Yesterday I covered list selection, which is the starting point of the direct mail marketing process.
Today, I want to hit on the development of a ‘matching offer.’
The offer you make in a direct mail package needs to be carefully thought out and matched as closely as possible to the interest, needs, and motivations of the list. And as a general rule of thumb the more specifically matched the offer and list are the higher the response rate.
Here are two simple examples to help you understand this idea.
Example one, John’s Sporting Goods Store mails a brochure about his upcoming sale on skiing and hiking equipment to every resident in his store’s neighborhood. His offer may be great, 25% to 50% discounts, a free gift for everyone who comes in, but his response will still probably be very low because of a high waste factor in his mailing.
Let’s say John mailed 10,000 brochures. As few as 15 to 25 people may come in. A response rate of only one half of one percent or slightly worse but that’s deceptive because of the waste factor.
Of the 10,000 residents mailed only 1,000 of them maybe interested in skiing or hiking. If that’s true and fifteen people come in that may represent one and a half percent response rate, which is usually acceptable.
Example two, John’s Sporting Goods Store mails the exact same offer as in example one but he only mails a thousand brochures to a list of people in his store’s neighborhood who are subscribers to Skiing, or Hiking, or Field and Stream Magazine.
In example two John’s list acquisition cost will be much higher than example one. In example one the resident list may cost only $35 to $40 per thousand names. $350 to $400 for the 10,000 names. In example two the list may cost a $150 or even $200 for just the thousand names and in example two the cost of printing the brochures will go up dramatically per unit.
In example one the 10,000 brochures may cost only a nickel each, $500 total. In example two, the thousand brochures may cost twenty cents each, $200 total.
However, in example two John saves almost two thousand dollars in postage by calling the waste factor out of his mailing. Overall he spends about 2,500 dollars less with the sophisticated approach in example two and gets the same results as he would with the costlier, less sophisticated example one.
Most small businesses and many big businesses waste substantial sums of money by taking the less sophisticated, easier approach. If the typical small business like John’s Sporting Good Stores conducts just four direct mail campaigns a year and there’s a $2,500 differential available each time that’s $10,000 a year that can be wasted or saved.
$10,000 is a lot of money to a small business. Part of the magic of the sophisticated approach is the list to offer match. But to be successful you must also develop a very good attractive offer.