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Analyzing the Benefits-Results of Print Marketing

October 2, 2007 In his most recent post, Richard made a great point. In all the talk about personalized marketing, it’s important to remember that there are benefits to static direct mail, too. It’s inexpensive. When designed properly, it can be attention-getting. Combined with a compelling offer, when it hits the right person at the right time, it can be highly effective. It’s what Richard calls the “serendipity factor.” It’s cheap and it works, and that’s why marketers keep using it.

Now, to continue the “good cop, bad cop” role, I want to play bad cop…again.

Will Serendipity Work for You?

It’s true that serendipity is an important factor in traditional direct mail. If you print enough pieces, some will hit the right people at the right time. However, average direct mail response rates are only 1%. Whether it’s higher or lower depends on your target audience, what you are selling, the appeal of your offer, and your timing.

If you can afford to send out tens of thousands of pieces, serendipity might work for you. Especially if you have a generic product that has mass market appeal. At about $.10 per four-color piece (over a certain volume), a 50,000-piece campaign would cost about $5,000, plus postage.

But then, you must ask yourself. If you get a 1% response rate (or 500 responses), what kind of return is that, really? Those 500 responses are just inquiries. Now you must turn them into sales. Whether this will produce a good ROI depends on what percentage convert to sales and the dollar volume of each sale.

If 30% of your inquiries convert, that’s 150 sales. You just spent $5,000 on postcards and $13,000 on postage (less, if you sorted for postal rate discounts), plus whatever you spent on design. So let’s assume the postal discounts cancel out the design costs. So that’s $18,000 total. With 150 conversions, you must receive at least $120.00 in sales per customer to break even. Let’s say gym memberships cost $300 each. That conversion is pretty good. If, on the other hand, you are selling a product less than $120 value, it stinks.

But every marketing campaign is different. In this case, 50,000 mailers is too high. I recently had a completely unrelated conversation with a 1:1 marketing company that was producing mailers for health clubs. He pointed out that the health club market is extraordinarily competitive because one of the primary deciding factors is simply how close to the club the person lives. In New York City, your radius of prospects might only be a few blocks. In a suburban area, it might be a few miles. So you probably don’t have 50,000 people in your target database. Maybe you have 5,000—or less. With most people who want memberships already having them, your response rate might drop to about .5%.

Now recalculate. A total of 5,000 sent, with a .5% response rate, or 25 responses. A 30% conversion, or 7.5 people buy memberships (okay, this is a math thing — I know you can’t sell a membership to half a person). With 5,000 mailers, you probably aren’t going to get the postcards for $.10 apiece. Nor will you get the same postal discounts. Let’s say you get the mailers for $.15 apiece. Now, with $500 in design, you’re up to a sale of $340 just to break even.

Granted, my numbers could be high. If you get pricing from a high-volume provider, if you want to go that route, prices on postcards will be much lower. Even so, it doesn’t impact the cost of postage, design, or other costs, so even cheaper printing won’t change the dynamics of this analysis that much.

Look at Everything

In conclusion, the point Richard makes in his post is important. It’s one that we don’t hear enough. It’s easy to get caught up in the latest “it” applications, and we can’t forget that there is a reason that traditional applications have withstood the test of time. Any time we talk about marketing, we have to look at all of the options, including the traditional ones.

But when we make those decisions, we have to take everything into account, not just price. We must look at…

•    Demographics of prospects
•    Size of prospect market
•    Marketer budget
•    Design costs
•    Print costs
•    Database clean-up and prep costs
•    Postal rates and discounts, if applicable
•    Total program cost
•    Per-piece cost
•    Response rate
•    Conversion rate
•    Dollars generated per sale
•    Return on investment

Marketing is a complex business. It’s a lot more than it appears on the surface. If we don’t take into account all of the options, and all of the factors, when creating a campaign, it’s easy to end up making the wrong choices.

Posted by Heidi Tolliver Nigro on October 2, 2007 | Comments (10)