Direct Mail Strategies: Low-Cost, High Return Approach
This article consists of two short excerpts from the book, Marketing Without Megabucks: How to Sell Anything on a Shoestring. In all, there are 37 pages of material on direct mail in the book. The same material, with updated postal costs, is also included in Grassroots Marketing: Getting Noticed in a Noisy World. Get your own copy of either book by clicking the link at the bottom of this page.
Please note: this article is based on postage prices in effect at the time the book was written.
To succeed, you should make money if 1/2 to 1% of your recipients become customers. These rates of return may sound low, but mail actually draws better than many other media. Consider a display ad in a publication with a circulation of 80,000 or a radio ad that reaches 100,000 listeners; you’d be ecstatic if you got 400-1,000 new customers (1/2% of 80,000 to 1% of 100,000).
Let’s assume a fairly expensive route: a one-color, five-sheet package sent via first-class mail. Your printing and mailing cost per prospect to deliver this sizable chunk of information is 60 cents or less for photocopying, a penny for the envelope, and 29 cents for mailing, 90 cents for the whole thing. If you rent a mailing list, add four to ten cents per name. (In Chapter 16, you’ll learn to drastically reduce this figure.)
I’ve ignored them because they vary too much, but include your other costs: labor to stuff the envelopes, cost of product and inventory, and, of course, advertising. Do this kind of analysis for any marketing method, but it’s crucial in direct mail.
If the 1/2-1% range holds, that same 90 cents in mailing cost per prospect translates into a cost per sale of $90-$180 (ouch!). On the low end, if you’re mailing a single-sided postcard, your cost per piece will only be 22 cents (19 to mail, plus three to print). But you won’t make as many sales, since it’s hard to provide enough information on a postcard to get people motivated to buy.
Obviously, you can play with the per-piece cost by varying the mailing. But any way you look at it, the cost per sale to reach first-time customers with a private first-class mailing is objectionably high.
With these high costs per sale, it’s imperative to see the initial direct mail contact as only the first step in a long term relationship; it may be worth $90 to grab a customer who’ll spend $5,000 over the next three years. But it won’t be worth it to sell one $100 product, once.
Also, many direct mailers pour money down a hole with bad marketing, inappropriate offers, and poor-quality list management. You’re going to do it right; consequently, aim for 2-5% new customer response. PARW, for instance, consistently maintains a response rate in this range. Still, base your projections upon the lowest responses you can safely count on; then you won’t get burned if you’re wrong. If a mailing starts to pull 2-3% response, it’s clearly a winner. If you achieve a 5% response from people who haven’t dealt with you before, consider yourself a certified marketing genius and hang out your shingle as a consultant.
From existing customers (or donors), expect a much higher return — in rare instances, up to 50%. But 5-10% is more believable, and is a reasonable goal. At 10%, the same 90 cent packet costs $9 per sale — a much more viable figure.
Knowing typical response rates also helps you figure out how much to mail. For instance, 100 names is too small to accurately judge a mailing. One sale could represent anywhere from 0.5% on up to 1.9%.
500 pieces is a reasonable minimum test mailing. In an initial mailing of 500 full-ounce pieces, at 90 cents per piece, your cost is $450 for the entire test. If your offer pulls fewer than three responses out of 500, it’s not working. At three to five responses, you’re in the ball game but you’ll want to strengthen either your offer or your marketing piece. If you get more than five responses it’s a winner; and if more than 15 responses come in, mail immediately to every single identified prospect.
Make Sure Your Mailings Work
To use direct mail effectively under any circumstances, you’ve got to: use accurate lists; screen out duplicates; match your offer to your targeted list; create an effective marketing package.
Unfortunately, the only sure test is to mail out and wait for undeliverable pieces. Put your return address on the outside of your envelope; for bulk mail, include the phrase “forwarding and return postage guaranteed.” You will pay to send mail on to the new address or back to you, but you’ll know which names are still good.
Still, the more cleaning you can do before you mail, the better off you’ll be. Before mailing, remove any obsolete names. Enter all any address changes.
For high volume mailing, consider using the National Change of Address service. This clearing house will match the Postal Service’s list of forwarding orders against your computerized list, for a fee. Ask your postmaster for Notice 47, National Change of Address.
If you rented a list, you deserve 95% deliverability or better. If undeliverables exceed this figure, ask for reimbursement for those names. If you get more than 10% back, get your money back on the entire purchase and switch to another mailing list house next time. Not all brokers will guarantee this level of performance, so choose accordingly.
If you mail primarily to existing clients, be vigilant about getting the names right. Your reputation for personal service will be seriously impaired if you mangle consulting clients’ names.
Repeating the identical offer to the same client in the same mailing costs you needless money, and presents you as a nuisance. Particularly when combining names from more than one list, weed out duplicates.
Computer mailing list software can do this to some extent, but don¹t leave it up to the computer. It will either look only, miss close matches or eliminate some unduplicated names (for instance, two households in the same building, or two branch offices at different addresses). So go over the list visually. If you see an uncommon name at both a street address and a P.O. box with the same first three zipcode digits, it may be the same person.
Look, too, for variant but close names at the same address. For example, I legitimately get mail under the following names: Shel Horowitz, S. Horowitz, Horowitz/Friedman (my wife’s name is Friedman), at both my home address and my business P.O. box. Sloppy copying yields Morowitz, Horowicz, Hortwiz, etc. And my street and business name get equally mangled.
Match Your List to Your Offer
By now, you should know this well enough to tell it back to me: sell to the people who want to buy. Identify the problem you can solve, and mail only to those who need that benefit.
Make Your Mailing Piece the Best it Can Be
There’s no secret here. Experiment and monitor the results closely. Mail out versions with different headlines, illustrations, body copy, and the like. Test different price points. But only test one or two variables at a time. Code each version separately, and mail them at the same time, to different people on the same list. As results shift in favor of one version, vary another element. Test market and refine over and over, until you know your mailing is a winner. And continue monitoring the results. Any marketing material will lose its punch eventually; when yours stops working whether it’s six months or six years after you introduced it be ready to replace it.
Shel Horowitz is Director of Accurate Writing & More, a
family-owned firm in Northampton, MA, offering low-cost marketing
strategies for businesses. This article is excerpted from “Marketing Without Megabucks: How to Sell Anything on a Shoestring.”