COSTCO’S HIGHLY TARGETED AND INTEGRATED MAIL AND DOOR DROP PLAN UPLIFTED RESPONSE BY 28%

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Costco, a cash and carry membership warehouse club, had been working with

Royal Mail MarketReach’s Planning team for over two years. An ongoing ‘test

and learn’ strategy helped them optimise their mail and door drop targeting and

contact programmes across the business.

The launch of Costco’s 26th UK warehouse in Hayes provided a fantastic

opportunity to bring all this insight together. The key measure of success was

the recruitment of new members, both Trade (who must be registered business

owners) and Individual (who must work within particular professions or sectors).

BACKGROUND

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Costco was able to draw on two years of valuable insights into the geographic,

demographic, behavioural and timing strategies of mail and door drops. Taken

together these insights create an integrated and highly focused media plan.

The first step was to determine the optimum geographic catchment area for the

Hayes warehouse. By analysing membership data for each of the three surrounding

warehouses – Farnborough, Watford and Reading – Costco could view each

warehouse’s total membership in concentric five minute drive-time bands around the

location. They selected the band that contained 90% of each store’s membership

to define the distance members were reasonably willing to travel. This definition

served as the starting point for a suitable marketing area in Hayes.

They then evaluated this area for the overlap with nearby warehouses, refining the

targeting to minimise cannibalisation and on areas with low membership penetration.

However, they did include one area of geographic overlap. Experience had shown a

high level of lapsing among those on the edges of the 90% bands due to distance.

So they identified recent lapsers from other warehouses living close to Hayes as an

additional segment to include in the mailing plan.

Next, membership profiling identified key demographics such as age, lifestyle and

finances defining the most valuable Costco members. Further analysis confirmed

four key prospect selections;

1. Occupation – Prospects would either qualify by having a suitable profession

(Individual) or by being self-employed (Trade)

2. Wealth – Prospects with look-alike wealth and savings attributes

3. Company Directors – Company Directors and business owners qualify

for trade membership

4. Small Office/Home Office – Self-employed from home

SOLUTION

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By profi ling these criteria against a B2B database for company types, size and

turnover, Costco was able to create a targeted business mail selection within the

Hayes catchment. They engaged each prospect with personalised mail detailing the

type of membership they were likely to qualify for and a new member incentive.

They based mailing frequency and timing on insights developed from previous

launches. These had identifi ed that prospects touched multiple times by mail had

higher response rates. In addition, testing had shown that door drop had a halo

effect on mail, so Costco combined the two media to maximise impact.

The mailing programme began two months before the launch. Door drops were

deployed up to six weeks prior to launch, with a second wave of mail landing a week

before the warehouse opening. Costco split the door drop into four waves to allow

enough time to register new members effi ciently.

Top new prospects for whom Costco could acquire B2B data received three

communications: two mail packs and a doordrop. Lapsed or ex-customers from

nearby stores received two communications: a mailing and a door drop. The door

drop maximised reach across the key areas, reaching additional prospects

beyond those mailed through bought data.

The integrated mail and door drop programme focused on maximising pre-

registered membership for launch day. All mail and door drop messaging

encouraged prospects to join before opening, incentivising them to do so with a

timed offer that expired just before the store opened.

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The Hayes opening was Costco’s most successful UK launch to date and the

second most successful warehouse opening globally. The first day ROI is a key

target for Costco. The integrated mail and door drop strategy generated a first day

ROI of 3.74:1. 63% of new members were recruited before the warehouse opened.

And the timed incentive uplifted response by 200% on the day the offer expired.

Every individual part of the plan delivered.

Each of the four prospect selections delivered positive ROI:

1. Occupation

2. Wealth

3. Company Directors

4. Small Office/Home Office

RESULTS

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The targeted business mail selection achieved an ROI of 3.90:1.

And overall segments that combined multiple touch points and targeting

performed more effectively.

The lapsed file from nearby warehouses achieved a 14.4% response rate, proving

the power of location.

The optimum contact frequency uplifted mail response by 28%.

This programme brought together over two years of ‘test and learn’ strategy

development. Because of the results they’ve achieved, Costco’s growing confidence

in their use of mail and door drop has led to them now investing 12% more

annually in targeted mail and door to door.

Source: Data IQ, Winner Award for Best Data-Driven Direct Mail Advertiser(s), 2015. Data Storytelling Awards, Shortlisted for Innovation in Direct Marketing, September 2015