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Are you Direct Marketing or Direct Missing! Part 3

In my last blog, I talked to you about the 3 problems with Direct Marketing or rather Direct Missing!  As a simple recap they are:

  1. The person you are marketing to is no longer where you think they should be!

  2. You don’t know enough about the person!

  3. Getting the message through!

If you read the first two blogs you probably got the idea that I’m into cleaning the data and also finding as much out about the person being targeted as possible and that data enhancing should be added to the cleaning mix and that hopefully, you can see why some additional costs are beneficial in enhancing the returns.

So come on get on with it I hear you cry – well I’d say that if I was you so …..

Getting the message out and delivered:

There are still the good old traditional routes to market there has always been:

  1. Direct Land Mail

  2. Telephone

  3. SMS

  4. Email

  5. Good old Direct Land mail has to still be a great route to market to the target so let’s look at the pro’s and cons

Pros

  1. Something nice to receive – everyone loves to get good mail

  2. Tactile – people like to receive something of quality

  3. Unusual – not everyone gets land mail anymore – so it’s a rarity

  4. It’s personal

Cons

  1. Cost for printing the marketing pieces,

  2. Cost for folding and envelope insertion,

  3. Cost for addressing

  4. Cost of franking.

  5. The time it takes to produce

So is it worth it – with the cost of a first class letter to increase to 62p and second class to 53p, even with a volume mailing discount the cost of the mailing piece will be well over £1.50 per item so the responses have got to be good and the only way to get this is through highly targeted knowledge based data.

So a 100,000 mailing campaign to a targeted audience will cost circa £150,000 without the data costs which can run from anywhere from zero for one’s own data to £200 per thousand for specialist data supplied from a reputable data supplier.

So at the top end the cost could be around £170,000 for the complete supply of data through to the mailer going out – and yes this is just a single letter mailing not enclosing a booklet or similar which will increase the cost.

If a 3% response rate is achieved then 3,000 of the target market show an interest and lets say you get 10% (300) of those to buy the product at lets say £50. This produces a revenue of £15,000.

Wow you lost a fortune!

Lets look at the break even – 3,400 sales are required so in essence we needed 3.4% of the target to actually buy to break even – and that is forgetting about any commission for the sale to the salesperson. Ideally we would be looking at 5% return for the job to be classed a success but more realistically we should be looking for 10% sales to class the activity as a great success.

10% sales = £500,000 revenue

5% sales = £250,000 revenue

3.4% sales = £170,000 revenue

Simple metrics that can help decide the fate of what we do.

Lets look at the 10% sales requirement.

If we reckoned that 3% of all the enquirers purchased then for this mailing to work we would need to have mailed 333,333 ie 3.3 times as many as we did – so clearly this is not the best route to take for the product priced at £50.

If we use this logic then we need 300 sales with the product priced at £566.66 for the mailing to work and break even generating £170,000

Obviously if we get the figures we have referred to above 3.4% sales then we generate £1,924,400 revenue. If we assume the 10% of responders buy then we had 34,000 responders ie 34% of the mailing volume. Now is this realistic one might ask – well let’s look at the other routes for DM before you decide.

  1. The telephone marketing route is a highly tried and tested route to market but over the last few weeks has come in for some huge criticism for unscrupulous use and the ICO is on a campaign to stamp out this method of “unwarranted” intrusion for causing so much angst amongst the receiver of the call. Independent article

Telephone call costs are now less than a penny a minute using the Voip (Voice over IP) technology available from many companies like OneNet, Vonage, Rebtel and many others and because its an internet based telephony service the call centre can be any where in the world.

What I won’t do is launch into the sharp practices that some call centres use for the data provision but let’s assume you pay the same price for the data for using telephone calling as you do for the mailing programmes.

So we now have a contact cost of say 1p plus a foreign worker earning say £5 per hour making 30 calls an hour. This would mean it takes 3,333 man hours to call the entire list (assuming they all have contactable numbers).

Lets also assume that every call lasts 3 minutes, which it wont because NO takes less than 3 seconds! However yes does take a bit longer haha! Anyway 100,000 x 3p = £3,000.

So the total cost of the calling exercise is £19,665. Considerably less than the mailing programme. Therefore the return required is less for breakeven so if we get the same result as the mailing campaign we can either make a shed load more money or sell a cheaper product!

Why don’t we do this then – well if you remember my fist blog we talked of the size of the Telephone Preference File and its standing around 20 million numbers – well sadly that doesn’t leave a lot to append to the accurate data we have.

Currently the usable rate of appending a usable phone number is about 8% so our 100,000 file might only be able to add 8,000 telephone numbers that have not been suppressed.

3. Gosh it’s getting harder to move away from Direct Land Mail but let’s have a look at SMS broadcasting. Well the cost of an SMS is around 1.5p to 3p a message depending on who the broadcaster is and there are certainly many in the market place.

There is the number of words that can be used so the cost is going to be similar to the use of the telephone call centre and let’s face it when we get a text message we all look immediately to see who its from and if it grabs our interest we open it and follow the links.

Yes a website is required but if the business already has a site then its just s specific landing page that will be needed to produce which is considerably less than printing!

Again one should never forget the annoyance that SMS can cause and the ICO has stated that any SMS data marketed to should be specifically opted in and recently collected.

It looks as we might be on a winner here as there are plenty of mobile numbers available to be marketed to and the cost is reasonable and that means we don’t have to have high success rates just to break even.

4. Finally, Email. Well without a doubt this has become one of the most popular methods of sending out marketing in recent years so let’s look at why.

Its personal, gets right to the receiver is fairly cheap to produce and also to send.

It’s obvious to see why people love to use the medium of email but the problem is that most companies have no real understanding of the maze that Email Service Providers have to wade through to get the deliverability out and what’s more they don’t actually guarantee to get your email to the inbox

In my first blog we mentioned the spam traps, the honey pots and deceased domains and that cleaning removes these but what cleaning doesn’t do is guarantee your email getting through to your target.

The ISP (Internet Service Provider) the likes of Hotmail, Gmail, AOL and many others are the ones that set the requirement for you to receive your mail and that’s before the SPAM cops have even started. IP reputation, volume being sent, content ratio of text to image, the sender score and so on.

What I hear you say more issues as if it isn’t hard enough to get the deal from the customer in the first place we have to negotiate this minefield and still make a profit.

Sadly it all comes down to so many questions and I don’t think there is one right answer. The table below does simply show the sort of returns that are achieved using my example of a 100,000 mailing piece being sent by land, telephone call, SMS and email using totally cold data that has no knowledge of the company marketing their product and the second figures are what can be achieved by companies who have an engaged client base.

100,000 Campaign100000Direct MailTelephoneSMSEmailMailing Cost inc Data £        150,000 £        19,665 £          2,000 £              500Data Cost £          20,000 £        20,000 £        20,000 £        20,000Creative £            5,000 £          5,000 £          5,000 £          5,000Total Cost £        175,000 £        44,665 £        27,000 £        25,500Cost per piece £               1.75 £            0.45 £            0.27 £            0.26Avg Response rates Cold Mailing3%                3,000             3,000             3,000             3,000Cost Per response £            5,250 £          1,340 £              810 £              765Avg Buying Rate from responders10%                   300                 300                 300                 300Cost Per Sale £                583 £              149 £                90 £                85Avg Response Rates – Engaged Data25%             25,000           25,000           25,000           25,000Cost per response £               7.00 £            1.79 £            1.08 £            1.02Avg Buying Rate from responders10%                2,500             2,500             2,500             2,500Cost Per Sale £            70.00 £          17.87 £          10.80 £          10.20Yory Wurmser director of marketing insights at DMA reports that Direct Mail response rates was 4.4% and email was .12%

What has all this really told you – Direct Mail is expensive – it is if you get it wrong, its cheaper to email – it is if you can get it delivered, Telephone calling seems to be the best way – it is if you can get enough numbers not on the TPS or perhaps SMS is the best alternative – it is if you can find the data to match your target audience.

Direct Marketing is only the name of the action we take – we know that telephone calling gets the highest response rates, followed by Land mail with Email being the best return on investment however the one aspect we have not looked at is using a combination of methods to get the message across and get that deep penetration required for longevity of customer.

It all comes down to the amount of money you are prepared to invest in your campaign from the selection of the data to the creative be that responsive email templates or the letter being sent out but what is a guarantee is that if you get it wrong the discerning public will not bother to let you know by telling you but by not telling you!

So what’s next I hear you say – well what about the receiver of the mailing campaign actually telling you what they want to receive and when they want to receive it – wow that would be a novelty wouldn’t it! Direct Hitting – Not Direct missing!

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