“I sent out a boatload of postcards, and you know what? I only got three or four calls. What a waste! Direct mail marketing is a rip-off. I’ll never do that again.”
Sound familiar? If you’re disillusioned with your direct mail response rates, you’re not alone. We’ve heard marketing managers say these words with obvious frustration about their latest direct mail advertising campaigns—and we understand. There are few things more defeating than realizing you wasted a good chunk of your company’s marketing budget and have no (or very few) new leads to show for it. This sentiment is pretty common—and from it, you might conclude that direct mail marketing simply doesn’t work in 2015.
That begs the question, why do people keep doing it? Why do huge, incredibly successful companies offer some pretty wonderful direct mail every week? Are the big boys just so loaded with cash that they can afford to flush it down the toilet? Do they succeed just by the sheer repetition of their brand?
As it turns out, about nine out of 10 companies surveyed rank direct mail marketing as their number one marketing channel. Nine out of 10! That list is comprised of huge companies with plenty of money to burn, but those companies are also profit-driven; if a marketing tactic doesn’t benefit the bottom line, it’s thrown out the window.
Here’s what they know: compared to all other marketing efforts, their direct mail campaigns have the highest rate of gaining new customers. According to one survey of companies, direct mail reportedly accounted for gaining 1 in every 3 new clients, dwarfing the runner-up (email), and blowing away the much-loved channel of search engine marketing.
Let that sink in for just a second. You may have heard that “print is dead,” however, to the right audience, direct mail seems quite alive and well. But just how effective is it?
DM News reports that in 2012, the average response rate for direct mail was 4.4 percent for both B2B and B2C mailings, which actually surprised them a little as well. Let’s clarify a couple of things:
- Based on the wording, this result is for direct mail of all kinds, some of which gets pretty creative. This isn’t just the ubiquitous postcard, or the spammy “open to see what you’ve won” kind of stuff. There are probably sweet boxes, packages, and genius-type stuff that many marketers simply can’t afford to replicate.
- This measures responses. At this point, we’re not discussing the actual “conversion rate” of turning a prospect into a customer—however, that’s nothing to sneeze at.
What are the possibilities with direct mail?
If you could manage 2% direct mail response rates for your direct mail marketing campaigns, would you feel like you’re flushing money down the toilet? Let’s walk through the costs and returns of a small-ish direct mail campaign. In terms of cost, we need to determine how much you’ll spend to get one customer, the acquisition cost.
Let’s do a hypothetical exercise.
- You decide to do a mailing of 2,500 large format postcards (6? x 8?).
- You’ll need to purchase a list from a data company, estimated at $100. Prices vary depending on the kind of data you need.
- Your postcards will cost $600 to print, about $625 to mail, and $125 for address printing (unless you want to put all the labels on by hand).
- Your total is about $1,650. So, for 2,500 cards, your cost per unit is $0.66.
So, how many customers can you get?
- If you can generate a 2% direct mail response rate, that means that you’ll hear from 50 people from your direct mail efforts.
- If you close the deal with 60% of them, your business has 30 new customers.
- So, you spent $1,650 to get 30 customers.
- Your acquisition cost per customer is $55 each.
As a marketing manager, you’re acutely aware that the math must succeed if you’re going to, so let’s see if we’re making good use of our advertising dollars.
At first, you may think that $55 per customer is way too much money to spend on a customer. And if you’re selling a $2 product that your customer will only buy once, it is. That’s why you must do one more set of calculations to figure out how much one customer is worth to you. We’ll call this the lifetime value of a customer. In a nutshell, to calculate the lifetime value of a customer, start with the average amount of a purchase.
- Let’s keep it simple and say you’re selling one product for $50.
- Further, let’s pretend that on average a customer will purchase from you twice each year.
- At this point, you can calculate how much value your customer has per year, so all we need to do is dip into your books and make a rough determination of how many years your customers continue to do business with you. For our example, let’s say the average is about 5 years.
- The lifetime value of your customer is $500 ($100 x 5 years = $500).
Calculate The Lifetime Value of A Customer
Play with these numbers to quickly determine the revenue you could expect based on your direct mail response rates. You’ll be surprised at the value of one customer. Change any number to see the updated values.
- How many years does your average customer work with you?
- How much does a customer spend when he/she buys from you?
- How often, on average, does your customer purchase from you in a year?
- The average lifetime value of one customer.
For example, if you spent $55 per customer, and a customer is worth $500 to your business, you’ll divide your lifetime value of a customer by your acquisition cost and you’ve got your return.
You’ve made 909% return on your investment. Not bad! Spending $1,650 on your direct mail campaign will bring $15,000 worth of business over the next 5 years. Direct mail clearly works in this scenario.
These six strategies will help you make these types of direct mail response rates a reality.
- Define your audience. Spend time figuring out who you need to talk to, and don’t settle for a shotgun approach. Often, poor response rates are caused by simply not defining your audience clearly. Once you have your audience defined, work with a list data company to create the right list for talking to that audience. Be willing to spend more for a highly targeted list.
- Match your offer to your audience. If you’re going to spend money to talk to your audience, make sure you’re saying something that they need to hear in order to respond. In other words, if you’re going to make an offer that they need to respond to, make sure it’s something they want—that’s actually special. That seems pretty obvious, but it’s surprising how often that basic element is overlooked. It’s important that your offer have a deadline as well, so your customers won’t set it aside with good intentions of calling you later.
- Provide multiple ways to respond. Not everyone responds to an offer the same way. Give your customers several ways to follow up with you.
- Create a special landing page on your website, and give it a unique call tracking number.
- Create an original video that helps further the connection with your future customer and put it on your website’s landing page, along with a contact form and that custom tracking number. That way, you can tell who’s coming from which direct mail piece.
- Give potential customers a way to mail something in (for those who love the mail).
- Make sure your unique call tracking number is a part of the main call-to-action on your direct mail piece.
- Test small. Here’s one of the beautiful things about direct mail advertising: you can test a smaller demographic, and see how different messages work. You can send different messages to subsets of your main list; then, once you’ve determined the winner, you can go all out with your larger mailing.
- Track everything. It’s imperative that you track what you’re doing with direct mail marketing. Grab a phone call tracking number and then look at the analytics to see which campaign messages worked better than others. If you’re going to use landing pages, make sure you create a separate tracking number for each landing page.
- Think long-term. Many of us are looking for “one-hit wonders” that magically deliver customers to us. While direct mail does seem to offer some nice rewards, the best marketing happens consistently. Consider multiple mailings to the same list over a period of time to build on the message you’ve created.
So, you’ve done everything you need to generate great direct mail response rates. You won, right? Not quite! You still have one final task: convert those responses into customers. This is where it’s critical to train employees who answer your phones. Your sales team will be the first human interaction those potential customers have with your business, so make sure they know what to do. One powerful way to make sure they’re handling this all-important role well is to make sure your recording your sales calls, so you can review each call as needed to see how things were handled.
Each of these steps will ensure you have impressive direct mail response rates, a successful, effective campaign, and an impressed group of colleagues to whom you’ve brought more leads and customers.