How to guarantee a profit in direct mail

17/08/2007 by Tony Attwood.

It actually isn’t as hard as is sometimes imagined – and here’s how I do it

Firstly, you work out the necessary response rate that you need to make money. So, let’s assume that you make £20 from each average sale. Also we’ll assume you are running an average sort of campaign where it costs you around 40p each time you mail a potential customer – so £40 per 100.

Obviously you need to make 2 sales from each 100 posted in order to get this return – 2%, which is quite often achievable in direct mail.

Now the first objection is often that the orders one gets are so variable it might result in £100 profit or £2 profit. The second is that the value of the first order is neither here nor there – because most customers come back and buy more – which is where the real profit lies.

My answer to both points is the same: do an experiment, follow one group of customers over time and see what happens.

So, you might choose to mail 300 potential customers selected at random. That costs you in marketing terms around £60. Now you track the result – the total gross profit you get from those 300.

For the firms selling one item its easy – you make £20 per sale, you need 3 sales to break even. You get six sales, you are making money, so now you can go on and mail lots more companies.

For the firms where profit per sale varies, or where profit comes later, you do have to track those 300 over a period of time. Sure it is a bit more work, but the rewards can be enormous. Let’s say that you get four customers, and they bring in £10 each – you’ve made £40, and that is obviously a loss. But tracking those four over the next four months you find that you’ve made another £200 – money that would not have been made had you not done the original promotion. So it is profitable – and you should be doing this over and over again.

Put like this I think it seems so easy – and yet thousands of companies don’t look at direct mail in this simple way. I would urge anyone who is involved in direct mail to do this type of analysis.

The next objection that I hear is tracking, as in “we never know where the customer saw our advert – we’ve tried putting codes on leaflets, but they don’t use them…”

I am 100% certain you can track customers – and I have done it with a publishing company. I’ll go into more detail next time – but if you are anxious for the solution now, by all means give me a call on 01536 399 000.

Tony Attwood

Posted in Uncategorised | Print | Comments Off