Direct Marketing

You may think that everyone is fed up with that pottery barn catalog showing up in his or her mailbox, but in reality, as long as at least 2% of the people who receive it actually buy something from it (which they do) it will continue to show up in your mail. You may be thinking, wait a minute; I don’t get the pottery barn catalog. If you do not see this catalog in your mailbox there are a number of reasons why. I’ll describe some of the below.

How did I get on this list
The world of mailing lists and direct mail is a very large industry. There are hundreds of companies in the business of compiling mailing lists and selling those lists to marketers. You can buy a mailing list for just about any demographic, geographic or psycho graphic group you could imagine. A friend of mine used to joke that he believed that he was in a list of left-handed, blue-eyed, red-sox fans. In reality, he was definitely on many lists as a red-sox fan, and possibly he could be on a list for being left-handed. But I doubt that he is on any list for being blue-eyed. He is however also on many other lists based on his age, income, ethnicity, religion, marital status, number of kids, hobbies and interests, etc.

How did I get off this list
Yeah, right, that’s not going to happen. One of the best strategies for getting off a list is having the mail returned. You would have to do it all the time, but it will eventually get you off of some lists. Unfortunately some lists brokers don’t care. They are not paying for the mailing, the person who is buying the list from them is and they are buying based on volume. It’s all about the CPM (Cost Per Thousand), with the M representing the Roman numeral for one thousand. Just last week I was working with a client who was asking me create and send a 10,000 postcard direct mail to a very specific target audience. My client wanted to reach individuals who were over 50 years old, had an income level over $125,000 per year, who currently owned a home with a value over $425,000, and they must live within a 30 mile radius of their office. Well, there just were not enough people who met all that criteria to make a 10,000-piece mailer work. What do you do now? Well there are two choices and they both are disappointing to a marketer. The first choice is to just mail to whatever size list is available. In this case the number was just under 5,000. That may sound like a fine plan, but in reality, it could be a marketing disaster from an ROI model. Check out “Let’s look at the numbers” below for an explanation. The second choice is to expand (or soften as we say in the business) your criteria. My client actually chose this option (my recommendation too) this strategy had us expanding the radius to 40 miles and lowering the income requirement. We ended up with a list that contained 9,485 names. Close enough.

Let’s look at the numbers
Just like direct sales, direct mail is a numbers game, so here are some of the numbers. I will use the numbers from the story above for consistency. If you want to develop a postcard mailing to a list of 10,000 names, depending on the offer, you can expect an approximately 2% response rate. In some cases you may be happy with a response rate of one half of 1%, in others you may expect or require a 5% response. For this example, I will use 2%. When we mail out 10,000 postcards with a 2% response, we would receive 200 responses. That may be good and that may be bad. It all depends on what you are promoting. That is a point for a later article. Let’s just look purely at cost for now. If the cost to design and develop the postcard with a professional firm cost you $5,000 and the printing for the 10,000 pieces costs you $2,000, your design, development and printing carries a cost of $7,000. That $7,000 equals just 70 cents a postcard. That is probably not too bad a cost also depending on what you are promoting. When you add the cost of the list and the postage, you are right around $1 per contact. 10,000 people, for $10,000, many marketers would be happy with that. (Some may need to get that cost down to 40 cents to make a campaign work, while others can spend 3 or 4 dollars per person and still make it work. It is all based on the product and profit margin.) Using our 2% response rate and our 200 responses, you would divide the $10,000 by the 200 responses, which equals $50 per response. Again, depending on what you are selling, this may be good or bad. For my client, it is just right.

Now in looking back, you may remember that this client’s other choice was mailing to a smaller list. Here are some of the issues with that option. The cost to design and develop the mailer does not change. Even the printing cost does not change very much from 5,000 to 10,000 pieces. It is already setup to print. The second 5,000 pieces are really just paper cost. Based on these facts, their cost to mail to a list of 5,000 may come down to $8,500 from $10,000, but using the same formula, this equals a cost of $1.70 per contact. Add this to the much smaller number that the 2% response from only 5,000 names provides and you can really start to see the importance of knowing The Numbers Game.

The smaller mailer would cost $85 per response, incase you do not have a calculator handy. That may be good and that may be bad. It all depends.

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