Once you get the data, what can you do with it? Once you append data to your customer base you (or your list vendor) can use a multitude of research tools designed to understand your customers' characteristics.
Profiling is a research technique used to determine the characteristics of your customer base at one point or a "snapshot" in time. You can then use the profile analysis to determine what your "best" customer looks like. Once you have an idea you can work with your list vendor to "find more customers with the same characteristics." The goal is to understand what your best customers look like and find new, but similar customers with the goal being that they will also have an interest in your offer.
Modeling is a very sophisticated research technique used to understand your customer's characteristics. Although many types of models can be created to understand your customer base, the common goal is to understand what characteristics drive your customer's behavior. Although you may have fifteen bits of information on each customer, it is common for a few data elements to "drive" the customer's behavior. For example, when purchasing a minivan, although a couple is in their mid-30's, living in the suburbs and are highly educated; the fact that they have children may well dictate their desire for a minivan (versus another type of vehicle.
Once a model is used to determine what drives people to perform a particular action, the results are shown via an algebraic formula. This formula can also be used to select new prospects for a product or service based on how similar they are to what the model defines as the "best customer" characteristics. Using this algebraic formula, you can then select new prospects from a database (provided you have the appropriate data to make this decision.
Once a model has been completed, it can be used to select highly qualified candidates for telemarketing and/or direct mail promotions. A model is typically good for about one year. This is dependent on the industry for which the model is created; the more dynamic the industry, the more often the model will either need to be refreshed or recreated.
Over time, the ticket to successful direct marketing will be to measure the performance or response of mail campaigns. The highest performing modeled selections, in combination with creative and offer, will be referred to as the "control". Any piece tested against the control is referred to as the "test". Thinking of this as an incumbent/challenger relationship is often helpful in understanding the relationship. The goal should be to continually have the challenger outperform the incumbent. Although this will often not be the case, with continual testing we will be striving for the best possible response rates.
Three main factors of a direct mail piece contribute to the response rate. They are the offer, list and creative.
The offer refers to the product or service being offered. Even with the best creative and the best candidates, if the offer is not relevant, response will be low. For example, offering Internet service to individuals who do not own a computer will likely be unsuccessful.
The list refers to those selected to receive the offer. The model often drives this, for sophisticated marketers. Often times, the list is selected in other less statistical ways, such as a predisposed belief as to the typical customer. In this case, new opportunities to reach new markets are often missed. The model will assist greatly in selecting highly qualified individuals to receive an offer.
The creative refers to the appearance of the offer piece. Is it colorful and humorous or serious in nature? The creative has to reflect the product or service being offered. For example, while a vehicle offer can often be engaging and even humorous, one might want to take a more serious, hard-hitting approach when offering insurance.
To conclude, the list, offer and creative are crucial in driving high response rates. Poor choices in any of these three categories will have a negative effect on response in most cases.