Why your dog should bite the postman, and the problem of getting new customers.

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In case you missed it, USPS has published its proposed rate increases starting January 21st 2024. It’s doubtful many people are bothered by this personally, no one uses snail mail anymore, only junk mail, utility bills and weekly ads arrive in our mailboxes. 

But if you’re still sending thousands of letters or ad fliers you most certainly are bothered by it. The drive to go ‘paperless’ is reaching fever pitch with everyone from credit cards and loyalty programs screaming at us to ‘save the planet’, a.k.a. save me the price of the stamp and keep my business costs down. Like the hotels telling us to ‘save the planet’, a.k.a. save me the price of washing towels and keep my business costs down. 

But industries and businesses still printing and distributing advertising fliers are not in the position of hotels or credit card companies. There is of course the digital opportunity, replacing paper communications with emails, CRM and data management. But even that has the same problem as paper – what do you put into the ad to make it as compelling as possible? We’ll address the digital opportunity in the next blog post.

Grocers, restaurants, mom-and-pops and various national franchises from roofing and double glazing to home security, window blinds and laminate flooring all want you to pick up the ad from your mailbox, read it and feel compelled to use their services.

From January, those businesses will pay even more because the USPS is unsustainable and keeps raising the price of a stamp. Simple economics for USPS, however, multiply that by a million fliers intended to fuel your business growth, but now mailed at a higher cost. Is it a price companies will continue to pay if they can’t maximize the investment in their ad? 

What’s the solution?

Broadly there are three simple ways to assuage the inevitable stamp price increases. Firstly, and most simply, stop sending ads direct to homes. This not only saves the cost of the stamp but also the paper and printing. Winning solution? If stopping the weekly ad was a panacea, everyone would have done it by now. The reason they haven’t is because they know they will lose sales. What’s worse is because ads delivered to homes are neither personalized nor trackable and the associated sales are not attributable to identifiable customers, when those sales dollars are lost the advertiser has no idea where they went or how to win them back.

The second possible solution is to send out fewer ads; be choiceful about zip codes, go after high density populations, target areas with the best fit demographics to your preferred customer, use proximity to your location as a key decision point, etc. the list goes on. Another winning solution? Maybe, but mailers to homes are a form of mass media. Like TV, radio or outdoor, they are less targeted and broad (relative to personalized / digital), sent with the hope that some of the target market will see the ad and react (positively) to the promotion. So, reducing ad circulation is akin to lowering reach, and leads to lower sales. At which point refer back to the challenge and outcome in solution one.

The third solution is obvious but difficult: make the ad better and measure its impact by broadening the appeal of the ad (engagement) and making it more profitable (promotional efficiency). If you’re going to the trouble of advertising, make the ad as good as it can be. You would never produce second rate TV content, allow it to be aired only at 2am on the Cooking Channel and not measure its performance. The diligence exists to benchmark the quality of your TV ad for emotional engagement, ‘call to action’, and you buy a broad target audience and the copy airs at times of high viewership with the objective of high customer engagement.

To do this with a paper or digital ad is difficult, particularly if the ad features multiple promotions. You need to know what appeals to the broadest set of both existing and potential customers and to understand the interplay between promotional prices of different items.

Easy to describe, so where’s the difficulty? 

The strenuous and rigorous management of the item and promotional data is incredibly complicated. Imagine a business offering fifty different families of items, and within those families, ten different varieties, leading five hundred unique SKUs. Even for a mom-and-pop double glazing firm, it’s not difficult to imagine this level of complexity. When you consider windows, doors, sills, frames, sizes, colors, and hardware this is likely a massive underestimate, it’s probably more like five thousand unique SKUs.

The most sensible way to approach this issue is to go down the ‘best sellers’ route and most businesses adhere to this rule: promote the bestselling items, because, by definition, they have the broadest appeal. But this is not necessarily true. 

Without the broadest view of the whole customer rather than single transactions, the best seller solution is biased towards heavy and frequent customers – the items they buy appear most frequently, hence the items become ‘best sellers’. While every business has an opportunity to grow via their existing customers buying more, for sustained growth they need new customers. To get new customers you need broad reach advertising. Broad reach means thousands if not millions of inboxes and mailboxes. This means millions of stamps at ever increasing costs beyond the control of the business. And CFOs think TV is expensive and wasteful.

So, printed and digital ads do work, they drive growth. But which items appeal to new customers? Which item and promotion combinations achieve the most profitable basket? Fundamentally, which items should be featured most prominently, what is the optimal promotional price and how do you measure customer behavior to provide a holistic and enduring ROAS? Put another way, how do you confidently justify the increasing price of a stamp?

If you want to know how to broaden the appeal of your printed or digital ads, how our machine learning platforms build models to maximize reach and drive efficiency of promotions, give us a call. Not only does DecaSIM AI answer these questions, we build models for individual stores, versions of ads, zip codes, geographies and demographics. We can share the empirical evidence which shows sales uplifts of up to 6% and EBITDA increases of 0.5% pts to 1% pts. 

At DecaSIM we haven’t got all the answers, but we know what to do with the price of a stamp. 

Put growth at the center of your promotional investment – DecaSIM.

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