July 2005 - You've Got Direct Mail

Getting the most from your direct-mail marketing budget means staying focused on your overall objectives, studying your test mailings carefully, and not giving up too easily.

By David Lustig

The business budget. Few people like them and even fewer of us have enough money to make them work the way we want. But what is in the business budget will determine how we will conduct business, what ideas and concepts we try, and more importantly, what ideas and concepts we don’t.

Think about it. When someone on your staff says, “Hey, I’ve got a great idea!” your answer is usually, “Great. But we don’t have it in the budget.” Or, “Maybe next fiscal year, this year the budget is shot.” Then there’s the ever popular, “If you can find it in the budget, do it.” Choose whatever variation of the above theme you want, there’s never enough money in the budget. Yet from the federal government to a warehouse mega-store to the mom-and-pop grocery to your business, whatever that may be, everything runs on, over or through that budget. How well it runs, of course, is strictly up to you.

So when the question comes up about expanding your marketing efforts to something like direct-mail marketing, you start looking at the budget. Is it in the budget? If it is, is direct-mail marketing something you should consider doing in conjunction with, or perhaps, after a direct response television campaign? And how much, or what percentage of the budget do you use is as variably an answer as asking, “What’s the weather?” without knowing where the person is in the world. There will be a reply, but it may not be one that suits you, your product or your budget.

Regardless, the key is to address the most important criteria and see how it meets your marketing objectives, product needs and, most of all, your budget.

“When a target audience is easily identifiable and addressable, you should test direct mail before making a large investment to learn what does and doesn’t work,” says Ken Dec, chief marketing officer of PreVision Marketing in Lincoln, Mass. “You could test direct mail at any time in the marketing cycle; before you produce TV as a low-cost way to test messages and offers-with DRTV for the additional response lift-or after the TV to give the campaign some ‘legs.’”

Grady Hauser, general manager of Personalized Printing & Mailing in Northfield, Ill., sees it a little differently.

“The question as it relates to DRTV is guided from the start,” says Hauser. “While TV advertising can be a helpful indicator, so can other factors such as focus group data, radio ads and coupon offers from newspapers.

“When to use direct-mail marketing is more a function of relying on test results from a well-designed, multi-cell direct mail test. If the initial test results show promising cells (most cells, says Hauser, will not be profitable, but if some are, that is the point of the tests), then a follow-up test [that] modifies the successful cells will drill down and get progressively better profitability results.”

Joanna Krotz, owner and president of Muse2Muse Productions, a New York-based custom publisher and co-author of the “Microsoft Small Business Kit,” believes things have changed.

“People just want rules. There are no real rules anymore. It was clearer in the past. Now there are many more outlets and niche outlets.

“With direct mail, I think it really comes down to [choosing] it when you have a handle on it. Print can be so much more expensive than electronic. You need a good customer profile. Sending [direct mail] blindly is a waste of time. You have to figure out your marketing goal,” she says.

Sandra J. Blum, president of Blum & Company of Fairfield, Conn., contends that direct mail, while a challenge, can be worth the effort if done after DRTV if there is no product or service awareness.

But, she says, “If the product is established, the timing of direct mail after DRTV is less of an issue. Introducing new products via direct mail alone is a challenge.”

So, what type of budget should be set aside for a direct-mail campaign? It can be akin to asking, “What’s in the budget?”

“One with money,” says Blum chuckling. “Seriously, however, the budget is determined by the number of pieces mailed, postage required per piece, the creative format used and the production costs that it entails. Creative services are amortized over a successful mailing’s life, so it should be thought about in that way.”

PreVision Marketing’s Dec believes figuring how much of the budget should be set aside for a direct-mail campaign all depends on what you want to accomplish.

“You should always begin at the end,” says Dec. “At what target cost do you want to acquire a new customer? That should drive how you prioritize your spending.”

Personalized Printing and Mailing’s Hauser looks at it a bit differently.

“A direct-mail budget needs to be seen in two pieces,” explains Hauser. “The test is truly a promotional budget cost. It will rarely be profitable on its own, which is the point. You are testing to see which cells are profitable so you can roll out larger quantities to cells with a high probability of being profitable. The size of the test-that is to say the quantity-and the size of the test budget are both a function of expected response rates. You have to go into a test with large enough quantities so that the response rates are statistically valid.

“For example,” he continues, “a small test of 5,000 pieces that yield a response of 1 percent (50 sales) is only accurate to a range of between .65 and 1.35 percent. This a wide swing that is not acceptable as a basis for an expensive rollout campaign; therefore, the test quantity needs to be increased to say, 50,000 pieces for a cell, in which case that same 1 percent response really indicates an accuracy of between .9 and 1.1 percent; acceptable accuracy for most product managers.”

Muse2Muse’s Krotz believes that for a marketer, determining what part of the budget should be set aside depends on what advertising you do in general.

“Do you do any TV advertising at all?” asks Krotz. “Do you franchise? Another way to cut cost is to partner with a mailer. It’s a good way to begin and test and to see where your zip code customers are coming from. It’s a good way to start road testing, but you have to make sure that pack your partner is in is compatible.”

As far as budget breakdown, she says people feel direct mail costs 40 percent of the budget with postage. The next highest cost is the database.
“People think printing is the biggest cost, but it isn’t,” continues Krotz, who adds that it is important to get the best address list you can-otherwise, you’re just wating money.

“The more high end, the more private, the more preserved your customer target, the more you’re going to have to spend for a list,” she says.

“What is your target? How much are you selling? What is your goal? If you’re selling an expensive item to a few people, low response doesn’t matter. And if you’re selling to your loyal customers, you should get a much higher rate of return.”

So, you have determined what type and size list you want, or hope you can afford, or, in some cases, what your budget will allow you to acquire. So the question becomes: is there an average distribution of a direct-mail campaign?

“This is a complex question,” replies Blum. “Frequent mailings can improve response if the creative is varied. A successful creative execution that is mailed over and over again to the same target market, will, at some point, ‘wear out.’ As a rule of thumb, you can probably mail the same control piece to the same audience three times a year. If you vary the content and style, you can mail more frequently and try to reap all the marginal profits available and build a profitable campaign around monthly mailings.”

Dec adds that an average distribution of a direct-mail campaign depends upon the size of your identified market.

“Again, you should test to see what does and does not work in terms of list, creative and offer, using the results of the test to roll out the larger campaign.”

So, if you’re starting to see a trend, it’s that once you determine you’re going to do direct marketing, and you’ve looked at the budget to determine what you might be able to spend, what is the one item that all four experts pepper their advice with? Test. Test. Test.

“People don’t road test,” says Krotz. It is pound foolish to direct market without testing. Get some little codes to mark the envelope so you know where it came from. The same [applies] for a coupon. Have a code.

“Understand your goals. People don’t do that. Are you branding? Are you increasing sales? Are you trying to draw people to your Website? Your efforts should be laser-like, not shotgun. Keep testing and don’t rest on your laurels.”

Listen to Dec and you hear the same good advice.

“The biggest mistakes tend to be not testing and poor targeting,” he says.”

Hauser says there are a lot of mistakes marketers commit, but again, the first is testing.

“Testing too small of an amount and believing the result are predictive; not running a back test to verify the first test results; not testing more than one or even a few lists, offers and formats; after a successful rollout is determined, not running small tag-along tests to always refine and improve the rollout; and not planning the test drop dates-mailing dates-to avoid common problem dates such as holidays, major sporting event weekends like Super Bowl, and summer vacations.”

Krotz feels that many marketers do not send a series of three or more mailings before giving up.

“Send out two or three to the same customer,” she says. “Make sure you have something to offer when the buyer comes into the shop. Sweeten the pot a little by adding a ‘lollypop’ they weren’t expecting. That’s why many stores have cookies on the counter.

“The power of thank you has been so overlooked in this current climate. When someone is attentive and thankful for the business, people remember. If your direct-mail campaign has brought someone in, don’t lose them.”

Dec puts his opinions in harsher terms.

“One misconception that marketers have about direct-mail marketing is that people think it is all ‘junk mail.’ It’s only junk if it is not relevant to the consumer. That’s why targeting and testing is so important. The right message delivered to the right customer at the right time is never junk.”

Finally, after hearing so many alike, and yet diverse opinions, how can a marketer get the most mileage out of his her or direct mail marketing campaign?

Sandra Blum sums it up nicely.

“I think marketers should understand that success in direct mail is often counterintuitive,” she concludes. “It doesn’t come naturally to most people. But you can learn from all the direct mail out there surrounding you. It’s like a living laboratory. If you receive or see a mailing many times, it usually means it is the control, that it is working and beating everything tested against it. Save those mailing and study them.

“To be successful, you have to be open to testing and failure. It’s like oil wildcatting. You have to be willing to hit dry wells in order to hit the gusher. Whether you are testing format, offer or list, when you get a winner, you have tapped into an ongoing stream of revenue and profit.”

How Do Your Neighbors Really Feel About Direct Mail?
By David Lustig

It’s one thing to preach to the choir. Direct marketing is good. Direct marketing budgets are workable. Yes, there is a formula for everything.

But what about the people who receive the material you send out? On the marketing side, it’s called direct marketing. On their side, if you will, more often than not it’s called junk mail. Naturally, that’s a term marketers really don’t want their product being referred as. Instead, they believe direct mail offers goods and services to people in the community, throughout the state and across the nation. It makes the population aware of products that they might not have been aware of before getting our information.

That’s all well and good, but I really wanted to hear from people what they think of the material that marketers have slaved so hard to produce.

So I conducted my own survey. I walked my neighborhood, e-mailed both business associates and friends, made calls to people who hadn’t heard from me in a long time, and I asked questions. Note, this is not scientific. It doesn’t cover the entire financial spectrum and admittedly, they are all people who know me. I asked them to be honest and don’t hold back. Some did, most didn’t. The calls were to 17 states. I didn’t call anyone I might have known in Alaska or Hawaii because my telephone-calling plan charged extra for those states. I didn’t call Canada, or anyone I thought didn’t want to hear from me.

The cross-section of people included a variety of ethnic backgrounds with jobs that comprised of engineers, transportation specialists, writers, editors, aerospace, automobile mechanics, automobile salesmen, doctors and nurses (my wife works in a hospital), the mail carrier and my gardener.

Here’s what I learned after asking people what they thought of the unsolicited mail in their mailbox.

If it didn’t interest them, it was junk mail and they shouldn’t waste so many trees. But if the subject matter did interest them, it was something to hold on to, at least temporarily.

The mailers that men liked most came from do-it-yourself stores, both giant warehouses and the small shop down the street. Men liked to wander through catalogs and look at things like lawn tractors, barbecues and tools. Women liked department store catalogs and anything on sale that they could fit into and the tag said size 6 or smaller.

What everyone hated most were credit card applications, name address lines with Our Valued Customer, Owner, Current Resident and in one case, Our Neighbor. Everyone seemed to have time to waste on material that spelled his or her name wrong. My last name is Lustig. I have received mail with Lusting (very common), Lustic, Lustik, Lustigon and Current Resident.

Thick envelopes with a variety of offers were generally something to take into the house and thumb through. Men and women both liked the dollar-off coupons from the local car wash. One person took exception to a coupon about toenail fungus.

Dental information and massage parlors were mostly a ho-hum-most people had their favorite dentist. Tanning salons did better, especially if they had a discount coupon. Everybody loved it when once in a while, a major fast food chain would have a coupon on something.

Misfires included painting and gardening services directed to areas with homeowners associations that provided those services. Another misfire was bringing up something many people don’t want to talk about; there was a mailing one time to announce the opening of a new psychiatric practice in a small town and if anyone in your family needed help, they were there to help. Oh yes, the direct mail that promised to put you in touch with everyone with your last name received mixed results. Said one person I spoke with, “I’ve tried my best to separate myself from family for two decades. They don’t even know my telephone number anymore. I just tossed it in the trash.”

One person said that the volume of his junk mail exceeded the “real” mail by a factor of four. Most of it, he said, went into the trash, except some financial offers that put his name and bogus account numbers on starter checks, forcing him to buy a cross-cut shredder.
Some of my friends and associates took great pride in making sure they passed the garbage barrel before going in the house. One person said he used to do that but one day he accidentally threw away his Social Security check. Now he scans every piece of mail.
In general, the beauty of direct mail was always in the eyes of the beholders. If the subject was of interest, it was held on to at least long enough to read and digest. If there was no interest, such as another person who had nothing but hardwood floors throughout his house and was getting very tired of discount offers to clean his wall-to-wall carpeting, it was a fast trip to the trash can.

But look back at this little informal survey and you might notice that almost no one automatically took all the direct mail and tossed it. In theory and in practice, direct mail works. To what extent depends on the market, the product, and service being offered.

Everyone looked at some of it if not all. To those people who found nothing of interest, like the phrase or not, it was junk mail. But to those people who found something they liked, and that was a majority of people, it was something to hold on to and look at later. And those people I spoke with who learned about a sale on lawn tractors, ladders, shoes, car washes thought it was anything but junk mail and something they should hold on to, at least for a little while. There was even one person who held on to the piece from the psychiatrist. He told me he was thinking of giving it to his wife.

David Lustig is a contributing writer to Electronic Retailer magazine. We would appreciate your feedback. To submit comments, point your browser to directmailjuly.marketing-era.com.

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