Email, Snail mail or both?

In a world of increasing online commerce and social networking, is there still a place for old school direct mailing campaigns?  The short answer is that it depends. There is no silver bullet in marketing. In fact, several marketing strategies complementing each other will increase your ROI (return on investment) as well as brand awareness. There is more merit in determining break even calculations than forecasting revenue when you are experimenting with your marketing strategy.

It varies by industry
The average response rate for the 1,122 industry-specific campaigns that the DMA studied was 2.61%.
Within sectors, nonprofit fundraisers enjoy the most success with direct response, getting rates of 5.35%. Close behind are retail stores (with 3.36%) and establishments selling services to businesses (3.34%).
Manufacturing delivers 3.17%; personal and repair services 3.07%; and travel 2.98%.
The two sectors at the bottom of the list — computer/electronic products and packaged goods — still get better than 2% response.

It varies by audience and offer
With a highly targeted direct mail campaign to a CPA firm featuring a very compelling offer I have seen rates around 10%. However, a blanket direct mail program to a broad audience with no offer can be as low as 0.2%.

Presentation and communication matter
Your communication and presentation must be very professional and targeted. Using labels will reduce your response rate by 25%. Additionally, using window envelopes can reduce the open rate by up to 50%. Use a good quality paper and envelope. It is best to personally sign your communication in blue ink.  I recommend marking or stamping the envelope with Confidential or Urgent for a higher open rate.  Most importantly, use a real stamp and not metered mail.

Getting your list
I recommend two services. InfoUSA and Zap Data.  I personally use InfoUSA.  There are many attributes available so that you can sort and refine your list.  Customary attributes included are type of business (industry name or by SIC codes), size of business (revenue, square footage, business expenses or number of employees), geography, credit rating, years in business as well as exclusions.
There are similar attributes for individual households that help you narrow your targeted audience by gender, income, owner verses renter, etc…

Creating your campaign
It is better to mail repeatedly to one smaller list than to mail only once to a broader list. You should plan a minimum of three times a year to each prospect or customer.  You need to make some assumptions. Start by using 1% response rate for new prospects and 2% for existing customers.  Run a campaign for at least 6 months while measuring the results. Determine the cost of your mail piece. (Paper, ink, envelope, stamp, reply card, cost of name, etc…).  Use 50 weeks per year for your campaign. Depending on your business cycle there are probably 2 weeks that customers will not be interested and not worth mailing.

Assumptions

1% response Rate
100 mailings per week
$1 cost per mailing

100 x 50 weeks x $1 = $5,000 marketing cost

1% response rate = 50 leads (5,000 x .01)

1 in 10 leads results in a sale = 5 sales ($5,000 / 5 sales = $1,000 break even)
2 in 10 leads results in a sale = 10 sales ($5,000 / 10 sales = $500 break even)
3 in 10 leads results in a sale = 15 sales ($5,000 / 15 sales = $333 break even)

In this example, if your average income per transaction (sale) is well below $400, then this direct marketing campaign is not a good option.  If your average income per transaction is above $1,000, this marketing campaign is worth pursuing.

If you are marketing business jets at millions of dollars per transaction, then direct marketing is a great option.  If you are marketing a low cost or low margin product, then you should focus on using direct marketing where there will be a higher return rate. Existing customers or extremely targeted prospects with very compelling offers will increase response rates and your ROI.

Track your results
You must track your results and understand the impact. For example, if you change the font or color of your content, then you want to know the impact on response rate. Does $20 off any purchase over $100 work better than 20% off purchases over $100? Track everything!

Tips and best practices
Always try to mail on Monday or Tuesday.
Be consistent with your mailings each week. Ex: 100 mailings per week.
If you must change the weekly allotment, use increments of 25 to change.
Expect a 5-10% rejection rate from databases, attempt to resolve incorrect addresses manually
Use an email blast with Direct Mail to increase response rate.
If you work from home, rent a post office box and use Suite xxx instead of Box xxx for a return address
Attempt to get referrals from leads that do not result in a sale
Treat your new customers like royalty. It is much less expensive to retain an existing customer than acquire a new one.

The DMA 2009 Response Rate Trends Report has the information you need for all types of direct marketing promotions. http://www.nmoa.org/catalog/dma/dma_response.htm

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