Direct mail acquisition is simply customer acquisition with direct mail, so the first question ought to be: what is customer acquisition? For many companies, customer acquisition involves what we call ‘brand advertising’. Brand advertising means pushing the familiarity and recognition of your brand out onto the public using mass advertising campaigns on the radio, television, and billboards. Then, based on the brand awareness that has been created, the small percentage of people who are qualified for the product or service will hopefully step forward and get into contact with the company. The total amount of money that was spent on these mass advertising campaigns, divided by the number of people who step forward to make a purchase, equals the ‘customer acquisition cost’, which is the key performance indicator for this kind of advertising.
For Customer Acquisition With Mail Marketing, the Emphasis Is Different
With brand advertising, the success of the campaign is entirely based on the first impression that the prospect has of the advert, and the only thing to learn is how to tweak the attractiveness of a particular advert. However, when acquiring customers with direct mail, there is a potential to learn a whole lot more about potential prospects, and not just about one advert.
Because you have a ‘single view of customer’, that is, you know exactly which offers and advertisements they have received, and you know exactly how they personally responded, there is a potential to learn more than just a response rate statistic. You can learn the characteristics of prospects who don’t like the offer and those who do. You can learn the objections that prospects have to an offer, and what they like about it.
Even though mail marketing offers excellent tracking of performance statistics, the emphasis is not so much on numbers, but on feelings, opinions and relationships. But how does this work in practice? Well, we are able to learn more about our target customers based on the characteristics of people who respond to our offers. We can also send modified offers to or contact prospects who do not respond in order to determine whether they are really unqualified for the offer, or just have an objection.
Learning From Your Responses and Your List
After you have sent out your first round of mail advertising, it takes a couple of weeks for the response rate to rise to its final number. Now, the details that you are able to source about the people on your list multiplies with the information you now have about who did and did not respond, to yield an enormous amount of information about the kind of person who will become a customer based on your offer.
Send More of the Same to Good Prospects
Now that you have learned what kind of person responds to the offer that you have tested, you can press on with your customer acquisition campaign. Just keep sending the same offer to that type of person until the customer acquisition costs start to outweigh the earnings per customer.
Don’t Send the Offer to People Who Will Not Respond
You know that you should keep sending mail to the kinds of people that are proven to respond, and by the same token, you should stop sending the original offer to the kinds of people that don’t respond. Instead, use the power of the single view of the customer that you have in order to fix the problem that is causing prospects to not respond. This could be that some of the people you are targeting are actually not qualified for the offer, which is likely due to errors in your list. Another answer is that they like the offer but they are turned off by the advertisement. The final possibility is that they liked everything about the mail that they were sent but have an objection that was not addressed. Before we send more mail to these people, we have to find out exactly what the problem is.
Trial and Error
One approach to doing this would be to send be to take a look at the information we have on the prospects who did not respond and make an educated guess about the reason why. Then, we send them a modified package and await a response. With a good understanding of the market and some experience in mail marketing, this approach might be sufficient to unlock another portion of the market who you can profitably advertise.
Start a Dialogue With Stubborn Prospects
When you are sure that you have an accurate list, and yet there are groups of stubborn prospects who are qualified to buy but still don’t respond, we need to take a more ‘hands-on approach’ to discovering their objections with the offer or the advertising. We can do this by sending them an especially appealing survey package, that offers a free sample or other rewards when they answer some questions about their thoughts and feelings about the offer, advert and their relationship with the company.
Addressing Objections Immediately
Once you have determined that a particular objection is what is stopping a qualified prospect from buying, there is no reason not to put the answer to that objection front and center in the advert. For instance, if you realized that the primary objection to ordering a ‘Build-It-Yourself Kids Playpen and Slide Kit’ was that the prospect cannot feel the quality of the materials in person, you know what to do. Give them local examples of where they can see it themselves. “Why 10 Local Kindergartens Just Installed Slide-Kit” should be your headline in this case.
Direct Mail Campaigns Gradually ‘Unlock’ the Whole Market
A successful direct mail campaign feels like being presented with a line of locked post-boxes, all filled with cash. They are each secured by a combination lock. You start with the easiest box, which represents prospects that are proven to respond, open it and take the money. The next locked box is the market that doesn’t like your advertising style. With a little fiddling around, the lock pops open, and you take the cash. In this way, you gradually ‘conquer’ the entire market. By comparison, other forms of advertising often seem like spending $100,000 on a mysterious packet of seeds labeled ‘Money Tree’, tossing them in the soil and hoping something happens.
Direct Mail Marketing Tips for Customer Acquisition
We’ve previously explained exactly how to go about acquiring customers using direct mail marketing, so now that you’re well on your way to conquering the market, we thought you might like a handful of uncommon tips you might not have thought of.
Consider Adding Unusual Mediums Like Calendars, Posters or Postcards
The key here is that even though these are more expensive than a standard paper sales letter, that also makes them less disposable. If you give the prospect something that is more substantial and more useful, they are more likely to keep it around the house after reading it, rather than throwing it away. If you work hard to create a guidebook with useful information about a topic they are interested in, they will keep it and refer to it often, allowing you to subtly suggest your services and products that could be useful when they are facing a certain problem.
Credibility Is King
Take the time to put yourself in the customer’s shoes and ‘receive’ for yourself one of the packages that you are sending. Does it look sophisticated on the outside? Any signs of tackiness could prime the prospect to interpret your company as disreputable and ‘just trying to sell something’. Go through the process of opening it. Is it packed nicely? Does the most important page come out first? Follow the flow of the writing. Does it have enough personalization to catch and hold their interest? Does it try to sell too hard or too early? Subtle issues with your mail package can ruin the prospect’s good impression of your company, so it’s important to go through the experience of receiving your mail as the customer to iron out any and all issues.
Following Up Is Easier and More Powerful Than You Think
You would be surprised how many people would be willing to have a long and detailed conversation about how they felt about the mail marketing package you just sent them if you just ring up and ask them. This allows you to get insight into all the possible objections that people might have to your offer, including many you’d never be able to think of yourself. Don’t be shy about trying to maintain a relationship with people who don’t initially bite.
Offering Free Trials Can Be Cheap and Effective
Imagine, for example, that you own a local car dealership, and you haven’t been getting much foot traffic through the door recently. So you send out 500 letters to households in the local area with a simple message, “Try something new today, come in store and test drive our new Toyota Prius.” What does a campaign like this cost? Well, a simple sales letter only costs around $1 per household. If anyone comes in to test drive the car you get a few more miles clocked on your demonstrator model. More traffic will keep the salespeople busy, but if they are not working to capacity anyway, then that’s no loss. Experience tells us that this kind of offer might bring in about 20 people to 50 people, which will be just the right amount to boost your traffic, and the sale of a single vehicle will cover the costs many times over, even if you have to bring 100 people through the door to sell one car. In general, don’t be afraid to spend money to make money in marketing, offering free samples or free trials if that’s what it takes to attract people. As long as your profit per sale is higher than your CPA (cost per acquisition) you’re still making more money!
If You Can’t Get the Sale, at Least Get Something
Get an email address, a name, a survey response, get something. If you’re not aiming to sell a product right then and there with every package sent then at least get the information that you need to continue your relationship with the prospect. Using QR Codes and PURLs this can be done very conveniently nowadays, as you can offer more valuable information as a way of attracting the prospect to your website and your email list.
Sell the Solution to a Problem
Start with a powerful story about a person who has a problem. If possible, personalize the subject of the story to make it as relatable to the prospect as possible. All products have to target a pain-point, a problem or a burning desire. If you can’t explain one of these things in a story, your sales letter is unlikely to be effective. Once the problem has been established and the prospect identifies with the subject of the story, then you can explain how the product or service that you are offering solves the problem. Finally, by foreseeing any objections the prospect might have to the offer, you can make close the sale easily by making the decision to buy the product or service seem straightforward, obvious and logical.
‘Associate’ for Better Reputability and Information Sharing
If you can, work together with a related company to provide a sales package that offers good information on a topic, as well as complementary services that both help the customer with that thing. This not only decreases your advertising costs, it also makes the mail package seem less ‘sales-y‘ and more genuinely valuable. Another great advantage of fostering a relationship with companies with complementary services is that you can share information like customer lists and statistics for your mutual benefit.
Direct Mail Acquisition Versus Retention
Cost per Acquisition (CPA) Is the Most Important Metric of Any Marketing Campaign
Most marketing companies would consider spending $5 to acquire a customer for a cheap consumer product like toothpaste to be a bargain. For high-ticket financial products, they would be willing to spend hundreds of dollars to acquire a single customer. In the business-to-business arena, they would spend thousands of dollars to get a particular company to sign a big contract with them. As long as the customer is providing the company with more gross profit across their lifetime than the cost of acquisition, most marketing companies would consider this a success!
When you realize just how much money marketing departments are willing to throw at customer acquisition, two things become very clear. One, losing customers (having poor customer retention) because they switch to a competitor or lose interest in the product is a huge problem, because the customer acquisition cost is wasted. Two, reducing the customer acquisition cost by a small margin could result in huge savings in the annual marketing spend, and consequently, and a huge increase in profits.
Consider Microsoft for example, one of the biggest technology companies in the world. In the financial year ending 2017, they turned over $89 billion dollars and made about $20 billion net profit. In the same year, they spent $20 billion dollars on customer services such as sales, customer support, and administration. Their most recent operating system, Windows 10, was released in 2015 and has since sold 400 million copies. They make about $100 for every license sold.
Now, suppose we want to illustrate the huge impact that decreasing customer acquisition costs might have on their net profits. Allow us to run some rough numbers. Let’s assume they spent half customer service costs on marketing. That’s $10 billion. They sold around 200 million operating systems in the 2017 financial year. That’s about $50 to acquire one customer. Now imagine if you were in charge of marketing, and you were able to reduce that cost to $40. That’s a saving and an increase in net profits of two billion dollars, or about a 10% increase in the company bottom line. This is the power that good customer acquisition techniques have on the success of a company.
To understand the importance of customer retention, and the disastrous effects of failing to retain your customers, the calculation is quite simple. Take the amount of money spent acquiring customers, then take the percentage that you failed to retain, and throw it out the window. For instance, if Microsoft spent $10 billion acquiring customers in 2017, and loses 20% of them to Apple or Google, that’s a waste of at least $2 billion in that year. Of course, if they retained those customers for life, they could be worth hundreds or even thousands of dollars each, so the real cost of losing a customer is hard to know exactly.
Acquiring Versus Retaining Customers With Direct Mail Marketing
Obviously, considering that a 20% change in your CPA or customer retention rate could result in a 10% increase or decrease in your company’s bottom line, you want to know how different types of marketing can affect your CPA and retention rate. Well, according to the latest research from the Digital Marketing Association, direct mail marketing is competitive with other mediums in all areas, with a household CPA of $26, compared to $25 for internet display advertising. However, there are two areas in which direct mail marketing really pulls ahead of the rest.
Firstly, direct mail marketing excels in customer retention campaigns where the probability of selling something to an existing customer was around 65%. Improvements in customer retention also generated very high-profit yields, with a 5% increase in retention rate resulting in a 25%-95% increase in gross profit.
Secondly, direct mail marketing excels in more targeted customer acquisition campaigns. Even though the CPAs for mail marketing are comparable to other mediums on average, making use of variable-data, personalized advertisements and the precise household-targeted delivery that mail marketing offers can dramatically reduce CPAs.
Why Is Mail Marketing Better for Customer Retention?
There are a few reasons for this. Firstly, unlike many other mediums, it is actually possible to develop a one-to-one relationship with a customer by direct mail. With broader forms of brand advertising such as television, your relationship is not with a single customer but a crowd of customers. You speak to many customers with many different messages, and when you receive feedback it is contradictory and you can never be sure which message they are responding to. With mail marketing, you have a ‘single view of customer’, meaning that their response to every offer and every message can be tracked.
Another reason that mail marketing is better for customer retention is simply that people are familiar with receiving mail from companies that they have a long-standing, trusting relationship with. Think about the bills and statements that people receive in the mail. Bank statements, phone bills, utility bills and rental notices all represent correspondences in business relationships that have been continuing for years. How often do you change your electricity provider or bank? Mail means a long-term relationship and mail means trust.
Why Is Mail Marketing Better for Targeted Customer Acquisition?
The accuracy and specificity you achieve when targeting an audience with mail are unlike any other medium. This is why mail marketing is often used when there is a very specific audience that is qualified for an offer, where others are totally unqualified. For instance, a baby formula company recently achieved great success in reducing their CPA by only sending mail advertisements to houses that were known to contain new mothers. Because only 10 out of 100 households meet these criteria, advertising costs could be reduced by 90% versus a totally untargeted approach. Considering it often costs $1 to send a simple envelope, and companies often send expensive packages with samples, this represents a huge saving.
Another reason why mail marketing is better for targeted customer acquisition is that personalization of letters has been shown to increase response rates dramatically. A recent survey found that including a name on the sales letter increases the response rate by 100%, and more thorough information increased the response rate by up to 500%. Therefore, if you can get a detailed list of the audience that you are targeting, it is probably a good idea to consider direct mail marketing.
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