A river runs thru it V3.0

A RIVER RUNS THROUGH IT
A case study of a pizza joint.
© 2011 Kurt Roemer

In this study we will seek to demonstrate 3 points. One: A skilled and forward-looking sales/marketing
person can grow an account that would otherwise remain static in its revenue generating capacity. Two: With
the proper marketing knowledge and action, the client can experience true revenue gains. And three: Direct
mail marketing is a continual process and stellar results rarely come from a one-time mailing effort.

The restaurant in this study is a one-location “family style” pizza place. It is not affiliated with a chain or
national franchise. It consists of a small storefront, in a downtown location (as opposed to a strip mall or
shopping center). While the restaurant has 8 tables in its small dining room, it relies on delivery pizza for 80
percent of its business and revenue. Although the menu offers sandwiches and a number of pasta entrées, it is
considered a pizza place by the public.


For the past number of years the pizza restaurant did an annual saturation mailing of 5,000-10,000 tri-folded
flyers to a radius around its single location. The nature of the job was as such: A tri-folded flyer was
designed and printed by the restaurant owner. It was pretty much the same flyer year after year with few
modifications other than price changes when needed. The flyers were delivered to the mailhouse for folding,
addressing, and mailing. The saturation mailing went to all households in a 2 to 5 mile radius around the
single restaurant location. The restaurant budget for the mailing predetermined the size of the radius. In lean
years a 2-3 mile radius was chosen so as to limit the number of flyers mailed, and thus, control the cost of the
project. In other years a 4-5 mile radius was used. The restaurant offered free delivery of pizzas within 5
miles of its downtown location. This resulted in the defacto and arbitrarily chosen determination that the
trading area of the restaurant was within a five mile radius of its location.

Saturation mailings are a very common style of mailing for restaurants. And although it can be a simple and
cost effective type of mailing, it can also be improved upon if done correctly. When asked why the restaurant
did not mail more often than once every 9 to 12 months the owner replied that although he did see some
immediate bump in business from each mailing he did not see enough long-term increase to warrant
spending additional money to mail more often. The restaurant also advertised in the countywide newspaper
and held it in similar regard for how lack-luster the newspaper advertisement was in bringing in business to
his restaurant. The general feeling by the owner was that he did not really want to spend money advertising
but felt compelled to because “all the other pizza places did” and he wanted to have some exposure in the
marketplace. He felt rather helpless in how to effectively advertise and compete with the big pizza chains.


I was given this house account almost by accident. The owner of the mailhouse for which I worked did not
believe in handing over regular house accounts to his commissioned sales people, of which I was one. He
could not see the benefit of paying commission on an account that could be handled, as it always had been,
by a non-commissioned customer service clerk. In this instance the clerk was away on vacation and the
mailhouse owner reluctantly turned the job over to me to work up and get into the mail. His error was not
realizing that a qualified salesperson GROWS accounts, a proactive salesperson does not see accounts as just
static in revenue potential. In this particular case I found the account had been neglected or treated as merely
another routine job by the mailhouse. The growth potential for the account was considerable but the
mailhouse, which was used to doing things the “same old way,” failed to see the potential of the account
through their myopia.


Preparing the job usually started with telling the restaurant owner how many flyers to have printed up. This
was established by taking a postal route map with the business location in the center of it and drawing a
circle on the map comprising of a 2 to 5 mile radius around the restaurant and calculating the number of
residences within the circled area. This is a pretty standard practice for doing saturating mailings. The

drawing of the circle on the map can be done by hand with a printed map or on computer using available
geocoding software.

While I was drawing my circle on the map, I noticed with glaring clarity that a river ran right through the
center of my circle. The restaurant was located near the river, on its Eastern side. Based on the radius circle I
was drawing it appeared as though half of the restaurant’s trading area was to the East of the river and half
lay to the West. When seen on maps, most roads, rivers and railroads just look like colored lines but in
reality, on the ground, they can be seemingly impenetrable barriers. In this case the river had a few bridges
that connected the East side of town to the West, but each side of town was considered its own domain, so to
speak. As in many cities where you were from the “wrong side of the tracks” if you lived in a particular area
separated by railroad tracks, in this case the river was a divider of the town. People thought of themselves as
living in Eastside or Westside when describing where they lived. Besides being a mental barrier between the
areas of the town, the river acted as a physical barrier as well. Similar to a moat built to limit passage to a
castle, the river impeded easy travel between the two parts of town.


With this in mind, I called the restaurant owner and asked him how much business he did on the West side of
town. He had no idea. I suggested that the answers we seek may be in his restaurant POS (point of sale)
system. Yes, he answered, the POS system did contain the addresses where his delivery drivers made their
stops, and he would find a way to get me that data. A week later I was given a data dump from his POS
system. It contained the addresses of where pizzas had been delivered in the past 6 months. The information
was qualitative in value and not quantitative. In other words, the data contained each delivery address but not
how many times the addressee bought a pizza. For our purposes at this time, the addresses alone were
sufficient.

As I suspected, his Eastside restaurant sold very few pizzas to residents of the Westside of town. Eighty
percent of his pizza delivery business was on his side of the river. It became painfully clear to me that part of
the reason the restaurant had such poor results from past mailing efforts was that half of the mailing went to
people who were just not predisposed to cross the river to buy a pizza. This was in part because the West
side had a number of larger highly publicized pizza chain outfits that customers considered more local to
their location and also because of the mental barrier that precluded Westsiders’ from thinking of an Eastside

business when choosing where first to phone for pizza delivery. Because the postal routes on his side of the
river were arbitrarily chosen as well, many of those flyers were also a waste to mail.


By reviewing the delivery address information that the restaurant owner supplied, I was able to pinpoint the
exact areas where he had his heaviest market penetration and specifically chose postal routes in those areas.
Now, his mailing would be going to areas where he already had presence in the mind of consumers, making
sales, much, much easier, and where he could continue to expand the majority of his business. The sales
results from this new marketing strategy? Well, he had impressive results. He mailed fewer pieces, at less
cost, and garnered a much higher response. This increase in business motivated him to expand his mailings
from once a year to 6 to 7 per year. The mostly ignored account went from a sleeper for the mailhouse to an
active, profitable account due to the attention given to it by an educated and motivated sales person. In the
end, revenue for the mailhouse from this pizza restaurant account increased tenfold.


THE PROGRAM GROWS
The account continued to grow. The next step, after the redefining of who the flyers were mailed to was to
look at what was being mailed. A redesigned flyer was mailed out and different offers were tested. With the
mailing now going out every 6 to 8 weeks, it provided the opportunity to split run A-B tests of different
offers and compare the response rates to each other and to previous results. The geography of the mailings
was tested as well. In those routes where business had historically been lacking, we experimented with a mix
of different offers to try and boost response. This became the proximity data that we collected and analyzed
each month. Trends and response rates were tracked and charted. These findings aided in selecting where to

mail and what offers to make in subsequent months. This continued to increase the response rates to the
mailings and the sales of pizzas. The form factor of the mail piece was experimented with as well. The tri-
folded flyer was tested against a large postcard format and a letter in a printed envelope. Seasonal differences
in pizza sales were also capitalized on through Super Bowl pizza specials and through holiday deals created
to take advantage of already existing heavy sales periods.

THE MAILING GROWS UP
Our next major leap in sophistication was the mailing evolving from a mass mailed saturation piece to a
targeted and engineered mailing. A saturation mailing distributes the pizza restaurant’s flyer to everyone in a
neighborhood, which includes many current customers. However, for the program to evolve we needed to
engage current customers differently than unknown consumers or “prospects” as we will call them. Current

customers should be treated differently than unknown prospects because we know the customer’s value to
the restaurant and we understand their pizza buying habits. In many cases they bought a pizza without
needing a discount coupon to inspire the purchase. Therefore, with the saturation mailing, we were sending
discount coupons to current customers for no reason at all. The restaurant was giving discounts on the sale
when it was not necessary. For these reasons the mailing project was split into two parts. The first portion
continued to be a saturation mailing designed for and mailed to unknown prospects. A different mailing was
created and mailed monthly to existing customers and utilized variable data printing (VDP) to personalize
the offers we made. The offers for current customers were designed to modify their purchasing behavior. For
instance, a customer who never ordered beverages or deserts received coupon offers to incentivize the
purchase of drink and desert items along with their pizza.


FOUR LEVELS OF CUSTOMER LOYALTY
The next phase, in dealing with our mailings to existing customers, was to create a customer loyalty
initiative. It was a natural progression that built upon the success of the program by further defining
customers by their purchasing history. Current customers were segmented into 3 tiers based on their
frequency of purchase and dollar amount of purchase. A fourth tier was created for first-time purchasers.
Each customer tier was marketed to differently. The customers comprising the highest tier were the heavy
pizza buyers. These customers were thanked for their patronage and rewarded for their loyalty to the
restaurant. It was decided that we would not try and squeeze additional sales from this group, but instead to
reward them and attempt to maintain their high level of pizza buying. The middle group was sent offers with
the goal of growing their business. I was also cognizant of, and careful not to, create discount coupon addicts
among any of our customer tiers. This is a common problem with programs like this and can result in
developing a customer base that expects discounts and will not buy without them.

The third and lowest tier customers were marketed to with the main objective of creating a buying habit. It
was presumed that these lowest spending customers either purchased from other pizza places too, or were
just not heavy pizza eaters. Our main goal was to get this light purchaser segment to move up the hierarchy
and become a tier one or two customer. My method of inciting this process was to get the tier three
customers into the habit of making my client’s pizza parlor the one that they thought of when phoning for

take-out or delivery pizza. Much of the process that consumers go through when deciding their meal choices
is determined by habit. There was no way that a customer would become a more frequent patron of the
restaurant unless we made it a habit of theirs to think of us first when choosing who to phone when hungry
for a pizza.

Tracking and testing the response to our offers at all three of the tier levels became an ongoing experiment.
Those efforts that performed well were tweaked and used again and those that underperformed were
examined and scrutinized for answers as to why they did not resonate with customers.

Our fourth customer tier included the first time pizza buyers. The people trying you out for the first time are
not officially customers until they have made repeated purchases. When a brand new customer responds to

the mass mailed saturation piece, they transition from being a “prospect” to being a “newbie”, in our loyalty
ranking system. This fourth, newbie loyalty tier was built around the need to acknowledge first time buyers
and get them to continue to buy. Offers were engineered to capture and grow the newbie customers with the
hope that we could one day move them up to one of the three higher, permanent loyalty tiers. Note that our
categorizing this as a “loyalty” program does not mean that the customer was invited to join a loyalty or
rewards club. Referring to our segmenting of the customers as a “loyalty” effort was an internal way to
describe our goals.


REINVIGORATE LAPSED CUSTOMERS
The final phase of the pizza mailing program was designed to monitor and reinvigorate former and lapsed
customers. These were customers who had seriously slowed or stopped buying from the restaurant. Former
customers who had been in the top two tiers of the loyalty hierarchy were too valuable to let go without a
fight and were included in this churn reduction plan. There are many reasons why a person stops buying
from a particular vendor. It was our goal in this part of the program to monitor this churn in customers and
find out why they left and what we can do to bring them back on board.

TIME FOR LUNCH
After the pizza delivery mailing program became established and had run successfully for a number of
months, it was time to look at boosting the restaurant’s daytime walk-in lunch business. It was determined
that the lunchtime trade came from the surrounding business district. Many of these customers dined on
sandwiches and Italian entrées, not pizza. Like most restaurants the lunch menu was an afterthought, just a
pared down version of the dinner menu with smaller portions and lower prices. We revamped the lunch
menu and modified it to better reflect the wants and needs of the lunch crowd. This was the first time the
owner really took a good look at his lunch menu. The changes worked and daytime traffic responded
positively.


To help publicize the lunchtime menu improvements, a mail campaign was designed to capitalize on the
forward momentum that had started. Businesses within selected areas of the city were targeted with mailings
emphasizing the benefits of the new menu. The behavior pattern of the lunchtime diner indicated that they
had different needs at different times. We made sure that those needs were addressed in the mailings in an
attempt to appeal to as broad a base of potential customers as possible. Realizing the need of some customers
was to grab a sandwich or meal and take it to go, the restaurant improved its take-out packaging and
selection of items available to grab and go. Many customers expressed the need to be able to order, eat, and
be finished with a sit-down meal in an hour or less. The restaurant owner took these requests to heart and
made the dining process more expedient for sit down customers. These changes were some of the benefits
that we extolled in the mail pieces.


As with the evening pizza mail campaign, we monitored what worked with the lunchtime mail program. We
studied with whom the different offers worked and why. This analysis allowed the program to become more
effective and less costly as time went on.

SUMMARY
This case study demonstrates two things. One is that a business owner’s faith in the power of advertising can
be restored by instituting a well designed and executed plan. The second is that the common practice of
focusing an advertising campaign toward “getting new customers” overlooks two very important sources of
revenue: current customers and former customers. Although the programs described above sound complex
and time consuming, a marketing professional experienced with creating detailed mail campaigns can make
the process easy and very cost effective. The time required to crunch the data and make the mailing decisions
for the client amounted to just a couple hours a month.