What Does It Cost To Do A Mailing?
One of the most Frequently Asked Questions I get in regard to direct marketing is "What does it cost to do a mailing?" So let's take a look at the costs involved and other considerations such as testing, that affect costs.
Recently, a young man I know, whose smarts in the area of developing and marketing shareware I greatly respect and admire, maintained that one could do a direct mail test for about $10,000. I took issue, making a few of the points I'll get to here in a minute. He said, "But what if $10,000 is all someone has to fund a mailing?" I suggested that person take his or her ten Gs, spend a week in Vegas and see if he can quintuple it at the tables. If not, he'll at least have had a helluva week in Vegas, and he won't have blown his $10,000 on a likely bomb of a mailing. After all, what would you tell someone who wanted to enter the Grand Prix de Monaco, but all he could afford was a VW Bug?
The point is there are certain minimum thresholds in direct mail that must be reached or all that will happen is you'll join the ranks of those who say, "We tried direct mail once. It didn't work."
The most you can mail for $10,000 today is about 10,000 pieces, assuming you did the creative yourself at no cost. That's for a typical, 5-part direct mail package: outer envelope, letter, brochure, order card, and business reply envelope (BRE).
So let's say you want to mail the 10K pieces. That means you'll be limited to mailing one list. Or at the most, two lists, because you need to test at least 5,000 names per list for any kind of statistical assurance. If your anticipated return is around 1% -- a safe bet for budgeting purposes most of the time - - you really should test 10,000 names per list.
O.K., you have this exciting new widget and $10,000 and you're determined to test this great list someone sold you (rented for a one-time use, that is). You prepare your package and mail it in expectation of the infamous 2% response. But when you count the order cards, you only have 1%. Now you've spent $10,000 and what have you learned? That your Widget is a winner? No. That it's a dog? No. All you know for sure is that that wasn't the right list. Costly answer.
Of all the considerations -- and there are many -- that go into a mailing, list testing is far and away the most critical. If you can't find your market, it doesn't matter what your Widget is. And the only way to find your market is to test lists. The more lists you test -- at a minimum of 5,000 names each -- the better. With each additional list you test, you're buying yourself valuable insurance. Especially since only about 30% of the lists you test are likely to prove out. Now you see the odds you're playing with a single list mailing. You're better off in Vegas.
There are exceptions.
Some years ago I did a package for a brand-specific computer magazine. The list was a "hotline" of people who had just recently purchased that particular brand of computer. Result? Thirteen percent response. It was an innovative package to be sure (6" square in silver mylar, looking like it contained a floppy disk). But the tight fit with the market clearly didn't hurt.
Just this year I did a personalized, web press package for a local Bed and Breakfast. We mailed 10,000 names for $6000 and pulled a 3% response. The list was a geographic selection (based on the owner's registrations) of Country Inns Magazine subscribers. These are upscale travelers with a clear preference for Inns and B&Bs.
At these prices, the package had its limitations, however. One color, for example (black on a tan stock). But because I'm a brilliant copywriter, the package worked, and the B&B started building a premo mailing list at better response rates than they (or I) expected.
A web press package is one that's printed on a single, continuous roll of paper, then cut and folded into a direct mail package. It offers the opportunity for personalization, but with the budget I had to work with in this case, I couldn't do color, so I chose a colored stock with black ink. As we'll see in a moment, a standard package costs considerably more.
A Direct Mail Cost Model
Following is an estimate matrix for a typical direct mail package at four quantity levels. This is based on an actual printer's quote.
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| Outer env., #10, 2C: |
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| Letter, 8 1/2 x 11, 2C/1C: |
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| Brochure, 11x17, 4C: |
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| Order card, 2C: |
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| #9 BRE, 1C: |
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| Printing subtotal: |
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(Note the cost of printing 5K packages vs. 10K)
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| Lists* |
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| Lettershop (labeling, inserting, bagging, mailing): |
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| Postage, 3rd Class (barcode, 3-digit sort) $0.17.5** |
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| Subtotals, per M: |
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| Subtotals, lists & mailing: |
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* Lists vary from $50/M (compiled) to $120/M (response). Special selects can add $5/M to $15/M NOTE: For smaller packages (e.g. an 8Çx11 letter and order form w/ #9 BRE in a #10 envelope), you can extrapolate the appropriate numbers. Lettershop may be slightly less, but not significantly so. |
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Recently, a colleague who works with a software product gave the following numbers for a similar 5-part mailing package:
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| Printing: |
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| Lists: |
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| Lettershop |
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| Data processing* |
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| Postage: |
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$650/M ($16,250) | $500/M ($200.000) |
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* DP is an added costs if you have to merge/purge your lists or "de-dupe" or enhance them with other data. ** This was prior to the 7/1/96 rate changes. |
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You're unlikely to get the same numbers from any two people for the same mailing. Likewise, you'll almost never get the same numbers from any two different printers. It's critical to shop around. Use only printers with deep experience in volume mailing. Most so-called "job shops" can't do this kind of work efficiently. Also, the cost paper -- which sometimes skyrockets for periods of time -- will heavily impact prices.
If you're inexperienced in pricing jobs, find a direct mail package (you should be keeping a dm "swipe file") that closely resembles what you plan to mail and take it to 2-3 printers so they can question you on paper stock, colors, bleeds, photos, etc. The person who designs your package should also be able to give you a set of specs to take to printers.
Recently, a client of mine ruined a job trying to save money by going to a small local printer who gave him a low quote. He printed on available stock, a coated paper that had no tactile appeal whatsoever, and he printed and folded the 8x11 order form so they were all interwoven like Kleenex in a box. The lettershop had to spend hours pulling them apart, and then the coated stock kept sliding off the inserting machines. YUCK!
You can save time and money by using a printer/mailer. Someone with both capabilities under one roof. But always get and check references.
Prototype package for list approval.
Another point to consider is that the list owners whose lists you rent will want a "sample package" to look at before they approve your rental request. Frequently rough layout and copy may do the trick, but you will need your package written and mostly designed before you can submit list rental requests.
How long does it take?
Other timing considerations include two weeks for the printer, two weeks for the mailer, and a month for the copy/design/list/approval process. Custom envelopes can take 6 to 8 weeks to deliver.
Make a Budget
Here's simple budget format that will help you determine whether you're ready to do a test mailing.
| Function | Cost/M | Total Cost |
| 1. Copy & Creative* | N/A | $___________ |
| 2. Total Package Costs | $_________ | $___________ |
| 3. Total Cost | $_________ | $____________ |
| 4. Cost of Product | $_____________ | |
| 5. Fulfillment (Shipping, Postage) | $_____________ | |
| 6. Total Fulfillment, Product Cost per order (line 3 + line 4) |
$____________ | |
| 7. Number of orders received (estimate several rates of response) |
$____________ | |
| 8. Total Cost for Orders Received (line 5 x line 6) |
$____________ | |
| 9. Allocated Overhead (salaries, phone, rent, etc.) |
$____________ | |
| 10. Guesstimate Cost of Refunds/Returns |
$____________ | |
| 11. Total Uncollectibles x Selling Price | $____________ | |
| 12. Mailing Grand Total (Add lines 3, 8, 9, 10, 11) |
$_____________ | |
| 13. Number of Orders/Inquiries | $____________ | |
| 14. Per Order/Per Inquiry Costs (line 12 divided by line 7 or 13) |
$____________ | |
| 15. Cash Received Per Order | $_____________ | |
| 16. Total Cash Received (line 7 x line 15) |
$_____________ | |
| 17. Net Profit (subtract line 12 from line 16) |
$_____________ | |
| * Remember that creative is a one-time cost. | ||
Gathering Information, Paid for by Sales
That's my definition of direct marketing. If you make money on each sale, great! But even if you don't -- and many marketers go into a mailing knowing they won't show a profit -- remember that you're looking for information.
Your mailing and your tests should be structured so that when all the numbers are in, you'll know which lists worked (and maybe what segments of individuals on each of those lists)... what price worked...what premium...etc.
You probably can't test all those variables in a single mailing, so go for lists and offer first. That's where you'll get the most bang for your buck. Until those two factors are working for you, you don't have a program. Premiums, copy appeals, format, color of the stamp (just kidding), etc. can all be tested later.
What Will You Do For An Encore?
Whether you make a profit on that first mailing or not, remember that you are buying names. At a profit maybe, or at some cost tempered by sales. That customer list is your store. It's your database. It's your treasure chest. You make it grow by remailing your best list/offer panels and testing new lists incrementally in each successive mailing.
But even if you make a profit, there's not a lot of money in selling one thing one time (granting the usual exceptions). Especially not at typical "cold" list response rates of 2%, 1% and lower. You want to grow that customer list and market to it at significantly more profitable response rates of 5%, 10% and more (and at lower costs). But what will you market?
I often hear from folks who want to do a mailing, but have only one product to sell. If that's your case, direct mail may not be your best channel. If you can't upsell more costly versions of your product, or cross-sell upgrades, other products, training, support, or whatever...think it through carefully before you go into the mail. Even renting the resulting list is going to require a marketing budget.
Good luck.
