CASE STUDY DARTNELL CORPORATION

This case was authored by Eve Eve Caudill

Caudill, Illinois Institute of
Technology and J. Steven Kelly,
DePaul University.
f
This case was prepared as part of
the DePaul University Direct
Marketing Case Writer’s
Workshop. The Workshops are
presented annually by DePaul’s
Institute for Interactive and Direct Joe Drago, President of Dartnell, was not having a good day. The
Marketing, Dr J. Steven Kelly,
numbers had just come in from Dartnell’s most recent promo-
Director. To become involved in
future Workshops, call
tional campaign and Joe’s mood reflected the stormy fall weather
312.362.5913 or email outside. “I don’t understand these numbers,” he exclaimed, star-
skelly@wppost.depaul.edu. ing at the cold raindrops hitting the pavement outside his office
window. “We’ve switched to a new promotional campaign and at
Copyright © 1998, DePaul
University, Institute for Interactive
first it was generating a lot of interest. But now look at these
and Direct Marketing. This paper is numbers. This campaign is proving to be far less profitable than
distributed for purposes of we had anticipated.” Settling back into his chair, Joe appeared
instructional use only. No part of truly puzzled by this turn of events, “I don’t understand why we
this publication may be haven’t made more money with this campaign. What could have
reproduced, stored in a retrieval changed customers’ initial positive response”?
system, or transmitted in any form
or by any means— electronical,
mechanical, photocopying, SITUATIONAL ANALYSIS
recording, or otherwise—without
the permission of DePaul
The Company
University’s Institute for Interactive
and Direct Marketing. Additional Dartnell had rather modest beginnings in 1917 when John Cam-
copies of this paper are available eron Aspley began the newsletter to supply salespeople with
from The Institute at 312-362-5913. information on their profession. Today, with sales of about $16
million, it is one of the leading suppliers of training and motiva-
tional materials to businesses. Dartnell focuses its attention on the
areas of sales, customer service and teamwork and provides this
information through audio, video, book, and newsletter formats.
Its customers are Fortune 500 companies as well as small-to-

Published by John Wiley & Sons, Inc. and

Direct Marketing Educational Foundation, Inc.
CCC 1094-9968/99/020066-08
f

JOURNAL OF INTERACTIVE MARKETING

VOLUME 13 / NUMBER 2 / SPRING 1999

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 DARTNELL CORPORATION
medium companies, which actually make up
the bulk of Dartnell’s customer base. Dartnell
sells its products both domestically and interna-
tionally; internationally, it sells in about 30
countries. For most of its existence, Dartnell has
used direct mail as its primary promotional tool.
Competitors
Two competing publishers of motivational ma-
terials are Lawrence Ragan Communications
and Nightingale–Conant Corporation. Law-
rence Ragan Communications, with sales of
about $6 million, also provides newsletters to
businesses, although its focus is on employee
communications, public relations and manage-
ment information. Nightingale-Conant, with
sales of $94 million, primarily manufactures ed-
ucational, inspirational, and motivational audio
and video programs.
The Sales Training Industry
Although Dartnell has expanded its scope with
its training information, its primary focus has
been in sales training. Dartnell has seen several
factors driving a continued interest in compa-
nies utilizing outside sales training materials.
First, in-house training programs can be expen-
sive and time consuming. The number of hours
expended to train sales personnel can exceed
that of other types of employees and costs have
been estimated to be between $30,000 and
$40,000 per sales trainee. Second, some compa-
nies have begun to rethink the effectiveness of
their formal sales training and have shifted away
from company designated trainers. However,
rather than being phased out, these training
responsibilities have instead gravitated to man-
agement. Finally, it appears that the size of the
company does not necessarily correlate with
management’s interest in sales training. Re-
search by the Bureau of Labor Statistics found
that formal sales training programs have been
particularly popular with smaller companies.
Dartnell sees these factors as positively affecting
the demand for their motivational materials.
THE PRODUCT
Although Dartnell focuses on sales training ma-
terials, it also provides newsletters for other ar-
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eas of the workplace, including customer ser-
vice and telemarketing. A total of 20 different
newsletter titles are offered. Some of the titles
include “Customers First,” “New Account Sell-
ing,” “Effective Telephone Techniques,” and
“Quality 1st.” These newsletters promise to help
managers reinforce training and increase em-
ployee productivity and performance.
The newsletter strives to provide training in
quick, concentrated doses. Among the offerings
in each newsletter are quick tips, question and
answer columns, short articles and success sto-
ries. To keep the reader’s attention, the infor-
mation is interspersed with cartoons and quiz-
zes. All the writing is outsourced to a number of
outside freelance writers, all of whom are ex-
perts in their fields of knowledge.
These newsletters are meant to be purchased
by managers in sufficient enough quantities so
that each employee receives his/her own copy
to read and to refer to at a later date. Thus, the
typical target market consists of sales managers
and their sales force, in addition, as previously
mentioned, the newsletters provides benefits to
a number of other functional areas in a com-
pany.
PROMOTION
Dartnell uses direct mail as its primary tool to
acquire new subscriber companies. Prospects
are acquired from both outside and in-house
mailing lists. Lists from outside sources gener-
ate about eight million mailings a year, while
inside lists generate about 200,000. Dartnell
tests outside lists twice before relying on them
for a mailing. Inside lists contain only those
companies that have responded to a promo-
tional offering within a two year period. Direct
mail promotions typically are sent around the
first of the year and continue quarterly through-
out the year. The first mailing is particularly
important. It takes advantage of two events that
occur at this time: the setting of new budgets by
companies and an eagerness by management to
move into the new year with a motivated and
well-trained workforce.
Dartnell’s traditional solo-title (single title) di-
rect mail promotional piece promotes one pos-
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 JOURNAL OF INTERACTIVE MARKETING
sible title that a manager can order for his or
her sales force (for example, “New Account
Selling”) and does not include a sample copy of
the newsletter. In contrast, Dartnell’s new Sales
Suite (multititle) promotional campaign uses
an innovative method of promoting its newslet-
ter. Rather than promoting just one title, the
new promotional offering includes three titles
in the same topical area (for example, “New
Account Selling,” “Overcoming Objections,”
and “Successful Closing Techniques”) along
with sample lists of all the available titles offered
by Dartnell. Thus, the solo-title campaign allows
companies to order just one title, the multititle
campaign allows companies to order a combi-
nation of titles within a topical area.
Dartnell uses the envelope to attract atten-
tion and increase interest in its promotional
mailings. Color is used to attract attention; mes-
sages are used to motivate recipients to open
the envelope (e.g., “dated material inside,” or
“important information inside”). Once the en-
velope is opened the promotional piece inside
continues to sell Dartnell’s newsletters. The pro-
motional mailer uses a four color, very atten-
tion-getting format (see Appendix A).
The content of the promotional mailing fo-
cuses on customer value, which have been de-
fined in terms of two benefits for the customer.
First, the value of these newsletter can be seen
in terms of cost effectiveness, which compares
the cost of companies using the newsletter for
training purposes to the more prohibitive cost
of formal training programs. Second, customer
value can be defined in terms of the increased
employee motivation, morale and productivity,
which can result from employees’ exposure to
the newsletter (see Appendix B).
Finally, the Dartnell name is used in all the
promotional pieces and newsletters to signal
the quality of the materials. The prestige image
associated with the Dartnell name is extremely
important to Dartnell management and they
continually strive to build brand recognition
through their promotional campaigns. The in-
clusion of the Dartnell name is both on the
direct mail piece and on the envelope.
Another type of direct marketing, telemarket-
ing, is used sparingly and only for multiple title
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promotions. Previous experience with telemar-
keting failed for single title promotion and had
generated only slightly better than break-even
returns for multiple title promotions. Telemar-
keting has proven to be more effective, though,
for cross selling purposes, e.g., selling addi-
tional products, such as motivational tapes and
books, to current customers.
FULFILLMENT AND BILLING
To prevent repetition and boredom, and to
encourage prospects to become customers, new
mailings are cycled regularly past potential sub-
scribers. Dartnell responds quickly to customer
requests. “Basically, a prospect only has to
’breathe lightly’ on one of our promotional
pieces to initiate a fulfillment,” explains Joe
Drago. “Actually,” Joe continues more seriously,
“customer service is extremely important in this
industry and we believe in a quick response
system and thus follow up first time requests
immediately.”
Part of the new promotion promises a 30 day
grace period in which new customers can view
the newsletter for free (see Appendix C). Bill-
ing occurs after the first two newsletters have
been sent; the first newsletter is sent immedi-
ately and the second newsletter is sent after two
weeks. A month later a third fulfillment is sent
while Dartnell waits for payment. What Dartnell
management has noticed about this new pro-
motion is that there has been some decline in
the front end interest and a substantial decline
in pay up later on (revenues received on new
orders) (seeExhibits A, B and C).
CUSTOMER RELATIONSHIPS
One of Dartnell’s motivations for launching this
new promotional campaign has been to shift its
focus to building and maintaining long-term
relationships with its subscribers rather than
being thought of as “just another vendor” of
newsletters. In this vein, it has been attempting
to change its brand focus from being that of a
provider of a newsletter to that of a corporation
that can help its customers with their training
needs. This refocus has changed the way the
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 DARTNELL CORPORATION

EXHIBIT A
Dartnell Case Data Sheet

Solo-title Promotion Data*

Promotion Date: January 14, 1997

Pieces mailed 213,510
Cost/10001 $518
Orders Copies C/O2
Received 1918 7914 4.10
Paid 540 2389 4.42
Percent Paid3 28% 30%
Pay up4 per 10004 495
Renewal Data
Conversion5 40%
Renewal6 60%
Pricing
Pricing 26 issues per year
5 to 9—per copy 1.69 each issue

* These numbers are for instructional purposes only and have been disguised.
1
The cost of the promotion per each 1000 pieces produced and mailed.
2
The cost per order, which is the number of copies divided by the number of orders.
3
The percent of customers who paid for copies of newsletters received.
4
The timely payment by customers.
5
Those prospects who expressed initial interest with the promotional campaign who were converted to customers.
6
Those customers who renewed their subscriptions.

Subscriber Life Value Calculation

Promotion Date: January 14, 1997

Running Value Running Value
Subscriber Per Sub1 Promotion Promotion2
Promotion cost3 ($204.84) ($204.84) ($110,616) ($110,616)
Initial revenue3 195.71 (9.14) 105,683 (4,933)
Renewal promotion (4.00) (13.14) (2,160) (7,093)
Conversion 209.41 196.27 45,232 38,139
Renewal promotion (3.00) 193.27 (648) 37,491
Renewal 224.07 417.34 29,039 66,530

Assume 7% price increase annually.

1
The costs and revenues on each subscription brought in by the particular promotion.
2
The total costs and revenues brought in by the particular promotion.
3
The initial revenue made on each subscriber, what is made (owed) after subtracting promotion costs.
4
The promotion cost to renew a subscriber, which is then calculated for the individual and total promotion costs.
5
The revenue generated from converting a prospect to a customer, which are then calculated for the individual and total revenues.
6
The cost of renewing a customer, which is then calculated for individual and total promotional costs.
7
The revenues generated from each customer that renews a subscription, which is then calculated for individual and total revenues.

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EXHIBIT B*
Dartnell Case Data Sheet

Multi-title Promotion Data**

Promotion Date: January 28, 1997

Pieces mailed 147,218
Cost/1000 $570
Orders Copies C/O
Received 2198 9912 4.51
Paid 781 2658 3.40
Percent Paid 36% 27%
Pay up per 1000 793
Renewal Data
Conversion 40%
Renewal 60%
Pricing
Pricing 26 issues per year
5 to 9—per copy 1.69 each issue

* These numbers are for instructional purposes only and have been disguised.
** See Exhibit A for an explanation of terms and figures

Subscriber Life Value Calculation*

Promotion Date: January 28, 1997

Running Running Value
Subscriber Value Per Sub Promotion Promotion
Promotion cost ($107.44) ($107.44) ($83,976) ($83,976)
Initial revenue 149.57 42.05 116,817 32,841
Renewal promotion (4.00) 38.05 (3,124) 29,717
Conversion 160.04 198.09 49,998 79,715
Renewal promotion (3.00) 195.09 (937) 78,777
Renewal 171.25 366.34 32,099 110,876

Assume 7% price increase annually.

* See Exhibit A for an explanation of terms and figures.

newsletter is marketed to businesses (i.e., Dart-
nell’s strategy of allowing customers to view
newsletters before asking them to pay). In do-
ing so, Dartnell wants to continue to build its
premium image. Mr. Drago points to the brand
equity associated with the Dartnell name, stress-
ing that competitors frequently quote the infor-
mation found in Dartnell’s newsletters.
what positive. There are 1 concerns, however.
First, Subscriber Life Value is not meeting Dart-
nell’s expectations and needs to be improved,
both in terms of the size of the order per sub-
scriber and the length of relationship with cur-
rent customers (see Exhibits A, B, and C). An-
other concern is net revenue on the promotion,
which is lower than expected (see Exhibit C).

THE DILEMMA 1
Subscriber Life Value is a measurement of how much the cus-
Initial response to Dartnell’s most recent Sales tomer is expected to purchase from a particular company during
Suite promotional strategy appears to be some- the time that customer stays with that company.

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 DARTNELL CORPORATION

EXHIBIT C*
Dartnell Case Data Sheet

0.00

Multi-title Promotion Data**

Promotion Date: October 18, 1997
Pieces mailed 275,000
Cost/1000 $533
Orders Copies C/O
Received 3336 11642 3.49
Paid 621 1815 2.92
Percent Paid 19% 16%
Pay up per 1000 300
Renewal Data
Conversion 40%
Renewal 60%
Pricing
Pricing 26 issues per year
5 to 9—per copy 1.79 each issue

* These numbers are for instructional purposes only and have been disguised.
** See Exhibit A for an explanation of terms and figures.

Subscriber Life Value Calculation

Promotion Date: October 18, 1997

Running Running Value
Subscriber Value Per Sub Promotion Promotion
Promotion cost ($236.02) ($236.02) ($146,571) ($146,571)
Initial revenue 131.49 (104.53) 81,656 (64,915)
Renewal promotion (4.00) (108.53) (2,484) (67,399)
Conversion 140.70 32.16 34,949 (32,450)
Renewal promotion (3.00) 29.16 (745) (33,195)
Renewal 150.54 179.71 22,437 (10,758)

Assume 7% price increase annually.

* See Exhibit A for an explanation of terms and figures.

Return on capital outlays for direct promo-
tions are expected to break-even within a two
year period. Subscriber Life Value calculations
for the January 1997 campaign show positive
contributions toward these break-even expecta-
tions, although not as strong as expected. Initial
results from the October 1997 promotion, how-
ever, are not as positive (Exhibits B and C).
Net Revenue Issues
Joe Drago believes net revenues can be in-
creased through a two-pronged strategy that in-
cludes (1) a more optimal mix of newsletter
titles and customer lists and (2) a controlling of
costs per 1,000. In addressing the first issue, Joe
is still assessing the “optimal” mix with regards
to the number and types of titles offered. After
all, newsletters are sent out 26 times per year,
which, along with the number of different news-
letters and Dartnell’s new multiple title promo-
tional campaign, suggests a variety of configu-
rations. One of the changes under review is
whether a general catalog is a better choice
than a more narrow set of titles selected for a

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 JOURNAL OF INTERACTIVE MARKETING
particular target audience. Although no deci-
sions have been made, this issue is important
because of the view that title selection may be at
the root of the problem.
The second issue, controlling costs, is also of
importance. “We assess our direct mail promo-
tions based on the difference between the cost
of the promotion per 1,000 (i.e., for 1000 direct
mail pieces produced and mailed) and the
amount of dollars received from our customers
for those 1,000 pieces mailed,” explains Joe.
“Traditionally, we find at conversion—that is,
when customers renew for the first time—we
recover the cost of the direct mail promotion.”
This pattern of cost recovery has not been real-
ized for these last two campaigns (see exhibits
A, B, and C).
Customer pay-up is also of concern. Pay-up,
which means “the timely payment by custom-
ers,” needs to be increased. Joe is confused by
this lack of timely payment. “Does it have some-
thing to do with our new promotion,” he que-
ries, “could they be confused as to the fulfill-
ment of their orders?” Mr. Drago believes
customer confusion regarding their subscrip-
tion orders partially may rest with the “fit” be-
tween the new promotional strategy and the
fulfillment of the actual newsletter. Seeing our
look of confusion, Joe explains his theory. “It
could be that the actual newsletter does not
look like the promotional pieces.” “However,”
he ponders to himself, turning over other the-
ories in his mind, “could part of the problem be
the lapse of time between the order and the
fulfillment. . .although orders are quickly ful-
filled through first class mail.” Joe finally offers
a third theory: “could the problem rest with the
billing cycle—where several copies of the news-
letter are mailed to customers before the bill is
due.”
SUMMARY AND QUESTIONS
The new promotion was begun in January of
1997 and management at Dartnell has been
concerned with its success. Although response
initially was positive, i.e., it produced a greater
number of orders than did the previous promo-
tion, the net copies per order were lower than
JOURNAL OF INTERACTIVE MARKETING
those generated by previous promotional cam-
paigns. Thus, subscriber companies were order-
ing more of the different newsletters, but they
were ordering fewer copies of each title. Thus,
while overall orders exceeded the minimum
ordering requirement, there was concern about
the effect of this new trend on long-term reve-
nues. It was not clear to Mr. Drago what was
driving this phenomenon: was it related to size
of the majority of their customer companies
(which tended to be smaller companies, or
smaller divisions within a larger company), the
pricing structure (which favored the selection
of the multi-title package over the individual
newsletter2), or something else?
Short term issues
Recall that Dartnell’s strategy was based on the
idea that the newsletters would be purchased in
quantities so that employees received their own
copy to enjoy and reference later. But managers
have not been following Dartnell’s subscriber
model. Are they, perhaps, ordering limited cop-
ies which they are then passing around the of-
fice? If so, what can be done to encourage man-
agers to purchase a copy of the newsletter for
each employee?
A second issue involves the timing of the pro-
motion. Dartnell runs their promotions on a quar-
terly basis starting at the first of the year. Is this
timing most effective or should these promotions
be run on a periodic basis? And remember, the
most recent campaign lagged in its timing by a few
months. Has this lag affected its success? Or per-
haps is there a “wear-out” factor, which has con-
tributed to its decreased success. That is, do you
think customers are being “hit” with too many
promotions and they have just stopped paying
attention. Or can it be that the promotions in
general just need a “tune-up”?
Long term issues
Turning to more long-term issues—what about
repeat business? What can you suggest to en-
courage customers to reorder these newsletter
2
Managers paid less overall for selections under the multiple title
promotion than they did under the single title promotion.
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 DARTNELL CORPORATION
when their subscriptions expire. Additionally,
long term issues involve branding and relation-
ship building. How should Dartnell create more
brand recognition for their products. And is
Dartnell effectively moving toward a relation-
ship focused strategy, which is their goal. If so,
what are the issues involved in maintaining busi-
ness relationships and can Dartnell be more
effective in terms of profitability by maintaining
a relationship strategy versus a transactional
based strategy, (i.e., a one-time purchase)?
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Administrative issues
Configuration of title offerings continues to
concern management at Dartnell. Should the
company continue to offer its customers a se-
lection of carefully focused titles or include with
their offerings a selection focused on other ar-
eas of interest? Would a more general catalogue
of selections offer customers a less confining
choice set and allow for a more general over-
view of titles?
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