Direct Mail – still part of the marketing mix…

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There’s a belief that Direct Mail is long dead.

“It’s too expensive,” people complain. “It’s just junk mail” … “People just throw it in the bin – they don’t even bother to read it” … “email’s so much cheaper”… “it’s all online now”

chess pieces on a glass boardWell, there’s some truth in some of those statements.  But more worrying is that so many people don’t even know how to run a direct mail campaign any more.  They don’t understand the significance of – or indeed how to capitalise on –  the extraordinary wealth of data available to help refine the target market, the creative approach, and the message itself.  

Equally important is how to integrate direct mail into the overall marketing plan, using the channel in combination with online and other offline activity.

So I think it’s time for an objective look at direct mail – starting with its strengths and weaknesses. 

DM strengths & benefits

Direct Mail – Keys to Success

The days of a 25-30% response rate from a cold mailing are over (this takes me back to my days of selling Disney books to young mums – and yes, we really did see those response levels).  A more likely response target now will be between 1% and 5%.  Nonetheless Direct Mail is still be a highly successful channel – whether your mailing is “hot” (own customers) or “cold” (prospects).

In either event, the essential element is that of understanding your own customers.  If you know who is buying your product or service, you are able to:

  • target your communication so that it is relevant, timely, and designed to resonate with the recipients’ current needs
  • understand how best to “win your customers back” if they haven’t bought from you recently
  • match your customer profile against prospects and identify the “look-alikes” when you’re trying to find new customers
  • Offer appropriate response methods (eg post, telephone, online, email) so the customer can take an action

Successful direct mail requires a variety of skill sets:

Use of Data

Data has an impact on every aspect of the mailing campaign.  Data, analysis and insight allows a business to:

  • Big Dataselect the right audience for the mailing
  • make a relevant offer based on information (for example, provide attractive pricing, incentives or discounts)
  • develop appealing, appropriate creative material
  • ensure the mailing addresses the audience with the right language and tone of voice
  • understand the key metrics and the dynamics of how those metrics work together to result in success or failure
  • understand where the ultimate order is coming from – many is the time that a direct mail piece has driven consumers to place their orders from a website rather than through the post or over the telephone

Metrics

upward arrow graph croppedThe key direct mail analysis metrics vary according to the business.  For retail, they’re likely to be a combination of response and order value;  for trial offers, a combination of response and payment or conversion levels;  for insurance, response,  the  premium amount paid, versus the number of claims made and the value of those claims.

Below are  examples of the importance of the key metrics.

Take response rate, for example.  An average  response rate of 2% will result from some lists responding at 5 or 6% – while other lists  don’t even generate 1%.

Then, taking retail as our example, there’s the average order value.  Like response rates, this will equally vary from list to list and individual to individual.

So – what if a poor response is offset by a very high average order value – might the order value be high enough to make a marginal list (or creative approach or offer) worth retaining for future campaigns? 

A simple analysis will provide the answer, assuming, of course, that the sample size is statistically valid.  And this analysis should also provide the essential knowledge of which elements of the direct mail campaign (list, offer creative approach) perform well or poorly.   

Analysis and Insight

chess pieces on a glass boardAnalysis is a key element in the ongoing refinement of how best to reach and convince your market to engage or buy. The direct mail campaign needs to be set up in such a way that performance of every element can be measured and evaluated for future campaigns.  The analysis itself then needs to be converted into insights to allow the business to increase mailing effectiveness and / or investment over time.

For example, here’s a quick and dirty look at a “what-if” Direct Mail scenario. It is assumed that the piece is designed to sell a product, with the mail pack driving the customer to place an order (whether through the telephone, online or the post).  In this case, the two metrics illustrated are response and average order value.  Depending on the business type,  and the goal of the mailing, there are any number of possible permutations of these two simple metrics. 

The assumption is that the cost of every thousand mailings is £600.  The yellow-highlighted lines below are break-even assumptions, the other rows are variable response and average order value assumptions.

DM breakeven spreadsheet

It is worth noting, of course, that there would likely be additional packing and fulfilment costs (which could be offset by levying a postage charge).  The cost of the product would also need to be taken into account before assessing actual profitability of such a campaign.

But look what happens when the targeting, creative, message and offer are good enough to generate a 3% or even a 5% response, with an average order value of £200.  This leads to a potential sales revenue of between £300K to over £500K, and all from a mailing cost of just £30K.

DM 3% response

That’s the potential of Direct Mail – it’s worth considering, surely?  Even if only to spend a little time on a simple spreadsheet to look at potential risk / reward factors?

One thought on “Direct Mail – still part of the marketing mix…

  1. owie

    I have read so many articles or reviews on the topic of
    the blogger lovers except this article is genuinely
    a good article, keep it up.

    Reply

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