Case Study No. 4: Selling against low-priced competitors

Problem:  A manufacturer of a high-quality consumable product for restaurant owners was faced with the dilemma of selling against much lower priced competitors.

Strategic Solution:  Identify qualified prospects nationally among owners of 514 high-quality restaurant chains (with four or more restaurants) who would be receptive to a finer, more costly product.  Additionally, identify over 5,500 restaurateurs who own from one to three high-quality restaurants.  Mail a series of four highly personalized, full-color postcards to the first group and a less personal mailing to the second group.

Results: 

  • The results generated from the four mailing series = 411 respondents – a cumulative response rate of 11.9%, making the cost per response = $36.81.  The results from the less personal mailing to the second group = 5% response rate.
  • The number of first-time customers acquired after fulfillment mailing = 48 – a conversion rate of 10+%
  • The average initial order size = $600; average size of the second order placed during the first year = $400
  • The number of retained customers – those who ordered a second time during the first year = 38.
  • Even though the lifetime value for each new customer after payment for acquisition, assimilation, and retention marketing costs, plus fixed and variable expenses was minus $31, the expected lifetime value for each new customer after the second year = $251 based on an attrition of 21% of new customers after the first year, and after payment for retention marketing costs, plus fixed and variable costs.
  • The expected lifetime value for each customer after the fifth year = $1,104 based on retention of 29 of the 48 original customers, and after payment for retention marketing costs, plus fixed and variable costs.

For more information on how these results were accomplished, you are urged to continue reading:

Working with a modest marketing budget, Hogan Direct helped the client identify and retain new customers – beginning by creating a series of four attractive full-color postcards one week apart for greatest impact and recall continuity. The attention-getting, highly personalized series helped strengthen the client’s identity.

Each mailing piece demonstrated how the customized products with the individual restaurant’s name digitally printed on the product.  Personalization was also incorporated into the headline and throughout the body copy.

As a means for acquainting prospects with the quality of the client’s products, a free sample box was offered to respondents. The fulfillment package also included a personalized cover letter and an order form for respondents to use in placing their first orders.

Samples were sent out the same day as respondents’ calls were received.

The costs for creating and implementing the program were as follows

  • Obtaining outside mailing lists, merging and purging lists, editing the deduped file, processing  with digital laser printing, and performing lettershop services = $10,561.
  • Four mailings each to 4,892 highly targeted prospects. First Class presort postage = $4,310.
  • Total cost for four-part mailing series = $14,871.

The program was featured as the first Case Study in a book, published by Thomson Corporation, entitled The New Marketing Conversation: Creating and Strengthening Relationships between Buyers and Sellers by Donna Baier-Stein and Alexandra MacAaron.

Moreover, the program received an AMBIT Award in Kansas City Direct Marketing Association’s annual competition.

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