19
Apr

Direct Mail Expense vs. Profit

The USPS and low-tech marketing agencies would have us believe that a Club should “not” send offers to the right household for the right reasons. No, you should use basic selection criteria, such as age, income, presence of children and home value to carpet bomb — or spray and pray — an entire neighborhood, carrier route, zip code or county. Why? Because it takes less work and is cheaper on a per-piece bases; speed and cost.

What’s the sense in that?

ROI is of paramount importance to us and our Club Clients. It’s why we invest in and execute direct-engagement campaigns. With predictive, data-driven marketing we remove the “did it work?” or “belief it worked”, and instead rely on data to measure and report Return on Investment. At Instinctive Insights™, we target each household because of who they are, not because of what their neighbors look like. Granted, attractive prospects are likely to be clustered in a general area, but there’s no point in reaching out to someone too young, too old, too inactive and otherwise not involved in any activities or interests that mirror those fostered by a Club Client. Let’s look at a few pitfalls of low-tech carpet bombing, and then explore a better, high-tech solution.

The plagues of EDDM

(Every Door Direct Mail)

  1. You must mail to everyone on the carrier’s route. That includes not just “bad fits”, but also vacant houses and people with the mail on “vacation hold.” Talk about waste.
  2. Let’s repeat … you must mail to everyone on the carrier’s route. If there are 2,500 households on a route, and only 100 or 200 match the profile of who you know is attracted to a Club, why are we printing and paying for postage to the rest? Doesn’t make sense.
  3. A postcard must be one creative version, a one-size-fits all design that doesn’t even have the recipient’s name and address on it. Any Club with a diversified membership base knows why a family with children joins vs. an empty-nest senior. Why would we talk about child care and youth programs when engaging an empty nester? Conversely, why would we discuss Aquatic Therapy when engaging a young professional?

A Better Approach: Data-Driven Persona Marketing

Personas: Club Marketers, GMs and Owners know why different persona types join their Club. Variable printing – which does not have to cost more than one-size-fits-all printing – empowers a Club to present the right offer, message and images to each prospect, based on what we know about their household, and how “like” members see, view and talk about the Club. Data-Driven: We manage 400+ demographic and psychographic elements for nearly every household in the United States. Our predictive models ascertain the right elements and values that describe a prospect household most likely to become a member of a Club – custom to each location and prospect persona. In both data and creative, we can’t evaluate a young professional the same way we do a Family or Senior Household. Each persona has unique qualities that determine which household is most likely to respond to a persona-driven offer.

The Bottom Line:

Don’t Engage Everyone. Be Selective and On-Point High-tech, data-driven targeting, coupled with persona-based creative, is the way to be truly effective in a high-cost, high-reward channel like direct mail. Let’s look at a “cost” scenario from a Club Client that was using EDDM before being shown a better way. EDDM Instinctive Insights Number of Postcards 10,000 6,277 Postage Expense $1,450 $1,632 Printing Expense $1,200 $1,507 Total Expense$2,650$3,139 New Members Acquired 3 16 Acquisition Cost per Member $883 $196 The comparison is very apples-to-apples, not looking at the additional design time for multiple personas, data costs, etc., but even so, the variance between $883 and $134 is so extreme there’s no ancillary cost in the world that would help a spray-and-pray effort survive this comparison. Avoiding the Per-Piece Pricing Trap:

Focus on Profit and ROI Instead.

All of us manage a budget … I get that. But, a myopic focus on per-piece pricing often distracts a Club from assessing the opportunity, or Return on Investment for every dollar spent; a metric we find much more valuable when analyzing a campaign’s performance. EDDM Instinctive Insights Number of Postcards 10,000 6,277 Campaign Expense $2,650 $2,139 New Members Acquired 3 16 Avg. Monthly Dues $60 $60 Expected Annual Retention 70% 70% 1st Year Revenue Generated $1,512 $8,064 Profit or Loss ($1,138) $5,925 1st Year Campaign ROI (43%) 277% This is a simplified example of a calculation one might use. The methods we apply at Instinctive Insights are a lot more detailed to ensure a holistic view of campaign success, but it serves its purpose.

Conclusion

Yes, there is a place for Every Door Direct Mail and low-tech approaches to Direct Mail. For example, if you are a landscaper or pest control company, everyone in an “attractive” neighborhood may have a need for your services. But, for most businesses – and certainly Clubs – high-tech methods crush yesterday’s tired, old way of looking at simplistic, low, per-piece priced marketing.

If you would like to learn more about our approach, and see how it can benefit you and your bottom line, let's start a conversation.

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