Saturday, July 25, 2009

The Direct Mail Shotgun

A continued discussion of how ads work differently in different media...

Ready, aim, fire!

Shotguns are different from rifles. Rifles fire bullets, singular masses of metal propelled by gunpowder that make a single, clean (deep) hole in the target. Shotguns fire shot, a collection of small pieces of metal that scatter somewhat as they fly giving you a wider margin of error for hitting your target, but penetrate less deeply.

Direct mail is a lot like a shotgun, a scatter shot approach to finding new customers. You purchase a list of potential customers, create a mailing piece, send it out with a message that has wide (but not deep) appeal and hope you get a return. Unfortunately, the average return rate is usually less than 3%.

There are two problems with this approach:
  • The list
  • The message
It is difficult to get a quality list. People are more private and stingy with their personal information. They only give it freely when there is a promise not to sell or trade such info away.

The list makers all claim to have great lists, but there is a good chance they had to beg, borrow and steal to make a list that might actually get you a decent return.

Plus, these lists are based on basic demographics with no consideration for the all-important character traits these potential customers have. Demographics are far less important than psycho graphics for determining who will be most receptive to your message.

Creating a list on your own takes time and generally only gives you a list of current customers, not a list of potential new ones. This is okay if your goal is to get more repeat business, but not a way to generate new clients.

But let's say you are able to get a quality list of potentials at an affordable price. What are you going to say to them? How will you entice them into your store? A coupon? A discount? A sale?

While effective at drawing certain customers, coupons and discounts have some negative consequences, too. They signal customers that your prices are too high in the first place because you're so willing to lower them. They teach customers to wait for the next coupon or discount or sale. They tell your customers that prices are negotiable.

Also remember, the bigger the offer, the bigger the return (and the bigger the consequences).

You could make your mailing piece about a product, but you'll only be able to attract a portion of the list that is currently in the market for that product.

Now you see why although 46% of all adults read their direct mail pieces, 97% of the recipients of a typical mailer casually toss it aside and take no action.

If you're going to do Direct Mail, follow these tips:
  • Get your list from a reputable source or create your own. In this world of spam, permission is necessary to even get your mailer seen, let alone acted upon.
  • Ask for details of the list that go beyond age, gender, and income. Demographics such as these are not guarantees of matches for your brand message.
  • If you are sending multiple mailings to the same list, limit the coupons to once a year so as not to train them to wait for the next deal
  • Make your message as powerful as possible. Your message is like a magnet. It's power to attract is proportional to it's power to repel. Although some will be repulsed, others will be empowered to act.
  • Measure your results. A typical Direct Mail to a purchased list will garner about 2-3% response. Can you live with that? A good quality list with an above average message sent at the peak time of your season might get as much as a 5% response. A great message sent to your personally created list (your known fans) at the perfect time can get you a 9% response.

We only use Direct Mail once a year to thank our loyal customers for doing business with us. We send a postcard at the end of October with a message consistent with our Character Diamond and a coupon worth $20 off a $100 purchase (our only coupon of the year). Our return last year was 9.2%. Of course, the list was of high quality - all customers who had purchased from us in the past and asked to be on our mailing list. And the message was spot-on, hitting all the right buttons that made them customers in the first place.

Still, 90.8% of the postcards did not come back. And if you do the math... We generated over $100,000 in top line sales, but at a cost of almost $18,000 (printing, mailing and discounting costs). The biggest question is... How much of that was sales we might not have received otherwise? After all, the list was our greatest fans.

Use Direct Mail only if you know you have a quality list, know exactly how to say something powerful to them, and are willing to absorb those costs involved.

Do you agree or disagree?

2 comments:

  1. Phil,

    Great article. I very much agree with what you have to say here and as a manufacturer we have worked hard with our independents to create a program that provides the production and mailing costs and covers the cost of the discount. Of course I do believe that simple brand building pieces are very noteworhty as well and if you want to promote everyday prices and the great service and selection you can provide it can be a great forum.

    Joe

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  2. Hi Joe,
    Yes, you can promote your business in general through Direct Mail. The key element for any advertising is the ROI. Where it gets difficult with Direct Mail is measuring the ROI when a Call to Action (coupon, etc) is not included. The cost per person is usually quite high in DM versus other media such as email, billboards or radio. Those elements need to be measured in any form of advertising and weighed against your ability to deliver your message.

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