Marketing by mail.

The author of Power-Packed Direct Mail shows why this marketing alternative may be the best way to grow your business

HAVE YOU RECENTLY STARTED using direct mail, or are you thinking of using direct mail for the first time? Congratulations. You're taking the first step on a road leading to more leads, inquiries, sales and profits.

If you've already tried direct mail but were disappointed with the results, don't despair. By learning new techniques and avoiding past mistakes, you can make direct mail work for you as never before.

WHAT IS DIRECT MAIL?

Direct mail is unsolicited advertising or promotional material (that is, material the recipient has not requested) sent to an individual or company through the mail.

Most direct mail is sent to rented mailing lists containing the names and addresses of people your company has not done business with before. The purpose of such a mailing is customer acquisition: You want to turn this person into a customer by designing the mailing to generate an order. Or you can use the mailing to generate a lead, then follow up to convert the prospect into a customer.

Direct mail is one example of a type of marketing called direct response or direct marketing. Other examples include telemarketing, infomercials and other TV commercials giving a toll-free 800 number, and magazine and newspaper ads containing reply coupons you can use to request information, order a product or send for a sample.

A direct mail letter that asks you to fill in and return an order form to subscribe to a magazine or join a book club is one type of direct response advertising. "Everything I do is direct response," says Howard Ruff, publisher of Financial Success Report. "How can you measure how well you are doing if you don't use direct response?"

DIRECT MAIL IS BOOMING

Direct mail is a widely used and fast-growing area of marketing.

Consider these facts:

* According to  the Direct Marketing Association (DMA), direct mail is the third most popular advertising medium (TV commercials and newspaper advertising lead the pack), with 19% of all advertising dollars spent on direct mail.

* Pitney Bowes recently surveyed small businesses and found that, of those using direct mail, 85% are pleased with the results, citing new customer acquisition as the primary benefit.

* A survey by the Printing Industries of America found the printing of direct mail to be one of the fastest-growing sources of revenue for printers in the 1990s, second only to brochures and other marketing support materials--and ahead of annual reports, inserts, coupons and wrappers.

* In 1992, direct marketing generated revenue of $350 billion. During chat year, 55% of adults in the United States ordered one or more products by mail.

* A Simmons Market Research study showed that 68% of consumers surveyed said they found direct mail interesting or useful. Only 15% of those surveyed throw away direct mail without reading it, while 75% open and read their direct mail or set it aside for reference.

* Approximately 13.5 billion catalogs were mailed in 1992 (the majority of them, my wife notes, to our home).

* The direct marketing industry provides more than 5 million jobs, accounting for 6% of U.S. employment.

* More than 50 billion direct mail pieces are mailed annually--more than one every other day for every American.

ADVANTAGES OF USING DIRECT MAIL

Obviously, direct mail is just one of the many weapons available in your advertising arsenal. So you may ask, "Why spend money on direct mail? With that money, I could run an ad or a TV commercial, call prospects on the phone or hire a salesperson. Why direct mail?"

Direct mail has a number of unique characteristics that make it the medium of choice in many marketing situations:

* It generates and immediate, tangible response. Although it can do many things, direct mail is primarily a response medium. Few other advertising techniques can match direct mail when it comes to generating immediate replies in volume. If you want people to renew their insurance policies, visit your trade show booth, requests a demo diskette of your new software, send for a free brochure, place an order or subscribe to your publication, direct mail is a good bet for you.

* Direct mail can pay for itself--quickly. No other form of advertising can give you such a rapid return on your investment. Especially with lead-generating direct mail, where the size of individual orders is larger than in mail order, a single sale resulting from your direct mail package can often pay back the cost of the entire mailing.

And in mail order selling, a package that is profitable--that is, a package that generates $1.50 to 2 or more in revenue for every $1 spent on mailing--is literally a money-generating machine. You simply keep mailing to more names on more lists, and collect the profits.

* The response to direct mail can be measured-- scientifically and precisely. When you run an ad, do you know how successful it will be? If your goal is to build an image, how can you measure whether a particular ad or series of ads had changed the public's image of you (let alone how much it has changed or how this translates into greater sales for you)?

If your goal is to create brand awareness, how can you find out how many people are familiar with your brand, what they think about it--and again, whether this change in perception has generated revenue in excess of the cost of the advertising needed to create it?

With advertising, it is difficult to judge performance. Not so with direct mail. By counting the orders or inquiries, you know whether the mailing was profitable.

For example, let's say you mail 2,000 direct mail pieces to 2,000 prospects. Your cost, including postage, mailing lists and printing, is 70 cents per package, for a total mailing cost of $1,400.

The mailing generates 40 leads. Therefore, your cost per lead is $35 and your response rate is 2%. With follow-up, you convince eight of these prospects to buy your product. Your conversion rate is eight out of 40 leads--20%.

The product sells for $1,000 per unit. Eight units sold gives you revenue of $8,000 for the mailing. You would have had tog generate $1,400 in sales for the mailing just to break even; at this level, you have earned more than five and a half times breakeven--a successful promotion by any standard.

However, some things are not easily measured, even in direct mail. For example, while it's easy to determine whether a mailing succeeded or failed, the results don't tell you why it succeeded or failed. Also difficult, if not impossible, to measure is the beneficial effect of putting your message in front of the 98% or 99% of recipients who do not respond to your piece--a factor more and more direct marketers are attempting to measure and put to advantage.

* Direct mail can be tested. When a major automobile manufacturer, airline or fast-food chain begins a new advertising campaign, they are already committed, having spent hundreds of thousands or millions of dollars to create and run newspaper inserts, magazine ads and TV and radio commercials--with no real clue as to whether this campaign will be effective and the money will spent.

As you will see, you can effectively test a direct mail piece by mailing only a couple of thousand or even a couple of hundred pieces, at a cost ranging from $100 to $1,000. If the mailing is successful, then you can produce it in mass quantities, secure in the knowledge that it will work and your investment will pay of handsomely.

If the mailing is an utter flop, at least you have not spent much time, effort or money. Your losses are minimal. You don't blow your budget for the year, take out a second mortgage on your home or dip into retirement or college funds.

And if the mailing is so-so--neither a clear success or an obvious failure? You proceed cautiously, refining the piece and testing variations until you hit upon a promotion that generates an acceptable profit in a small test.

Once you create and prove out the piece as a winner, only then do you invest more in its production and distribution.

* Direct mail can be rolled out. Once a direct mail campaign is proven successful in a small test, it can be easily and rapidly "rolled out," meaning you mail more pieces to more names and more lists--testing the performance of each list before renting names in volume.

The initial work is in the creation, testing and refinement of the piece. This aspect of direct mail is as labor-intensive as any other form of marketing--and more so than some.

But once the piece is developed, rolling out is simply a matter of printing more mailers, ordering the lists and tracking the results. It doesn't require the ongoing efforts that trade show marketing, seminar marketing, telemarketing, in-person selling and many other forms of promotion do.

If you create a mailing piece, that's a big success, you can, for a time, sit back and just collect the cash--sometimes for many years or even decades. Of course, the smart marketer doesn't do this. Instead, she continually refines and tests her mailings to generate even more profitable results."

* Direct mail is selective. "Effective advertising is that which reaches, at the lowest possible cost, the most people who can and will buy what you have to sell, says Herschell Gordon Lewis, a successful direct mail writer and author of many books on advertising. With direct mail, you have the opportunity to send your message to your best prospects and customers, without wasting money advertising to people who are not potential buyers.

For example, a printer in New Jersey who specializes in restaurant menus wants to target restaurant owners and managers in the New York-New Jersey area. What's the best way to reach them? If he runs ads in one of New Jersey's business magazines, he wastes his ad dollars reaching the 99.9% of the subscribers who are not in the restaurant business. If he advertises in restaurant trade journals, such as Restaurant Business, he also wastes money, because only a small percentage of the magazine's readers are located in New Jersey.

By using direct mail, the printer can selectively send his advertising message to people who own or manage restaurants and are located in New Jersey. Thus, direct mail--not print advertising--is the printer's best bet for reaching the greatest number of qualified prospects at the lowest possible cost.

As a rule of thumb, if you are selling to a mass market containing hundreds of thousands or millions of prospects, space and broadcast advertising is the most cost-effective form of promotion. The cost of contact is just pennies, and since so many of the readers and viewers are potential customers, there is little wasted circulation.

If you are selling to an extremely small and narrow market, with perhaps only a few hundred customers, why bother to spend the money and creativity on advertising or mailing? Just call them up on the phone, visit them in person or do both. The market is small enough for you to do that.

If you are selling to a midsize market, with thousands or tens of thousands of prospects, and where the market is a subsegment of a larger market (for example, you are selling to radiologists and anesthesiologists as opposed to all medical doctors), direct mail is often the best way to reach them. The market is large enough to justify the time and creativity spent developing and producing the mailing, yet specialized enough that there is no magazine, radio show or others specialized medium targeting your specific audience.

* Direct mail lets you speak directly to your prospect's needs and concerns. Because you can be highly selective about who receives your mailer, the mailer can be very specific about how your product or service relates to the prospect's needs.

Instead of making general statements about product features, as much general advertising does, you can focus on the specific problems, requirements and desires of your target market--then show how your product addresses these needs.

For example, a company in Maryland sells filtration equipment used in industry. Although the filters are the same for each application, the benefits the filters deliver are different in each industry. In pharmaceutical manufacturing, the filters contribute to drug purity. In semiconductor manufacturing, they remove contaminants from the manufacturing process to prevent defective chips, which in turn increases yields and profits. Mailings aimed at each industry addressed these specific benefits, generating more interest and response than any generic filter advertising.

* Direct mail is personal. Television is a mass medium, with every commercial reaching thousands, or millions of viewers at the same instant. Newspapers and magazines are mass media, too, and your ad competes with all other ads in the issue for attention.

Direct mail is different. Your sales letter arrives in its own envelope, separated from other advertising messages. Even though the recipient knows it is advertising, its appearance resembles that of a personal letter, which receives a warmer reception. The letter can be written using personal pronouns (I, me, we, you), and it is signed by an individual, not a corporation. It speaks in conversational language, addressing the reader one-on-one. It can even be personalized with the recipient's name and address.

Make your direct mail warm, human, personal and friendly, and people respond accordingly. Direct mail achieves a level of me-to-you communication not possible in an ad, commercial or annual report.

Direct mail is a flexible format. Direct mail gives you the greatest degree of flexibility in format, graphics and copy. Your sales letter, for instance, can be as long or as short as you like. You can include a small pamphlet, a flyer, a jumbo-size brochure or even a poster in your mailing. You can place a microchip in your mailing, so when the reader opens it, she hears a spoken message or music.

You can use colors to get attention (try sending your next letter in a bright red or jet black outer envelope!). You can add a third dimension by enclosing a solid object, such as a gift or product sample. The possibilities of direct mail are endless! Compared with other types of advertising, direct mail gives you much more freedom, freedom that can boost your sales if you learn how to harness and use it creatively.

It fits shoestring budgets. Direct mail can be expensive to write, design and print, but a simple yet effective mailing can be produced on a small budget. Mailings can be complex packages, with inserts and color brochures and pop-ups and other elaborate gimmicks. Or you can send something much less expensive--a one-page letter in an envelope, or even a simple 3-by-5-inch postcard.

Another advantages is that you can mail as many or as few pieces as you wish. You can control your quantities precisely, and therefore your budget. For instance, say you've developed a simple sales letter that costs 50 cents apiece to mail (including first-class postage and printing of the letter and envelope). If you can afford to spend only $200 on marketing, send 400 letters. Only public relations rivals direct mail for cost-effectiveness and ability to generate results on a limited budget.

NEGATIVE ASPECTS OF DIRECT MAIL IN THE 1990s

Despite these advantages, direct mail, as with every other marketing method, has its drawbacks. Overall, it has become more difficult to make a profit from a single direct mail package, especially when selling products directly from the mailing. With lead generation, sale potential is usually large enough that even a few sales pay back the cost of the mailing many times over.

If quizzed on the effectiveness of direct mail, many experts would say that it is "still good, but not as good as it once was." Factors contributing to this:

* Increasing postage rates. In a recent four-year-period, postage rates for mailing catalogs increased 75%. This can easily put smaller and marginally profitable catalogs into the red.

Increased production costs. The cost of production--paper and printing in particular--has increased significantly over the last decade. Mailing lists are also more expensive.

Reduced response rates. Because there are so many products to choose from and so many being promoted via direct mail, competition for the consumer's direct mail dollars is keen. As a result, direct mail response rates have declined in recent years. For example, in fund-raising direct mail, a 3% response rate used to be typical. Today the average is 1%.

FEEDBACK, NOT FAILURE

Because of the combined factors of increased cost and competition and decreased response rates, it is clearly harder today, no easier, to create a winning mailing. However, the most common mistake that keeps businesses from enjoying the increased sales and profits direct mail can bring is the perception that if they tried direct mail once and it didn't work, hen it does not work for their type of business and will never work for them.

When a direct mail package succeeds, it can be a gold mind, but it can take many tests of a variety of mailings before you hit upon a winner.

RELATED ARTICLE: 25 WAYS TO USE DIRECT MAIL IN YOUR BUSINESS

1. Generate inquiries 2. Follow up sales leads  3. Sell a product/service directly 4. Generate appointments for sales-people 5. Get prospects to requests your brochure

or catalog  6. Fulfill inquiries generated by advertising,

PR or other promotions 7. Distribute brochures and catalogs 8. Distribute a product samples 9. Introduce a new product/service 10. Introduce a product upgrade or

enhancement 11. Educate consumers about your

product, company or industry 12. Alert customers about a change in

company policy or pricing 13. Thank customers for their business 14. Ask customers for referrals 15. Sell directly to accounts too small for

salespeople to call on 16. Invite people to attend a product

demonstration, seminar or sales

meeting 17. Get people to visit your trade show

booth 18. Renew or upgrade subscriptions, contracts,

insurance policies and other

agreements 19. Educate customers and prospects

about new trends, methods or

technologies. 20. Recruit new dealers/distributors 21. Remind inactive customers of your

existence 22. Conduct surveys, market research,

opinion polls 23. Gather information about customer

needs problems and buying habits 24. Announce discounts, price-off specials

and other deals 25. Introduce your company to new area

residents

Excerpted from Power-Packed Direct Mail: How to Get More Leads & Sales by Mail by Robert W. Bly; Copyright 1995. Reprinted by permission of the publisher, Henry Holt and Co. Inc.