Jul 8, 2004
Want your account statement to make money? Turn it into a profit center
By George Linkletter
"Take out your wallet, open it and remove two one-dollar bills."
This certainly sounds intriguing.
"Place those two dollars on the desk in front of you. Now, in your head,
multiply those two dollars by the total number of customers who regularly
receive your monthly bills or account statements."
OK, I can do that. Multiply the customer base by two.
"Have you got that figure in your head? Good. That's how much money
?
profit, really ? you are leaving on the table each year by not
capitalizing on the power of variable messaging and pricing in your
customer account statement."
"If you have one million customers, you are potentially leaving $2 million
on the table each year."
Even if I apply the standard 'credibility discount' of 50 percent
? you
know, if only half of what is said is true, will it still be viable? ?
that's a significant amount of money. And those dollars appear to be just
sitting there, waiting for someone to pick them up.
I'm talking with Jim Enright, who is President of Critical Decision
Systems, about how companies can tap into the profit potential of the
monthly bill or account statement.
Profit, of course, is a word that is rarely heard in internally-operated
customer messaging centers. Costs, yes. You hear about costs all the
time. And revenues, too, on occasion, or at least when the marketing
people are around. But profits? Never. You have to go to the outsourcers
to hear about profit. Or to Jim Enright and CDS.
An Innovative View
Enright is not constrained by the tradition of the customer messaging
industry. He comes from outside the HVCO industry. He is an economist by
training, a systems integrator by practice, and a pricing strategist by
experience. So it is easy ? and understandable ? for him to take a fresh
or unconventional view of customer messaging.
In fact, that is exactly what he has done. He and his colleagues at CDS
have developed a comprehensive in-statement marketing solution, or decision
management tool, which is now patent-pending and can accommodate a
virtually limitless number of customer-specific messaging combinations.
Enright believes the vast majority of customer messaging operations are
overlooking an immense opportunity to generate revenue via inserts and
on-statement marketing messages. Why? Because until now, those managers
have been preoccupied with issues of operational efficiency and mailpiece
integrity rather than revenue generation.
He is quick to acknowledge that mastery of efficiency and integrity are
essential to the success of any customer messaging operation. But the
leaders in the industry have already mastered them. Indeed, thanks to the
availability of reliable, high-speed inserting systems, and file-based
processing reporting and control technology, it is not uncommon to hear
news accounts of messaging centers that are able to produce flawless mail,
day after day, for months or even years at a time.
Robust Sequencing
And now, thanks to the advent of new yield management software from CDS, it
is possible to re-sequence billing and account statements in the print
stream according to the combination of inserts or marketing messages that
are assigned to the mailpiece. Plus, the CDS expertise also enables
managers to charge a variable or tiered price ? rather than the
traditional fixed-price ? for including those messages on or with the
statement.
Print stream engineering is hardly a new concept. Typically, re-sequencing
in the print stream is done to presort mailpieces to lower postage costs,
or to boost productivity by arranging all similar-sized mailpieces
together. For example, arranging all two-page mailpieces together yields
better efficiency than mixing one-page, two-page and three-page statements
at random.
But re-sequencing the account statements according to inserts that will be
enclosed, or better yet, managing the entire inserting operation to
accommodate the greatest number and variety of insert messages, is
certainly novel.
The CDS solution differs from existing approaches because it coordinates
the variable messaging potential of the entire statement package,
especially its three principal channels. These include the available white
space on the statement itself, the mix of the inserts enclosed within each
statement, and the exteriors of the reply and the outgoing envelope.
That's usually a minimum of six messaging opportunities per account
statement ? without increasing postage.
Of course, every inventor is passionate about his invention. But Enright
and CDS are also benefiting from some timely external influences, such as
the fact that print stream engineering technology is already deployed
widely in the HVCO industry, but not necessarily comprehensively. So,
while there is general awareness of the usefulness of print stream
engineering, most mailers have barely scratched the surface of its full
capabilities.
Second, a few other firms, notably the top tier outsourcers, are beginning
to examine decisioning as a stand-alone process. "It's always nice to be
first," says Christine Pham, the COO for CDS, "but it's even better to be
followed. Imitation proves the value of the concept."
Third, is the fact that telemarketing and spam have lost appeal for the
vast majority of consumers, and are causing marketers to reconsider the
value of the account statement as a way to acquire new customers.
Statements Command Attention
Indeed, a survey of senior marketing executives from the top 1,000
companies in the U.K., conducted recently on behalf of Group1 Software,
revealed that marketers themselves believed that the monthly account
statement or bill yielded the longest 'read' time when compared to
alternatives such as direct mail, direct e-mail, television commercials or
the Short Messaging Service of mobile phone text messaging.
Bills and statements topped the survey, with an average read time or
attention span of 42.5 second. Single-purpose customer letters, such as
those providing updates of essential account-related information, came in
second with an average read time of 34 seconds. TV advertising ranked
third at 19 seconds.
In-statement marketing also offers the two added benefits of exclusivity
and synergy. The exclusivity comes from less competition. Messages
delivered via the account statement are associated with only a handful of
other messages included in the envelope. Similar messages in publications
or newspapers, for example, compete with scores or hundreds of other
marketing messages. The impact of synergy comes from messages that are
selected to achieve mutual benefit. With each message reinforcing the
other, the entire collection of messages will benefit.
Pricing Power
The existing pricing structure for delivery of insert messages via the
statement channel is also ripe for adjustment. Currently, those fees are
as low as "a penny per insert, on average, for wide-scale mailings," says
Pham. "Alternative delivery channels, such as a stand-alone direct mailpiece, can cost more than 20 times that amount." And since most
statement envelopes contain a minimum of six distinct messaging
opportunities ? without triggering any additional postage costs ? there
is a huge and largely unexploited opportunity to generate revenue within
every account statement.
Indeed, the untapped variable pricing power of the account statement comes
from three related sources:
-
The ability to charge more for access to the most lucrative customer
segments;
-
The ability to charge more for creatively-assembled insert 'bundles'; and
-
The ability to charge for access (on a space available or yield
management basis) to customers of lesser quality that might otherwise be
ignored.
Whatever you call it ? optimum, tiered or variable
? pricing is Enright's 'sweet spot.' It's what he's been doing for years. And even though the
concept may be complex initially, CDS can show how variable pricing can
maximize revenue and even profit for statement-based marketing messages.
His experience spans dozens of pricing models and applications developed
for other industries. One recent project, completed for a Seattle-based
computer software firm, was designed to maximize the revenue and profit of
bundled software products. Earlier, CDS helped firms such as Sears, Pfizer
and Yellow Freight Co. develop and analyze solutions to measure the
effectiveness of business operations, marketing initiatives and pricing
strategies.
Lower Costs, Too
Plus, the CDS technology has already been proven effective in a
cost-reduction mode by a top-five credit card biller. The bank, which
processed more than 12 million account statements monthly, was stepping up
its in-statement marketing effort, but was plagued by an excessive number
of set-ups.
"Each mailpiece carried several inserts selected from among a large pool of
potential inserts, with each bundle of inserts assembled according to
multiple targeted assignments," Enright recalls. The CDS solution boosted
efficiency by reducing the number of set-ups, and the need for re-stocking,
so the inserting function across the entire shop floor could operate more
efficiently.
The bank reduced set-ups by 25 per day (from a base of more than 100),
achieved an annualized savings of more than $1.2 million, and incurred no
impact on postal discounts for presorting.
Lower costs or higher revenues? Or both? The CDS solution is uncannily
versatile. It can deliver either. Or both. Few other solutions can match
that claim.
For information, contact Christine Pham at
cpham@critisys.com.