Taking the Direct Route

Direct mail may not be a new sales channel for the wireless industry. But given its low acquisition cost, strong response rate and fast results, it is being reborn as one of the hottest ways carriers can reach new customers.

Direct-mail campaigns, in fact, have been more successful for the wireless industry in recent years than for any other business segment served by direct-mail agency The Hacker Group.

"We sell dirt, CDs, bread, you name it. We have about 400 projects running at any given time, and I've never seen a channel built so quickly and successfully in my career," said Jo Anne Hacker, Hacker Group executive vice president. The Hacker Group is contracted with AT&T Wireless and other local carriers of which AT&T holds partial ownership.

AGGRESIVE RESULTS Like AT&T, many other wireless companies that employ direct mail work with outside agencies. The emphasis on the science of list generation, creating the best free offer to bait customers and a well-versed telemarketing operation -- combined with it being the right time in the adoption curve for wireless phones -- is the reason direct mail is thriving today. And the formula works the same way for a national company as it does for a regional provider.

"Direct marketing will almost always work if the value of the sale is over $75, and in the wireless business, given the monthly service charge, you almost always have that," Hacker said. "If market share is your game, this is the best way to get it."

Consider this case study: A marketing executive at a Midwest regional wireless carrier said his company currently mails about 10,000 pieces per week, more than double the frequency when it began to dabble in direct mail in '97. The company typically gets a 3% response ratio, he said, and the conversion rate is 25% to 33%.

Both of these figures are above the standard 1% to 2% response rate and 15% to 25% conversion rate for direct mail, and they translated into 9,800 new accounts for the carrier during a 7-month period in 1998. There is a cost, however. Churn is higher for direct mail than other sales channels. In this carrier's case, the normal churn rate is 2% to 3%; with direct mail, it is about 5%.

These aggressive results are not atypical for wireless carriers today. AT&T Wireless started on its direct-mail journey in May 1996 in the Southwest region, and it is one of the most aggressive proponents of direct mail today. It mails every day in all of the markets it serves and brings in subscribers at less than half the cost of other selected sales channels, according to Jace Barbin, AT&T Wireless national director of emerging channels.

KEEPING UP WITH THE JONESES Julie Anderson, Cellular One San Francisco director of marketing communications, said her company's move to step up direct mail during the past year was a simple matter of keeping pace with a rapidly maturing market.

"We went from two players in every market to five, all competing for the same customer," she said. "Radio and print advertising is saturated, so a lot of people are turning to direct mail."

So what prompts tired people with big stacks of mail to open any given direct-mail piece? Anderson noted the importance of pushing a strong brand name as early and obviously as possible. Cellular One often does mailings with its name and logo stamped boldly on the envelope.

"If it's a brand name they know, they will tend to open the envelope," Anderson said.

"The biggest eye opener for us was that the really nice, sexy, expensive packages usually perform on par with vanilla packages," Barbin said. He said that if you're mailing a piece that costs 40 cents to 50 cents a piece and then you create a $1 package, you've doubled your cost, and the conversion rate consistently fails to make up for that cost. Sometimes the sleeker package actually can backfire.

"We want it to look like a direct-mail offer but not like mailbox propaganda," Barbin said. "One of the best responses we've gotten is to a plain AT&T envelope with a white letter stating: Here are the benefits of the service."

UGLY IS AS UGLY DOES The Hacker Group is known for attracting people's attention through clutter and even ugliness. According to the company, you don't want to soothe people; you want to agitate them so they will respond now. However, these extreme tactics do not always translate literally to the wireless world.

"Hacker takes a more extreme approach than I do," Barbin said. "We don't want to send a junky piece. I'm in a position to maintain the sanctity of the AT&T brand, so I can't get as far out in that direction as they want to take me." Higher-end packages tend to come into play when a carrier teams with a manufacturer on a direct-mail package.

Where AT&T and other carriers have conceded is in the casual wording of direct offers.

"The first time I read a direct-mail piece, I was appalled at all the grammatical mistakes," Barbin said. "But they get results."

Implicit in the conversational tone is a clear offer of a free item -- a phone or a power plug -- used to lure potential customers to pick up their phones.

"You don't want a lot of extraneous words on there," Anderson said. "People only have a few seconds when they open the envelope, and they have to get it right away. The best wording is something like, 'Hey, we'll give you a digital phone for $19.99 and an inexpensive way to get into wireless. And, by the way, you're pre-approved.'"

Once the caller is baited, the all-important call-center operation comes into play.

"We have to perform the ultimate dance," Barbin said of the mail campaign and the call center. "If one is not extremely complementary to the other, the costs go out of whack in a hurry."

AT&T does have a team that chases the mail, the only outbound telemarketing the company does, he added.

Barbin attributes AT&T's success to its winning team of direct-mail partners, and their continual brainstorming to generate better, more cost-effective packages.

"Some might say it's almost giving away trade secrets by bringing all these different people in the room and sharing the process," he said. "But what we do is not rocket science. It is very recreateable. And when we have our partners understand what their piece of the big picture is, they come with big ideas."

Here are some tips to keep in mind if you're evaluating direct mail:

* Develop a strong, flexible method to test various offers and packages. This will lead to a single control package and several additional high-performance packages.

* If you are planning to handle direct mail in-house, keep the operations out of the advertising and marketing departments.

"Direct mail belongs in sales," said Jo Anne Hacker, The Hacker Group executive vice president. "It is very goal-driven, numbers-driven. The biggest mistake I see is doing advertising in an envelope."

* Learn about and practice the science of lead generation as well as list suppression. List suppression is continually running files of names that should not be included in the project for reasons such as bad credit or the consumer has requested to be taken off the list. Most companies mail to a given list three to four times a year and then rest it for a period of time.

* Don't rest on your laurels. As Hacker puts it, "Eventually, every direct-mail program will fail. And when it happens, it happens fast."

Have at least one proven backup program on hand to replace it.