By , Doug and Polly White
Published June 07, 2016
Direct mail can be an incredibly powerful marketing tool. It can also be a black hole into which you pour money without a return on your investment. Below are five tips to help you ensure that you remain on the right side of the ledger.
If you’re going to mail, an obvious factor is your list of names and addresses. There are many sources here. If you’re offering a credit product, the credit bureaus are an excellent source of names. However, there are rules about the types of offers you can make, and the penalties for non-compliance can be severe. So, know and follow the rules. Beyond that, you'll find literally hundreds of vertical lists that you can purchase.
Direct mail should be a never-ending cycle of testing and learning. Dimensions you’ll want to test include:
While testing, choose your sample size carefully. Testing a very large sample can be expensive. After all, the fact that you are testing means that performance is unproven. On the other hand, if your sample size is too small, results may not be statistically meaningful. You’ll need to strike a balance.
If you are going to learn from your testing, you’ll need to analyze the results carefully. Make sure you understand the full economics of your testing. It is great to have a high gross-response rate, but you’ll need to understand your close rate and the amount of money you make from each closed sale. Consider all of your costs, not just your mail costs. We suggest building a profitability model to ensure that your direct mail program is profitable when all costs are considered.
Once you have identified which segments are clearly profitable, you’ll want to roll them out with the maximum volume you can handle operationally. This is why you need to be sure that you fully understand the economics. You may go from dropping 15,000 pieces of mail in a test cell to rolling out with 1.5 million pieces. If you thought you were going to make 10 cents per piece mailed, but instead lose 10 cents per piece mailed, the results may be devastating.
Pitfalls surround direct mail. We strongly advise you not to go it alone. Work with someone who knows what to do and not do. The money you spend on good advice will be worth every penny. Once you learn the ropes, you may find that there are pieces of the process you will want to take over. There will also likely be parts of the process you will continue to outsource.
In the right industry, a well-managed direct-mail program can be very profitable. Unfortunately, a mismanaged rollout can bankrupt your company. The tips above will help you have a successful campaign.