How to Make Money with Direct Mailing
For businesses new to direct mailing, the terms, lingo, and economics can be confusing and frustrating. The whole goal of direct mailing is to make you money, so it is important to understand how the system works. This article discusses the typical expenses for mailing services and a direct mail campaign and basic ways to predict how many potential customers it will make.
Before any direct mailing campaign is launched, there are a number of systems and processes that your company will need. Direct mailing is not as simple as pulling your customer database and sending them a letter. Successful direct mailing campaigns usually have these expenses:
Designers – costs associated with hiring a professional designer
Mailing list – costs associated with purchasing a customized mailing list
Copywriting – paying someone to professionally produce the content or copy
Printing – how much you pay to have your correspondence printed (e.g. postcards, brochures, etc.)
Mailing services – internal or external cost of putting the proper addresses and names onto your correspondence
Postage – actual cost of postage to mail your direct mailing campaign items
If this is your first ever direct mailing campaign ever, it can be very difficult to predict how many customers you may be able to convert. One of the key measurement tools you will use is response rate: the percentage of people that actually call you or visit your website because of your direct mailing campaign.
In general, a 2% response rate is a safe place to start. Some direct mailing campaigns may be wildly successful with a 10% response rate while others may not have any response rate it all. Without really knowing anything about your company, it is difficult to predict, so we will use a 2% response rate as an example.
Fortunately, there is an exact formula that you can plug some numbers into to get an idea of what to expect. If you’re not math minded, do not worry, this is a fairly painless formula.
( average sales price X conversion rate X response rate X pieces mailed ) – campaign cost / campaign cost = Return on investment (ROI)
Let’s plug in some numbers:
( $75 X 75% X 2% X 5,000 ) - $2,500
$2,500 = 125% ROI
Just in case you were not aware of what all of those numbers mean, here’s a quick description:
Average sales price – the average price of items sold because people called in response to your campaign
Conversion rate – the percentage of people that actually may purchase once they visited your website or call you
Response rate – the percentage of people that actually respond to your direct mailing campaign
Pieces mailed – the number of customers that were mailed literature
Campaign cost – the actual cost of all expenses associated with the campaign
Return on investment – the percentage of profits
Now that you know a lot more about direct mailing, you can make some educated decisions. One way to drive down costs considerably is to work with a professional printing firm that can also handle your direct mailing campaign. These companies already know how to get the best postage deals and can streamline the process of printing and mailing, which ultimately saves you money.
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