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How to Effectively Sell During Low Demand Periods

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June 01, 2001
Sales & Marketing
Mary Loftness - mary@profitablecustomers.com

© 2001 Hospitality Upgrade. No reproduction or transmission without written permission.

One of the major payback arenas for any CRM program is the ability to market effectively to your customers via direct mail or e-mail. The challenge is to get the data from existing property management or sales and catering systems and into a usable direct mail file. The following are simple steps for creating a direct mail offer that is enticing to guests, extracting the customer address data and getting the offer in the mail.

Offer Design
When brainstorming the offers for any direct mail piece ask the following:

  • When do you need the business?
  • How much can you afford to offer?
  • To what will people respond?
  • What are the financial implications of response?

In the direct mail industry, a 2 percent response indicates success. I’ve seen rates up to 25 percent for well-targeted, enticing offers that provide great value to guests. When anticipating the response to the offer, start by estimating a 2 percent response rate. As you strengthen the loyalty of your customer base, this response rate should increase. If you have an occupancy dip to fill, divide the responses needed by 2 percent to determine the mailing quantity. For example, if the week after Labor Day is notoriously quiet, you might need to sell 300 room packages to fill according to plan. Divide 300/2 percent = 15,000 direct mail pieces. If you are managing printing and postage costs effectively, this mailing will cost, for a personalized letter or postcard, approximately $6,000. The estimated return (300 packages, two nights, $75 per night) will be $45,000— $6,000 marketing cost for $45,000 revenue return. If there is hesitation about the ability to break even, understand that the break-even point is 60 packages for two nights, assuming a $25 cost per occupied room for variable expenses.

Don’t be cheap. Remember that this piece will be mailed to your best customers. Please don’t insult them by offering them something they can easily get over the phone directly or through a published newspaper ad. This is a private offering to selected customers, make it enticing (and profitable).

List Creation
Criteria before list extraction, or list extraction and then criteria? The available fields for selection and the size of the database from which you are extracting determine the answer to this ‘chicken or the egg’ question. In a 400-room hotel, one might create about 60,000 guest records per year. Based on studies of hotel databases, you will be lucky if 30,000 of these are mailable. Especially in high group hotels, many guest reservations are provided on a rooming list, or are travel agent or company addresses. Extract more than you need from the PMS or sales system. In addition to the guest address information, pull fields like market segment, room rate, source of business, number of stays, travel agent information, group code, date of reservation, date of arrival and folio balance. These fields will help to profile the customer better and determine the best possible list.

Extract your customer database to a comma-delimited or fixed-length file. If you have extracted less than 65,000 records you may retrieve your file in a spreadsheet program like Excel. If it is more than 65,000 you will need to import into Access or other database program.
Selecting the best targets from the customer database is best completed through a scoring process. Add a few columns to your database to allow for scoring the recency of visit {R}, the frequency of visit {F}, the monetary value of the customer {M}, as well as other factors including: distance traveled (is this offer best targeted to your drive-market customers?), room rate paid, market segment and a variance between arrival date and booking date. Don’t mail an offer for three months from now, if the guest is always a walk-in.
Sort and score customers according to each criteria. In classical database marketing the customer base is divided into quintiles. One derives the quintiles by scoring the field content into five equal parts. For example, one would score the most recent 20 percent of customers a five and the least recent 20 percent a one and proceeding through the frequency factor (number of visits) and a monetary value factor (room rate or folio balance). In hospitality we often find that property-defined segments work as well or better. You could score all guests who have visited within 90 days as a five, within 120 days a four, and move down the list.
If you average the criteria fields, you will probably have a fairly safe list. This allows you to keep the file in Excel, rather than having multiple selects (visited in the last 90 days, more than five stays and spends $300 per stay). In the short example in Figure 1, simple averaging of the RFM factor will determine those mailed, requiring an average of 3.5 or better to make the list.
List creation is an iterative process, the more lists you pull, the more fields you score and analyze, the more you will learn about past customers and their visitation patterns.

Direct Mail Piece and Processing
Unless you mail really often a personalized piece from the general manager can be your most effective direct mail effort. Having the big guy or gal invite a past customer back with great offers and a thanks for visitation can yield a great response.

The letter should never be more than one page and should reflect the culture and atmosphere at the property, if your property is informal, be informal … if your property is stodgy, well … be stodgy!
Inserting a personalized letter into an enclosed envelope usually requires a hand-match process at the mail house. This processing can be more expensive and time-consuming. A window envelope may work effectively depending on the company image, and it will save time and money.
Postcards can also be very effective. Print one side with a beautiful four-color, high gloss photo of your property and leave the back blank, so the left side can be lasered with a personalized message and the right hand side with the address. Postcards can be slightly oversized and still receive a discount.
Should you process the mailing in-house or externally? Typically, a mail house should handle any mailing over 500 pieces externally. Most properties do not have the facilities or software to generate a bulk (standard, third-class) mailing. Mailing bulk saves about 50 percent of mailing costs. A first class letter costs $.34; most bulk mail can be delivered for less than $.17.

The services that the mail house will provide include standardizing all addresses for mailing and presorting the mail for the post office. You can elect not to mail any addresses that don’t meet address standards.

Measure to learn. There are several techniques for effectively tracking responses.
Group master: Encourage the reservations team to track the offer responses via a group master. This allows standard information about the booking to transfer to all responders.
Special 800-number: It is inexpensive to buy several different 800-numbers, which point to appropriate DNIS numbers in the hotel switch. This will allow special routing if the reservations office has an ACD and will provide overall call statistics from the offer.

Ask for the operator, or ask for ___: If you are unable to utilize a special 800-number, asking for a specific person is very effective to insure that the response is coded properly. If it’s a President’s Day offer, you can always say “Ask for George or Abe.”

Bring this letter/coupon: If you provide redemption coupons in the offer, tracking can be completed from the redeemed coupons. Coupons or offers, which are to be turned in can easily be bar coded with customer information for more detailed tracking.

Track the offer’s booking pace: Measure reservations received at varying intervals from the promotion start time. This will assist in comparisons to future offers.

To recap, direct mailing to a well-targeted mailing list with a high-value offer can be very cost effective. Work hard to cost justify the right offer, determine the most targeted customer list, save money through detailed management of your mail house and measure the results to continue to improve mailing efforts.

Mary Loftness is a CRM consultant for the hotel and gaming industries. She can be reached at mary@profitablecustomers.com.

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