take on all the risk for a marketing campaign.
Pay-per-Click: The Early Years
Pay-per-click advertising makes it easier to quantify results. Sophisticated tracking capabilities allow users to know exactly what kind of response their advertising gets. The model also makes it easy to control spend; users can preset a spending limit and suspend a campaign when response meets that limit.
However, one of the biggest challenges of pay-per-click digital marketing is the difficulty in qualifying prospects. Unqualified clickers — people who will never purchase your product or service and click on your ad for the sheer heck of it — can cost you money. What’s more, many consumers simply don’t embrace or respond to digital advertising, no matter how good it is. Pay-per-click advertising will never convert those prospects.
Direct Mail is Still Very Powerful
Despite the provable benefits of PPC and other forms of digital marketing, direct mail’s day is far from over. Direct mail allows you to reach more prospects with greater precision than you can in any other channel. What’s more, research shows that people who might be prone to delete an email unopened still feel compelled to open their physical mail.
Research by the United States Postal Service shows 75% of households either read or scan the advertising mail they receive. Additionally, 13% of people who receive first-class advertising and 12% who receive standard mail advertising say they will respond to the ad. Another 13% and 16%, respectively, say they might respond.
Direct mail can be highly influential for consumers looking to open a new bank account. Synergistics Research found one in seven checking account openers were influenced by a direct mail piece from their financial institution. What’s more, direct mail is one of the top types of contacts that motivate current customers to open additional accounts, Synergistics found.
Of course, direct mail — and direct calling — have drawbacks also. Such tactics live or die by the prospect list they’re based on. A bad list can lead to poor results. Generating a good prospect list and pairing those prospects with relevant offers can be a challenge. Further, it can be difficult to track results and demonstrate ROI from such direct marketing campaigns.
The biggest obstacle to convincing your C-suite to invest in direct mail might just be that — until now — bankers have always assumed all the risk of a direct mail campaign. Even if you hired a marketing firm to do your direct mail campaign and it failed, the most it cost them was your business in the future; they lost nothing in the short-term. You, however have lost money, prospects, and credibility in the eyes of your bank decision makers.
An Emerging Alternative
The question is, does your financial institution have the budget, wherewithal and reliable data to cost-effectively conduct successful direct marketing campaigns? Many don’t, but an emerging pay-for-performance model could solve several of the challenges associated with traditional direct marketing.
This pay-for-performance concept brings the measurability and consistent ROI of pay-per-click advertising models to traditional forms of direct marketing. Instead of paying per-piece or per-call for a direct marketing campaign that may yield few, if any, sales, pay-for-performance focuses on only paying for actual, quantifiable results.
Pay-for-Performance Direct Marketing: The Next Level
Pay-for-performance direct marketing combines the advantages of both direct marketing and pay-per-click models. It’s the next level in direct marketing, where the risk is transferred from the client to the marketing partner. In this scenario, the marketing partner conducting the campaign funds the campaign. The client then agrees to a “bounty” per application or per loan, with that determining how much the campaign costs. This allows you to lock in your cost structure and minimize your risk.
What’s more, you get to decide what those results will be by designating your goal for the campaign. For example, do you want your direct mail piece to increase new account openings? Perhaps you want to cross-sell equity credit loans or lines to current mortgage-holders who have already built up significant equity in their homes.
A marketing partner with experience in the banking industry will be better equipped to identify prospects, generate and distribute an effective direct-mail piece, and turn the campaign into actual sales. The model is also 100% trackable, making it easy for financial institution marketers to demonstrate ROI for every direct marketing campaign they undertake using the pay-for-performance model.
The Future of Direct Marketing
Pay-for-performance can work when you are able to trust the expertise of your supplier to effectively build a campaign that will work to your specifications. Just as when you engage in PPC, you need to be able to trust that your supplier will put your advertising message in front of the right people at the right time.
Several firms already offer this pay-for-performance direct marketing model to for specific program objectives. Given its potential to capitalize on the impact of direct marketing, while still producing quantifiable results, pay-for-performance is poised to become the direct marketing tactic of choice for financial institution marketers.