Direct marketers take pride in accountability. But as I’ve said before, they can be their own worst enemies when it comes to measurement. They’re good at measuring things that are easy to count—clicks, page views, response rates, cost per lead, etc.
But they struggle with measuring the long-term or cumulative effects that the branding in their promotions has on current and future sales—people who buy, but not as a result of a specific promotion, the so-called halo effect.
Consider big direct marketing brands like 1-800-Flowers.com or Omaha Steaks. These brand names have been built through direct marketing promotions over time and, as a result, people self-direct to their Web and phone sales channels.
But most direct marketers don’t know how to account for this halo effect, and when they work with response rates only, at best, they shortchange their results; and at worst, they get fooled by failing to account for those who buy without responding.
Case in point: A few years ago, I analyzed a data set from a multivariate direct mail matrix test that had 12 cells: four list segments, four offers and four creative executions.
Working off of response rates alone, we identified the winning list segment, offer and creative. But digging deeper by matching the solicitation file to the sales file, we discovered that from a revenue-per-prospect standpoint, these response rate winners were not the best revenue producers. Further analysis showed that from an ROI standpoint, they were actually the worst. In fact, the offer with the highest response rate (a free trial) produced a negative ROI when compared with a control cell: People in the control group who did not receive this offer actually spent more than the ones who responded to the offer for a free trial.
Here are three ways you can account for the halo effect:
1. Compare customer sales data to your promotion history. This is a good starting point. See who was exposed to your promotions and purchased without responding
2. Index brand awareness to sales over time. Take a look at this post for a methodology to measure this metric.
3. Create an engagement score that counts brand exposures and index it to sales over time. More on a methodology to measure this metric next time.