Xerox 1:1 LabCase StudyFord Motor Company and BudcoDrive Results with Relevant MarketingFord Motor Company boosts extendedservice contract sales by 35%.
An Industry ChallengedThe Turbulent EconomyA Direct Marketing ChallengeSeptember 2008 marked the 100thanniversary of production start-up for theworld’s first best-selling automobile, FordMotor Company’s Model T. But few in theindustry were celebrating. Rather, the U.S.auto industry teetered on the brink of collapse,and top automaker executives testified beforeCongress about the crisis.The Ford Extended Service Plan (ESP) is theonly extended service plan backed by Fordand honored by all Ford, Lincoln and Mercurydealers. Ford sells nearly a million ESPcontracts each year in a variety of plansoffering coverage beyond the basic threeyear/36,000-mile new vehicle warranty.In the midst of this turmoil, day-to-dayauto industry business continued. Among theinitiatives underway at Ford was an effort toboost extended service contract sales for Fordcars and trucks.Client ProfileThe Ford Motor Company produces and sellsFord, Mercury, Lincoln and Volvo cars andtrucks. The company is No. 7 on the Fortune500 list of top U.S. companies, with worldwideautomotive revenue of 129.2 billion in 2008.Ford was founded in 1903 by industry pioneerHenry Ford and is based in Dearborn, Michigan.For more information, visit: www.ford.com.The PlayersIndustry:AutomotiveClient:Ford Motor CompanyDirect Marketing Provider:BudcoVariable Design, Engineeringand Programming:Terminal Van Gogh Ltd. (TVG)Digital Print Technology:Xerox2Many of those contracts, representing tensof millions in annual revenue, are generatedthrough direct marketing. That program is runentirely by Ford’s partner, Budco, a leadingfulfillment and direct marketing organizationbased in Highland Park, Michigan. With Ford’sdirection, Budco handles everything fromcreative strategies and design to printing,call center work, order fulfillment and resultstracking. Like clockwork, ESP direct mail piecesare sent to vehicle owners at various intervalsthroughout the first three years of ownership.However, in Fall 2008, the program facedmore difficult challenges than at any time inmemory, according to Jeff Sierra, vice presidentof Budco Marketing and Product Development.Consumer confidence was down in generaland for the big-three automakers in particular.Credit was extremely tight, eliminating manyotherwise typical purchase candidates. Oneresult: vehicle sales were down 35%, accordingto market research firm R.L. Polk.Still, the teetering economy gave many vehicleowners good reason to consider extendedwarranties. The average length of vehicleownership has grown by 24% since 2002, and64% of owners said they plan to keep theircurrent vehicle longer due to the recession,according to R.L. Polk. Many could benefitfrom an extended service contract.
Enter the 1:1 LabTesting New CreativeThe Xerox 1:1 Lab, a proving ground fordemonstrating the power of fully variabledirect marketing, thrives on challenges likethose Ford and Budco faced. The lab testsdirect mail content comparing the resultsfrom a customer’s traditional static directmail campaign to the same campaign withcustomized, one-to-one messaging and printedon a Xerox iGen3 Digital Production Press.The test helps print providers and their clientsrecognize how to develop more relevant,customized direct mail programs that grabattention and increase response rates.Over years of testing, Budco had found directmail letters to be the most effective way togenerate F-150 ESP sales. The existing letterhad some basic personalization for name,address and vehicle information: model, vehicleidentification number (VIN) and warrantyexpiration date. The letter made use of somelimited graphics: black-and-white clip art,an image of a truck with arrows pointing tolocations of potentially costly repairs and avariable pricing chart based upon the modeland location of the purchaser. The call-toaction was printed in red type, making it standout amidst the black body copy.Xerox customer Budco saw an opportunity toidentify and refresh a direct mail campaign forthe ESP program, and approached Xerox aboutengaging the 1:1 Lab.Ford not only endorsed the ESP campaigntest but asked specifically to focus on F-150trucks, which account for a large portion ofFord’s sales, but were the poorest performingsegment in the ESP direct mail program.By September, the agreement was in placeto focus on the F-150 ESP campaigns, usingFord’s existing customer data. Their objectives:improve the response rate, increase contractsales and identify best practices that could beapplied program-wide.Traditionally, the 1:1 Lab uses the existingdirect mail piece as the control, and developsa more relevant test piece using the samedesign and basic copy, but incorporating moreinformation that is tailored to the recipient.In this case, the lab also wanted to test a newcreative approach. “The letter was too stiff anddry,” said Ben Passmore, president, TerminalVan Gogh, Ltd. (TVG), Mississauga, Ontario,the lab’s creative design and variable dataprogramming partner. “It needed to be moreattractive and interesting.”So the 1:1 Lab recommended that Fordand Budco test two alternatives: a morepersonalized and relevant letter, and a moregraphical creative approach using aself-mailer format.The existing letter served as a control piece.The test letter was similar to the existingletter, but with variable images and additionalvariable text. They shared the same 8.5" x 11"dimensions; the same blue Ford logo andblack copy with a few lines of red highlightcolor; and the same packaging, a standard9.25" x 6" white, window envelope. Inside itwere the folded letter and an eight-pagefull-color static brochure.The self-mailer, too, was executed in twoversions, one using static images and basicpersonalization, similar to the originalletter, to serve as the control piece, and asecond test piece to apply more relevantpersonalization. Both used a 4/4, six-panel,clip-sealed self-mailer.Did You Know?According to DMA Response RateTrends Report, direct mail and catalogsoutperform other media in buildingtraffic to a website, phone number,store or other business.3
Data-Driven LetterCDABEEGHFJA NameG Pricing of plansB CityH Price expiration dateC Type of truckI Warranty start dateD Warranty expiration dateJ VINE Two components of messaging based on triggersF Age and gender imagery4I
Data-Driven Self-MailerFEIGGAHJKBCDLA Type of truckE Gender imageB NameF CityC Year of vehicleG Variable messagingD Warranty expiration dateH Pricing of plansEI NameJ Price expiration dateK Warranty start dateL VIN5
Creating More RelevanceFrom a conceptual standpoint, the 1:1 Labsought to create a sense of urgency amongF-150 truck owners to mitigate future repaircosts by purchasing an extended servicecontract. To do this, the 1:1 Lab focused onkey motivations such as avoiding majorexpenses, maintaining the vehicle’s value,delivering peace of mind and taking advantageof a time-sensitive offer—before surpriseemergencies occur. In the face of the tightenedcredit market, the team also sought toemphasize that interest-free financing wasavailable and purchases could be made easily.From a content perspective, Jeanne Gatley,TVG’s content architect said, “We used variablemessaging and images throughout to generatea livelier, more eye-catching look and feel withminimal text, but powerful images.”Copy was rewritten to convey the newmessaging and accommodate more variabilityto be more intimately relevant to the potentialpurchaser. Four new triggers for variablecontent were added: gender, income, age andgeography. In addition, the new test versionsshared five triggers with the control pieces:vehicle type and year, length of ownership,warranty expiration, plan pricing and vehiclefinancing term.6Variable messaging was vastly expandedto enable more than 40,000 possiblecombinations, with triggers based upon theowner’s financing status, income level, ageand gender.From a graphic perspective, a number of newimages and some existing images were used.A new variable photo of a stranded driverwas added—or rather, 12 such images, oneof which was selected automatically basedupon five age bands of males and females,plus three defaults. And a new graph wasincorporated showing the time and mileagecoverage an extended service contract couldprovide beyond the manufacturer’s warranty.This played to one of the campaign’s besttargets: owners who had long-term financingand were unlikely to buy a new vehicle untiltheir payments were completed.In the new creative for the fully variableself-mailer, the same photos were used, but incolor, and several new images were added. Anew variable full-color photo was used at thebottom of the page with the call to action,showing attentive customer service repsresponding to telephone calls. For male vehicleowners, the image was a female consultant; forfemale owners, the consultant was male.And another new image appeared on thefront cover showing a lonely roadsidelandscape with a bright orange emergencypylon in the foreground. Next to it, a questioncalls out the vehicle owner by name and asks,“Will you have it when you really need it?”followed by information about when theirwarranty will expire.The Campaign RolloutThe 1:1 Lab, Budco and Ford had someconcerns about running a test during sucha difficult time in the economy. “When theCEOs of GM, Chrysler and Ford went in frontof Congress, we didn’t know what was goingto happen,” said Budco’s Sierra. “We wereconcerned that we were testing during atime when sales were going to be negativelyaffected by the economy and bankruptcydiscussions. We talked about delaying thetest, but at the end of day, we decided topush forward.”Budco produced the mailer, includingprinting on Xerox iGen3 110 DigitalProduction Presses, finishing, letter-shoppingand mailing. About 20,000 pieces were mailedin four drops from November 2008 toFebruary 2009.Each of the four pieces—two controls andtwo test pieces—went to about 5,000 vehicleowners each during those four months.
Stellar ResultsThe most notable result of the campaign wasthat the fully variable self-mailer substantiallyoutperformed all three other approaches. Itsresponse rate was 5.7% better than the secondbest performer, the existing basic letter, and itssales were 35.7% greater.The results are especially noteworthy giventhe timing of the mailing, intersecting withthe heavy-mail holiday season and the sharpeconomic downturn.“The test tells us that traditional direct mailstill works, even during one of the mostturbulent periods in the history of the U.S. autoindustry,” said Budco’s Sierra. “The key is tonot overcomplicate it. Apply basic techniquesbased on a good offer, good segmentationand good timing. And relevant personalizationcan drive improved performance, creating ameaningful customer dialogue that increasesresponses and product sales.”Ford was also pleased. “The campaign wasa huge success and now we are rolling it outacross Ford’s entire portfolio of extendedservice products,” said Mark Bardusch, nationalsales and marketing manager, ExtendedService Business, Ford Motor Company. “Simplyput—the campaign will drive millions of dollarsinto our extended warranty business.”According to Sierra, the F-150 programswitched over to the fully variable, self-mailerapproach in November 2009. Increased levelsof relevant personalization are now beingincorporated in many other letter, postcard andself-mailer ESP campaigns.“This has been a very positive program,” hesaid. “We’re using the results to continue toimprove the program. That’s going to make ourcustomer happy, so everyone who participatedis going to come out a winner.”“The test tells us that traditional directmail still works, even during one of themost turbulent periods in the historyof the U.S. auto industry.”– Jeff SierraVice President of Marketingand Product DevelopmentBudcoAnd that’s a result worth celebrating.About BudcoBudco is a leading fulfillment and direct marketing organization with headquarters inHighland Park, Michigan. As The Dialogue Company, Budco helps clients build strongrelationships with business and consumer audiences by facilitating ongoing, two-waycommunication. Founded in 1982, Budco applies a suite of in-house resources to developand execute innovative, end-to-end business solutions, delivering results that drive clientsuccess. A Xerox customer since the early 1990s, Budco is a member of the Xerox PremierPartners Global Network and has seven Xerox printers including three Xerox iGen3 110Digital Production Presses and three Xerox Nuvera 144 production monochrome printers.For more, visit www.budco.com.7
The DifferenceProgram ObjectivesResults—The Power of Relevance Prove that the more customized, data-drivenmail piece generates more responses andsales than more traditional mass-marketingData-Driven Customized Package Test two direct mail formats, a letter anda self-mailer Improve response rates for Ford’s direct mailprogram promoting its Extended ServicePlan (ESP) for F-150 truck owners Increase sales of Ford’s ESP for F-150truck owners Identify best practices that could be appliedto other ESP direct marketing campaigns 35.7% increase in sales with themore relevant self-mailer 5.7% increase in response rate forthe more relevant self-mailer Reduced production costs by 3.2% Adopting techniques from the test campaignfor the F-150 and other ESP campaigns“Simply put—the campaign will drivemillions of dollars into our extendedwarranty business.”– Mark BarduschNational Sales and Marketing Managerof Extended Services BusinessFord Motor Company Projecting that the new approach willgenerate millions of dollars in additionalannual salesCase Study SnapshotIndustryBusiness ChallengeBackground Automotive I ncrease sales of Extended ServiceContracts in one of the worst economicclimates in the history of the U.S. autoindustry, with extremely tight credit andlow consumer confidence B udco, Terminal van Gogh and theXerox 1:1 Lab program were partners inproviding the direct mail lab testKey Client Contacts National Sales and Marketing ManagerPartners Budco Terminal Van Gogh Ltd. Xerox Graphic CommunicationsFor more information about the Xerox 1:1 Labor to schedule an appointment with a Xeroxrepresentative to discuss how your businesscan build better relationships with customersusing the power of digital, data-driven directmarketing, visit www.xerox.com/1to1lab orcall 1-800-ASK-XEROX. 2010 Xerox Corporation. All rights reserved. Xerox and thesphere of connectivity design, iGen3 and Xerox Nuvera are trademarksof Xerox Corporation in the United States and/or other countries. 01/10701P50414 U pgrade personalized direct mail letterused to generate Extended ServicePlan sales T he Xerox 1:1 Lab is an educationalprogram for creating data-drivendirect mail T he Ford-Budco campaign createdindividually relevant mailings based uponinformation in Ford’s customer database