What Kind of Results Can I Expect?
It's been said there are two answers to every question in direct marketing: "It depends," and "test it." To those, I'd like to add a third: "I don't know." Let's take a look at each.
It Depends...on what?
The very first element your direct marketing promotion depends upon is the list. I've met would-be marketers who had a very clear idea of who their ideal customer was, but when it came to actually finding those people on available, mailable lists, they weren't there! Others, when asked who their target market is will say, "everyone!" (I was once told this by a fellow who marketed pricey collectible coins..."everyone.") Needless to say, neither situation is very helpful.
The accuracy of the list is credited with roughly 40% of the success of the mailing. I once pulled 13% for a magazine specifically edited for the relatively short-lived Radio Shack Color Computer. The list we mailed was a "hotline" (last six months or so) of people who had just paid close to $2000 for that machine.
The package was designed square, to look as though it contained a floppy disk, and it stood out smartly in silver mylar. And because I knew they had just gotten that particular computer, I was able to tease them with "O.K. You have your Color Computer, your User's Guide and Desk Mate (an included program disk)...NOW GET THE REST OF IT!" It would be hard not to assume that there was a critical additional program for the machine in that envelope...and most people did, to the tune of a 13% response.
Magazine subscription response rates typically run from 1% to 5% or 6%, so 13% was considered a hit, and successfully launched the magazine. Yet, brilliant as the package was (hey, this is my article) most of that response was due, not to the copy and design, but to the accuracy and immediacy of the list.
There are also such factors as whether you use response lists or compiled lists...even whether you direct address or use labels. (For more on lists, see "Finding Your Way Through the Mailing List Swamp, October 96)
One-Step or Two-Step?
No, that's not an invitation to dance. It's another factor response rates depend upon. Are you selling directly out of the direct mail package? Or are you seeking inquiries? If your product is costly or especially complex, you may not be able to sell it directly, but you can use direct mail to obtain qualified leads for sales followup. This is a classic database marketing situation.
Without re-writing everything that appears in my other articles on this subject, let's simply say that are many factors that can affect the response rates of lead generation direct mail...mostly connected to the offer.
But is there any "rule of thumb" for guesstimating lead generation response rates?
Recently, a consultant contacted me to see whether direct mail might work for him. He is a restaurant consultant. He shows various types of restaurants how to measure menu revenues, and then modifies those menus to generate significantly greater profit, he claims.
I put together a proposal for a three-part direct mail campaign and his first question was, "what kind of results can I expect?" I knew that response could run anywhere from .05% to 20%. But that's a pretty wide range, so I decided to call one of the industry's leading consultants in business-to-business marketing and lead generation and described the situation. Mind you, this fellow is an author and an internationally renowned consultant in this field. The short answer was he didn't know. "I tell clients to estimate 1% per mailing," he said. And he confirmed my guesstimate of a worst case at .05% on up to 20%.
Well, I felt better that there wasn't some magic answer out there that I didn't know about and, in fact, I have most often advised marketers (both one-step and two-step) to estimate a 1% response rate and if that won't do it, think the project through again.
But why the range? Why can't we get closer than that to an educated estimate of response? In the menu consultant example, there are lists of restaurants one can mail to, but (a) who gets the mail? The owner? A clerk? (b) how many restaurant owners believe they need this kind of help to improve their menu profitability, vs. those who believe they can do it themselves? Remember, direct mail works best when we identify a behavior and model it...not try to change it.
Actually, this consultant had a good chance of success, I thought, because of his offer -- a Free menu analysis without obligation. Meaning he'd come pretty close to showing them what he was going to do before he did it. He also had excellent credentials, in terms of his client list and selected testimonials. Those too, are important factors in determining a response rate. Who are you? What's your track record?
Make Me An Offer...Please!
I mentioned the offer earlier. The offer represents another 40% of the success of the mailing.
Naturally, a key factor in the offer is the price. After the lists and the offer, the price is the most tested element in direct mail. Note that the offer includes price, but also takes into account the terms and/or guarantee, any premiums that might be offered. There are several psychological "stops" in pricing, starting at $50, then $100, $150, and so on. The higher the price, the more "push" you need behind it, in terms of both the package itself (you likely won't sell a new or complex idea at $200 with just a letter, for example), the proofs or testimonials, the illustrations, and so on.
In direct marketing, we try as much as possible to let the customer tell us what he or she is willing to pay for our product or service and how they prefer to pay it, through extensive testing.
Offer testing is also strongly recommended. Changing the premium can easily boost response 30% or more. So can an extended guarantee (unlimited guarantee vs 15- or 30-days). So can paying in installments, and paying after a 30-day trial rather than up front. Each of these carry their own dynamics in terms of the "Quality/Quantity Ratio" (See my article, "Direct Mail and the Dynamics of Response.")
In direct response advertising, just changing the headline can alter response 30% to 50% one way or the other.
Format Dynamics
After the List and the Offer (capitalize key terms in copy), you'll want to seriously consider and/or test Format. I say "and/or" because format testing is more costly and frankly, I don't see marketers of any kind doing a whole lot of it. Magazine publishers are the most aggressive in this area, partly because magazine subscriptions depend so heavily on direct mail and a winning package can make a big difference on the bottom line.
Many first time marketers want to use self-mailers because they appear to be so much less expensive than envelope packages. But, all other things being equal, you can measure self-mailer response in tenths of a percent compared with envelope packages that typically start at 1%.
First, in one-step marketing, it's very difficult to sell anything directly from a self-mailer. They just don't carry enough clout. Offering a free trial of a book or magazine is ok. You've no doubt seen most trade shows and conferences using self- mailers, but they're typically multi-page mailers and they have to mail them in the gazillions in order to fill a show.
In two-step marketing, self-mailers can frequently be a good choice, if designed as a series of three or more.
A software marketer who has been getting about .05% response with his own self-mailer is now mailing a four-part series I strategized and wrote. The first piece has already passed 1 1/2% gross response as I write this. My guess is he'll double that to 3% for the series.
I added strong user testimonials, color, and most of all, a coherent offer. But it's still just an 8 1/2 x 11" piece folded to 5 1/2" x 8 1/2". Here I believe repetition is the key. As with most space ads, you need to think in terms of three. They see the first one, consider the second one, and act on the third. That's an over simplification of some complex dynamics, but it's as close as anyone has come to explaining it.
Other format considerations include the amount of real estate you need to tell your story. Maybe you need a 9" x 12" outer envelope to pull off a certain type of appeal. I just did one of those in brown kraft for a certification testing software product in order to create a "official testing" environment. It's a vertical package with the window in the upper left quadrant. If it works in that format, I've recommended re-testing it in 6"x9" or #10 formats to reduce costs hopefully without losing the response rate.
Another reason for the size in this case is the need to show program screens and explain how they work. That usually means an 11" x 17" brochure. With that brochure, you already have one fold to 8 1/2" x 11". Folding it once more to fit 6"x 9" isn't too bad, but folding it in thirds for a #10 envelope turns it into a dog's breakfast. Sometimes a simpler, 8 1/2" x 11" brochure (2 sides) will do it, but it's a judgement call.
3-D Mailings
A critical factor in boosting response, of course, is getting the package opened. You may have a socko offer, but no one will know it if they don't open the package. Dimensional mailings are a near sure-fire, if expensive, answer to the problem of getting attention and getting the package opened. They also almost automatically win awards in the various dm and advertising competitions.
Few people can toss an item interestingly packaged in a custom box, or even in a jiffy bag, without opening it. Three-dimensional objects, however, whether custom designed or purchased in volume can be quite expensive, and the packaging adds more cost. But for high gross margin products (a $10,000 database or web server software product, for example), they work quite well. They're often tightly targeted to relatively small lists of select decision makers.
Other techniques include paying for FedEx or Express Mail delivery, either real or using one of the simulated packages that are commercially available. Working with a dm agency, I once had great success getting electric utility CEOs to a day-long conference using Certified Mail, preceded by a postcard alerting them to the Certified envelope that was on the way. They were on the phone to the agency before the Certified package even arrived!
It's For You.
Another way to boost response rates is to support your direct mail with telemarketing. While it adds to your cost, the often dramatic increases in response --- up to 300% and more - make telemarketing well worth testing.
In truth, there are many instances where telephone support is practically a necessity. Most business-to-business lead generation programs require telephone identification of the decision-maker you need to address with your message. It likely won't be the name on your mail piece. That and other factors in the lead qualification process will mandate telephone support.
Companies that sell through seminars find telephone followup essential. And usually more then one call is needed. Why? Because it takes a ton of persuasion to get busy people to override their schedules and physically go from point A to point B. Most of us don't have enough control over our daily lives to assure where we'll be on given day two weeks from now.
Indeed, any time you're trying to get people to alter their behavior (and "do" something other than send for a free trial), you'll need to provide lots of push.
The 2% Solution
The standard answer one gets when asking what kind of response to expect is "2%" No one knows where that came from, but it really doesn't mean much other than don't expect 50% response rates. Actually, any newsletter promotion (for a $300 - $400 newsletter) that pulled over 1% would be response heaven for the publisher. Conversely, 2% for a $25 - $30 magazine wouldn't be anything to shout about.
Then there's the matter of payup. A major business magazine once had me re-write their billing series because their super- duper, "low-cost" double postcard ("FREE ISSUE!") was netting just 40% payup. So what good is a high response rate? And what did they save?
Magazine circulation directors learned long ago that the only way to know what response rate you're going to get is to test your options in the mail.
A major left coast publisher wants to test a double postcard (actually a triple) against their current control package. The designer and I gave them three versions: a straight offer sell (make the free issue a no-brainer); a content sell (you must know this stuff to survive!); and an action device test (remove the sticker and place where indicated). They may not test all three right now, but they appreciated getting the options to consider.
Answer #3:
Recently, a fellow who sells magazines via telephone asked me if I thought he could sell subscriptions via direct mail. "Why not," I suggested, "most publishers do." But he wanted a "shell" type of package that he could run through his laser printer for titles and prices and mail it. That's different. I took a shot at a package concept, gave him an estimate and he e-mailed me: "...is this going to work or are we just on a fishing expedition? In other words, do you know your business well enough to say the piece we in effect "buy" will yield approx 1.2% response or what? If we commit funds to this will this definitely produce satisfactory results?"
Well, I know my business well enough to know that this guy has a lot hurdles to jump before he can look for guarantees. (1), He's mailing to "cold" lists not necessarily magazine buyers or even mail order buyers; (2) he has no content sell copy, just a price-off offer; (3) he's presenting a "hard" offer despite the fact that most magazine subscriptions today are sold "first issue free" and stress a "bill me" option; (4) he can't offer premiums; and (5) he has no credible image in the marketplace (he's not Ed McMahon) to back up his offer. Can he even offer a money-back guarantee? He never said.
What he calls a "fishing expedition," most publishers know as testing, something he clearly hasn't time for. I suggested he stick to the telephone until he learns more about direct mail. Clearly, this was a case for answer #3: "I don't know what kind of response you'll get," since he obviously wasn't up for "it depends," or "test it."
Few consultants want to admit they don't know, I guess, and do what they can to avoid the issue. Some freelance writers especially will tout their ability to increase your response rates by various breathtaking percentages -- even before they know what you sell, and to whom! How do they do that, I often wonder? My guess is they play the odds and "forget" the losers.
Figure the Breakeven and Go From There
There are lots of formulas for calculating response rates - once you have a testing history to work from. But in a first- time-out situation, the best you can do is figure your breakeven rate. Add up all your costs (See "What Does It Cost To Do A Mailing", September 96) take your net revenue per sale and determine what response rate you need in order to break even on the mailing. If it comes to 10%, you're in trouble. As I said earlier, if you can't make it at 1%, take another look at the project.
But keep in mind that direct mail is a database business. Your purpose is to build a list of happy customers to whom you can sell, cross-sell or upsell related products, upgrades, whatever. Marketers often lose money on the front end in order build a database for back end profits. "Direct mail is a process of gathering information, paid for by sales," some guru once said. It doesn't say "fully" paid for and your job is to be sure the information will be worth the cost.
