Reversing Churn Rate Through Direct Mail Marketing

Background

Quecan Distribution is a wholesale, import, and export business which has been in operation for over 15 years. The crux of its clientele are convenience stores in Montreal and the surrounding region to which it supplies tobacco products, beverages, food items, and general merchandise.

Overview

Quecan noticed a client churn over several years, the reasons for which were not apparent. Upon inspection, prices were competitive, product selection was diverse, customer service was above average, and hours of operation were excellent. None of these factors accounted for an increase in attrition.

I analyzed client behaviour in the convenience industry along with Quecan’s customer database and discovered some crucial insights.

  1. The convenience stores to which Quecan supplied goods were majority Chinese-owned. With few exceptions, the owners would operate the stores for several years, sell it to a friend or family member, take an extended vacation in the Mainland, come back, and buy a store.
  2. During this transfer, former owners would bring new owners to Quecan and introduce them to the managers. They would open new accounts and receive the same services and prices as the former owners, ensuring a smooth transition
  3. On many occasions, however, former owners would not bring in new owners. In the process, churn rate started increasing.

Recommendation and Methodology

Based on the client behavior and our database analysis, and competitor research, I made a recommendation to implement a direct mail marketing campaign that would see promotional flyers sent to addresses corresponding to stores. We opted for snail mail instead of email for two reasons – first, that most customers did not provide email addresses since they preferred not to be emailed; and second, that direct mail is 21% easier to understand, produces 70% higher brand recall, and has a 20% higher response rate (see: Smartmail Marketing).

For this project to be successful, we went through the process of ensuring that addresses and phone numbers within the database were valid and error-free. With some rare exceptions, most convenience stores remained at the same address. Some however, converted into laundromats or cafés. These names were filtered out.

The second step was to ensure that only those accounts which had not been active for the past year would be kept, the remaining address filtered out.

I developed a process that was simple to understand, implement, and replicate. The workflow was set out, management buy-in was achieved, and a publishing partnership was set up.

When opening new accounts, all employees were instructed to ask about customers where they heard from us. If they said that they received a flyer, we would know the strategy was working. If we already had their address on the file, we knew it was a lapsed customer.

Results

In April 2016, the direct mail marketing will complete its first full year. Many new  customers began walking into the store and have now become permanent clients. Without exception, each client has said something to the tune of, “We never knew you existed,” “We always went to Costco but you have so many things they don’t have,” and “your prices are better than Club Entrepot!”

An unexpected result was that several vendors wanted their products on the flyer because our 2000+ store distribution meant untapped marketing potential. In return, they would offer a promo discount which funds over one quarter of the costs of printing and distribution. In order to strengthen vendor relations, I developed design nuances that would answer the “what’s in it for me” question. Vendors who contribute, for example, would get guaranteed first page position, first slot position, or double slots for their products, something that non-participating vendors would not receive.

The optics are also remarkable. Quecan is viewed as a professionally managed, family run business. Brand recognition is improving every month, and customers in the double digits have been opening accounts after having received the flyer at least 10 times. This demonstrates that it takes time to reversed churn rate and gain new clients, but habits can eventually be changed. The cost of 10 flyers per customer was covered by their first purchase.

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