Prospecting vs. Retention Campaigns in Direct Mail

Key Takeaways

• Prospecting campaigns try to reach potential new customers, whereas retention campaigns are used to deepen existing customer relationships and encourage repeat purchases, reactivation, or renewals.
• Prospecting and retention direct mail campaigns will usually use different sources of data and could require different messaging and offers.
• Prospecting and retention campaigns shouldn’t necessarily be conducted in the same way, due to them having different target audiences and objectives.
• Businesses don’t have to choose between prospecting or retention campaigns, as both can play different roles in a company’s direct mail strategy.

Introduction

When you’re planning a direct mail campaign, who are you trying to reach with your mail piece? Are you attempting to find customers who aren’t familiar with your business, or are you trying to generate additional business from people who you’ve had a business relationship with in the past? Based on your response, you fall into one of two categories: running a prospecting campaign, or a retention campaign. But, what are these campaign types? What are the difference when looking at prospecting vs retention campaigns?

A prospecting direct mail campaign is a campaign with the goal of attempting to find new customers, leads, or inquiries about your business. A retention direct mail campaign involves targeting existing or previous customers with a campaign goal of maintaining, strengthening, and/or reactivating the customer relationship. Knowing the difference of these two types of campaigns and their objectives can help you to know how to best utilize both types for your business.

What Is a Prospecting Direct Mail Campaign?

A prospecting direct mail campaign has a target of acquiring new customers. These campaigns can be done using rented mailing lists that best describe the target audience that the company has identified as the best fit for their product or service. These could be based on:

• Geography
• Demographics
• Homeownership
• Consumer or business
• Business industry
• Lifestyle or interests

A prospecting campaign’s offer could be designed to give a potential customer a reason to try or learn more about your business, such as a new customer discount, free consultation, information about an upcoming sale, or other relevant offer.

What Is a Retention Direct Mail Campaign?

A retention direct mail campaign has a target of strengthening, reactivating, or encouraging repeat purchases from individuals that your company already has a relationship with. These could be previous customers, current customers, subscribers, members, or inactive buyers from your company. Some of the examples of a retention direct mail campaign include:

• Repeat purchase offers
• Renewal reminders
• Loyalty offers
• Reactivation campaigns for any inactive customers

Retention campaigns don’t have to always be discounted offers. With the purpose of a retention campaign being to maintain or further develop a customer relationship, these mail pieces could include reminders of upcoming specials, for example.

Prospecting vs. Retention: What’s the Difference?

Prospecting vs Retention: How Are the Mailing Lists Different?

When you’re looking at using prospecting vs retention mailing lists, read which description applies to your campaign. If you’re conducting a prospecting direct mail campaign, your mailing list will usually be built around a group of individuals or businesses that fit the identified characteristics that your target audience all have in common. This could be done using a response mailing list, segments, or selects to narrow down a target audience to those who best fit those characteristics that you’ve identified.

On the other hand, a retention campaign is primarily going to target the individuals that are on your house file. A house file contains the records that are collected and maintained by the organization through its own relationships and interactions, which could include current and previous customers, inquirers, leads, subscribers, or other contacts. For a retention direct mail campaign, you’d generally use the appropriate customer segments that are within that house file.

Do I Need a Different Offer or Creative When Looking at Prospecting vs. Retention Campaigns?

When looking at prospecting vs. retention campaigns, you might be wondering if you need a different offer and creative for one type versus the other. While you don’t have to have a different offer, your campaign could benefit from using a different message depending on the type of campaign you’re running. If you’re running a prospecting campaign, a new prospect might need a reason to try your business for the first time, whereas an existing customer of your business wouldn’t necessarily need the same message during a retention campaign.

The same path of logic can be applied to your creative. A mail piece that is sent to a new prospect may need to do a bit more to explain who you are, what you’re offering, why it’s relevant to them, and why the recipient should respond. However, a preexisting customer might already know that information and could use a different creative for their mail piece. While the offer and creative don’t necessarily need to differ depending on the campaign you’re running, the audience’s existing relationship should be taken into consideration when coming up with your mail piece.

When Looking at Prospecting vs. Retention Mailing Lists, Does One Have a Higher Response Rate?

While there is no industry-wide response rate for a direct mail campaign, prospecting and retention campaigns can hold different response rate averages. Direct mail benchmark studies have historically reported that house files have a higher average response rate than prospect lists. However, just because one campaign might have a high response rate, that doesn’t mean that that campaign was a success. Just because a campaign has a high response rate, that doesn’t mean that the campaign was a success. You should look at other metrics as well, such as return-on-investment, cost per lead, conversion rate, customer lifetime value, and others.

Prospecting vs Retention Direct Mail Campaigns: How Are They Measured?

One of the big differences between prospecting vs retention direct mail campaigns is how they are measured.

During a prospecting direct mail campaign, you might care heavily about the campaign’s:

• Cost per lead
• Cost per acquisition
• Conversion rate
• Number of new customers acquired

And if you’re running a retention direct mail campaign, you might care about your campaign’s:

• Repeat purchase rate
• Number of customers reactivated
• Customer lifetime value
• Revenue generated
• Retention and renewal behavior

Overall, you should be evaluating each campaign based on what it was designed to accomplish, rather than expecting the same metric to determine if a campaign was a success or failure for both types of direct mail campaigns.

Prospecting vs. Retention Direct Mail Campaigns: Which Should I Focus On?

When looking at prospecting vs. retention direct mail campaigns, you might ask yourself which one you should be focusing on. Depending on your business, industry, and other factors, you might want to focus on prospecting more than retention, or vice versa. If a business is focused on growing its customer base, then putting more of an emphasis on prospecting campaigns might be smart. If a company has a large customer base but few repeat customers, then you might choose to focus on retention direct mail campaigns. There isn’t a universal right or wrong answer, it depends on your company. Many businesses might benefit from using both strategies for different purposes.

Is Data Hygiene Important for Prospecting and Retention Direct Mail Campaigns?

No matter whether you’re running a prospecting vs retention direct mail campaign, data hygiene is very important, especially for companies that are attempting to upkeep a house file for a retention campaign. People move, pass away, change contact information, and become inactive over time, so ensuring that regular data hygiene is performed on the mailing lists is extremely important to having the most accurate mailing list as you can.

Can Prospecting Help Future Retention Campaigns?

Yes, it can. A prospect that your company is targeting in their campaign today could purchase from you and become a candidate for a retention campaign in your next mailing campaign. This is why it’s important to analyze every metric when it comes to evaluating a direct mail campaign. For example, Mailing List A could generate a higher initial response rate when compared to Mailing List B, but the customers that were acquired through Mailing List B could make more repeat purchases and generate more long-term value than Mailing List A. Looking beyond what the initial response was can help you to better understand the quality of the customers that you acquired through each prospecting direct mail campaign.

FAQ

• Q: What is a prospecting direct mail campaign?
  • A: A prospecting direct mail campaign is a campaign whose primary goal is to reach new potential customers with the goal of gathering leads, business, and inquiries.
• Q: What is a retention direct mail campaign?
  • A: A retention direct mail campaign is a campaign that has a goal of maintaining or deepening the relationship between the company and a customer who has a relationship with the business through encouraging repeat purchases, renewals, or inactive customer reactivation.
• Q: Is a house file used primarily for prospective or retention direct mail campaigns?
  • A: A house file is most commonly used for retention direct mail campaigns, as your house file is mostly composed of individuals who have an existing relationship with your company. However, house files can contain different types of records, so what the appropriate use is dependent on the contents of the file.
• Q: Do retention or prospecting direct mail campaigns have a higher response rate?
  • A: House files have historically produced a higher average response rate than prospect mailing lists in direct mail benchmark studies. However, that doesn’t mean that every retention campaign will always outperform every prospecting direct mail campaign. The two types of campaigns could have different objectives as well.
• Q: Should I spend more on retention or prospecting direct mail campaigns?
  • A: There’s not a correct universal answer to that question. The appropriate balance depends on your customer base, growth objectives, repeat-purchase opportunities, budget, etc.
• Q: Can I run prospecting and retention campaigns simultaneously?
  • A: Yes, both campaigns serve different purposes, so businesses can use both types of direct mail campaigns as part of a broader strategy for them.

Conclusion

When it comes to direct mail campaigns, there are several differences between prospecting vs retention direct mail campaigns, as well as serving a different purpose. Prospecting helps to discover potential new customers, whereas retention campaigns have a primary goal of helping businesses maintain, deepen, or reactivate relationships with active or inactive customers. Understanding the audience that you’re trying to reach can help you to determine which mailing data, offer, messaging, and campaign measurements make the most sense to use.

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