The Sophisticated Freemium

How good judgment, not just CPO-worship, can help with brand management in direct marketing.

By Patrick Hainault
Monday, November 10, 2008

Upon finding out what I do for a living, it never takes very long for folks to ask, “How come otherwise thoughtful publications insist on sending gaudy solicitations, printed on bill-like paper and filled with garish come-ons?” I explain that whatever package is being sent was first tested and that marketplace response indicated it was the best we could send.

While it’s easy to hide behind the mathematics of direct marketing, I know very well that what they’re saying is, “Have you no concern for your brand?” And the truth is that they absolutely have a point. At the core, doesn’t every marketer dream of creating a campaign that sweeps its target audience through memorable cleverness, inducing compulsive purchases while burnishing the products’ most flattering attributes in the consumers’ minds?

But then the need to demonstrate return on investment comes crashing in—and we’re back to offering premiums, freemiums and one-time-only-offers because they’ve proven to produce lower cost per order (CPO).

The problem is that it’s not entirely clear that praying at the altar of direct response metrics gives all the answers. For instance, response rates never convey information about a campaign’s affect on non-responders, or on how the responders’ perception of the brand has been affected. Just because the information isn’t there doesn’t mean the effects do not exist.

As the role of circulators continues to expand to encompass audience management, perhaps it is time for a quick refresher in the basics of advertising theory. With advertising generating over 55 percent of our industry’s revenue, we better believe that these theories work!

The basic model, in place for over 100 years, is the “hierarchy of effect,” also known as AIDA. It deconstructs the optimal sales process as one that captures Attention, maintains Interest, creates Desire and finally gets Action. I’d say that all winning direct response efforts absolutely nail the AIDA model.

Unfortunately for dedicated direct response marketers, the AIDA model was later refined. The added steps mangled the convenient acronym and resulted in something like this: 1) being at the right place, 2) capturing attention, 3) affecting perception, 4) being remembered, 5) creating a favorable predisposition, 6) inducing action and 7) delivering post-purchase consumer satisfaction (and hence repeat purchases).

That’s where voucher packages, loud offer-driven pop-ups and agent-sold offers fall off the model. These marketing efforts do little else than hijack attention and demand action.

This might work in the immediate, but it fails miserably in terms of affecting perceptions, being remembered or creating a favorable predisposition. And we can only hope our titles’ edit is spot on, because starting deliveries in “4 to 8 weeks,” and then showering the poor souls with upsell, cross-sell and early renewal efforts cannot possibly enhance post-purchase satisfaction.

What’s needed, then, is a way to quantify the net effect promotional efforts have on a brand. Young and Rubicam already has its Brand Asset Valuator, a nifty way to map one’s competitive positioning and momentum, but that costly tool is out of most publications’ reach, and is far too static to help measure day-to-day marketing decisions.

And so we are back to the initial quandary: How to achieve low cost per order and deliver positive brand impact.
Barring an elegant and affordable data-driven method (all suggestions welcomed), what we’re left with is good judgment, which cannot be exercised in a vacuum. Good judgment requires a plan, or at least some thought-through, specific objectives on which decisions can be anchored.

For instance, if a publication believes it needs greater presence in the marketplace, it is silly to develop direct mail packages that rely on blind, or even discrete, outers. Or if another strives to be perceived as sophisticated, it cannot offer cheap alarm clocks as a premium. While this sounds obvious, many a marketer has let CPO metrics lead him or her astray.

Armed with specific brand objectives—ones endorsed by the editor and publisher—it then becomes easier to focus efforts on executions that can also help brand positioning. A strongly articulated branding strategy may even enable one to make CPO concessions on specific efforts, knowing the value of quantifiable tradeoffs, and exercising judgment in determining which may best advance the brand’s strategy.

Until we can come up with a surefire way to quantify brand impact, audience marketers, along with publishers and editors, will have to accept that the management of brand positioning relies more on good judgment than on hard data. All will then have to remain comfortable with calculated guesswork and ambiguity.

What we can’t afford, however, is to remain comfortable with the notion that CPO is the only metric that matters. When you manage hundreds of thousands, if not millions, of consumer touch points, this is not only naïve, it is irresponsible.

Patrick Hainault is consumer marketing director at Mansueto Ventures, publisher of Inc. and Fast Company.