The Direct Marketer's Core Strategy: The Marketing Allowable

ALLOWABLESCUSTOMER ACQUISITIONMARKETINGALLOWABLESDIRECTMARKETINGSTRATEGY
Written By Ted Grigg
DMCG Results

Use marketing allowables to develop your marketing budget rather than a percentage of sales.

This focuses your budget on your most profitable customers and less on what's left over. Drive your plans using a single evaluation process to create successful marketing programs.

For example, if your customer marketing acquisition is $200 for each new customer. And your business plan calls for 10,000 new customers to make plan. Your total budget for acquisition becomes a matter of simple arithmetic.

$200 per customer X 10,000 new customers = $2,000,000

Your promotion, staffing, fulfillment, product deliveries, returns, phone support and and other related marketing costs for customer acquisition fall within this $2,000,000 budget.

You will also want to develop a customer retention allowable to add to your budget.

Keep it as simple as possible by quantifying your financial goals. Then determine the customer mix you need to achieve those goals.

This simple concept makes a lot of sense to CMOs, CFOs and CEOs. The devil lies in the development and agreement on the allowable details.

The customer lifetime value drives the creation of a reliable allowable. Most companies save the needed information to calculate customer lifetime value.

1. Average sale for all customers

2. Average profit margin per average sale

3. Average number of annual sales

4. Number of years and months the average customer remains active

5. The above information yields the average lifetime value of a new customer

Once you have the lifetime value, then the CFO or someone on his team calculates the allowables. His team will include present cost versus future value to come with the final allowables.

So far, my discussion revolves around the vital role of the allowable in preparing the marketing budget. The allowable plays a critical role in evaluating channel mix, offers, and creative executions. It can ven help divide the budget by marketing strategy such as social media support for traditional campaigns.

Through testing, how does TV or direct mail alone perform without the support of outbound telemarketing? How is social media contributing to acquisition or retention? Are we spending beyond our allowables? What mix performs best based on the allowables.

We must work to find ways to quantify all marketing spends. The first step is to create a reliable evaluation KPI. I know the allowable remains the Key Performance Indicator for all marketing activity.

Ted Grigg
What Ted does best is increase response by beating controls, applying multiple channels to target markets, profiling customer databases and generally improving sales results using deep direct marketing principles. Regard Ted as your personal “think-tank” for your direct marketing planning and strategy development. After analyzing several hundred million dollars of direct response testing in all channels, he brings with him the knowledge accumulated from seeing what tends to work and what does not. Having worked on both the agency and client side of direct marketing, Ted understands the unique challenges faced by agencies and their clients. Agencies need to sell themselves and deliver sales results. And clients not only require results, but need ideas they can implement while focusing on tracking response using a relational database. If Ted brings nothing else to the table, by profiling customer databases and creating response propensity models, he quickly becomes the clients’ expert on their own customers. His formal training includes a BA from Abilene Christian University and two years of graduate work at Texas Tech University. For a national direct-to-consumer insurance company, Ted developed a revolutionary direct mail format that beat most standing direct mail controls for this company. He also generated more profitable business for this firm by expanding compiled list circulation of less than 10% to more than 30% of total direct mail circulation within a year. (Insurance business generated by direct mail demonstrated higher persistency than customers coming from other media such as print and DRTV.) Ted’s plan and implementation of Medicare lead generation campaigns for over 60 regional and national HMO/PPO organizations combined multiple channels that surpassed some sales projections by as much as 60%. Additional industry experience over the last 30 years includes B2B or B2C for finance, securities, home security, healthcare, insurance, manufacturing, government, technology, nonprofit, retail, transportation, communications, and multiple categories in the services industry. As the founder of Wyse Direct (a division for Wyse Advertising in Cleveland, OH), he successfully launched and branded a new technology product for Seiko-Mead by supporting a nationwide sales team with a predictable flow of qualified sales leads. While a VP of new business development for the Grizzard Agency, Ted acted as the direct marketing strategist who refocused the agency’s culture to attract new commercial and fundraising accounts. At the time, Grizzard was essentially a direct mail fund raising production operation. His leadership and team building effectiveness prepared Grizzard for the eventual Omnicom acquisition and Grizzard’s successful integration into Omnicom’s large group of advertising agencies. An independent DM consultant, Ted continues to write numerous articles and conduct webinars on direct marketing techniques. He also wrote The HMO/PPO Marketing Plan — A Step-by-Step Guide publishing it through Executive Enterprises in New York City. During his youth, Ted was raised in Lille, France with his missionary family attending French schools becoming fluent in reading and writing French. Away from the job, Ted is a computer geek, blogger and science fiction buff!
http://www.dmcgresults.com
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