Use testing to improve response.

• Author: Turner, Jim
• Position: Direct Mail Essentials

There are few guarantees in marketing, but it's a sure thing that testing in direct mail will produce better response--as well as bank profits. Testing isn't difficult, but it requires planning and discipline because, in the rush to "get the mailing out," it is usually the last priority.

Just as you would not spend thousands of dollars extra by using an inefficient printer, you should not send a mailing without ensuring you are presenting the best offer to the right audience in the most efficient format.

Testing can improve profitability in several important ways. It can:

1. Increase the response rate and get more customers to respond for each dollar spent.

2. Improve the quality of respondents and produce a higher balance, for example, for loans or deposits per respondent.

3. Lower the cost of your mailing and enable you to spend less for printing, list, postage or processing.

The key variables for testing that affect response are the list of prospects you mail to, the offer you make to them (such as the rate, term or balance requirement) and the way you present the mailing (postcard, letter, self-mailer, for example). And, for some products, such as loans and deposits, timing also is a factor.

Direct marketers generally agree that the list is the variable with the most impact, followed closely by the offer you make and finally, by how or when you present the material.

For example, sending a mailing for certificates of deposit to younger, lower-income households is not likely to produce good results. So, if the mailing costs $500 per thousand pieces mailed, you will save $0.50 for each unqualified prospect you eliminate.

Different kinds of tests

Track the results from your lists by coding the reply cards or account application or assign unique telephone response numbers for each list you use. For deposit promotions, the most revealing tests typically are based on list selections for income, age or net worth. For loans, income and home value selections are useful.

For home-equity credit mailings, you might test offers featuring a variable rate line of credit versus a fixed-rate loan. Or, test a teaser rate for a limited term against a single rate. Or, test apply-by-mail versus a telephone application.

You also can test offers for various interest rates, for example...