Is your small business thinking about using direct mail? Is it the right tactic? Perhaps. There are two broad areas you should think about: first, does it make financial sense and then, if it makes sense, how can you improve your odds of success.
Will direct mail deliver a positive ROI?
Direct mail is not as easy to execute as it appears. Sure, it’s easy to put a flyer or a brochure in an envelope, pay for postage, and off it goes. All those potential customers receiving your message. Feels good doesn’t it. But wait, have you thought it through? Direct Mail can cost $650+ per thousand pieces or more. (Cost per thousand includes creative development, list rental, production and postage.) Even if you can do it for less, it’s an expensive tactic.
Some things to consider:
- All consumers aren’t responsive to direct mail. In fact, very few are and the number is getting smaller every day.
- All consumers aren’t your customers. Only a portion of the consumers you reach are in your category, and only a portion of them are your customers.
Before embarking on a direct mail campaign do a pro-forma ROI calculation.
What will the effort cost? – COST
How many packages will you send? – PACKAGES
How many responses do you expect? – RESPONSE RATE
How many of the responses will convert to customers? – CONVERSION RATE
What’s the sale or the customer worth? – VALUE
((((PACKAGES X RESPONSE RATE) X CONVERSION RATE) X VALUE) – COST) / COST = ROI
Is the ROI positive or negative? If it’s positive move to step two.
How can you improve the odds of success?
To improve the odds of success, you need to understand direct mail’s success hierarchy: List, Offer, and Creative.
Generally customer or “House” lists perform best. Recipients are past customer, you don’t have to convince them you are legitimate, and they have proven interest in what you sell.
Managing your house file can get very sophisticated but, for a small business owner, you will go a long way if you understand and use RFM.
“R” – Recency, or how recently has this customer purchased from you.
“F” – Frequency, or how frequently has this customer bought from you.
“M” – Money, or how much has this customer spent with you.
Update the information in your house file on a regular basis and rank your customers in terms of their RFM score. Mail your latest offer to the top 2 or 3 quintiles. Don’t waste money mailing to lower scoring customers; it’s unlikely to pay out.
If you don’t have a house file or want to expand your market, rented lists are another option. Rented lists add cost to the direct mail, and are generally not as effective as house lists because, in essence you are cold calling through the mail.
Don’t try and rent lists on your own. Use a reputable list broker. They are paid by the list owners so it won’t cost you, and they have expertise and knowledge about direct mail lists that you won’t have.
Make the best offer you can afford. And be sure the offer is relevant to your best customers. You don’t have to bribe them. Think in terms of rewarding them. Lead with the offer. Close with the offer. Include the offer in the letter’s PS. Mention it on the response device. Direct mail isn’t a branding vehicle. It needs to sell.
Some offer options are:
Time limit offers
While third in the hierarchy, how your mail package looks and what it says are still important.
“Pictures tell, copy sells.”
Effective direct mail uses design and pictures to support the sales message. If a potential customer has taken the time to open your package don’t ask them to interpret an obscure visual reference to understand your product’s benefit. Show them and tell them.
Conventional direct marketing wisdom says long copy sells better than short copy. Many years ago I asked the Executive Creative Director where I worked to explain why this was true. His explanation was simple, succinct and laden with common sense.
“Long copy sells better because it provides an interested prospect with all the information they need to make the purchase decision. If they aren’t interested, then they probably won’t see the piece so it doesn’t matter if the copy is long or short.”
Creative is another place where DIY isn’t worth the money you save. Hire professional direct mail copywriters and designers. They’ve already made the mistakes producing many, many direct marketing campaigns for others. They know what works and are worth every dollar.
How can you make direct mail work for your small business? Get the right message, to the right person, at the right time.