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The Green Sheet Online Edition

May 09, 2011 • Issue 11:05:01

How to use direct mail to build your business

By Peggy Bekavac Olson
Strategic Marketing

A frequent request I receive from ISOs and merchant level salespeople (MLSs) is for help with lead generation direct mail campaigns. They've either tried them in the past with limited success, or they just want to get their feet wet and don't know where to begin. This article focuses on direct mail marketing with the hope that you will use this effective sales tactic to help grow your payments business.

Direct mail overview

Direct mail takes printed promotional material and delivers it directly to prospective buyers of your products and services. The goal is to motivate them to respond to a call to action; in other words, take some kind of action toward making a purchase.

One of the benefits of direct mail is its ability to communicate information to almost any conceivable target group for a relatively low cost. It can create awareness and interest in your company, as well as your products and services, and be useful in generating leads outside your usual customer base or geographic area.

Printed promotional material used for direct mail typically fits into one of five formats: letter-sized envelope, postcard, oversized envelope, dimensional mailer and catalog. Delivery options include using the postal service or one of the large private shipping companies.

Direct mail typically contains a special offer, discount or incentive to entice prospects to take action. A call to action can be as simple as asking the recipient to pick up the telephone or visit a website to obtain further information about your company and its products and services, schedule a sales call, see a demonstration or even apply for a merchant account.

As a marketing tactic, direct mail can be your company's sole lead generation activity, or it can be combined with other efforts such as advertising, public relations, events, social media, web marketing, email marketing, telemarketing and more.

Ultimately, the goal of direct mail and other marketing tactics is to fill your sales funnel, or pipeline, with enough leads so that when moved though the sales process, some prospects become your customers.

Response rates and frequency

Direct mail response rates can vary greatly and are dependent on brand recognition, the product or service being offered, mailer appearance, the offer and the way it's presented, the mailing list used, time of year, general economic conditions, mood of the recipient - the list goes on. In general, over half the battle for a good response rate depends on the quality of the list you use; the other major success criterion is the ability of your promotional material to spur action.

Although response rates are difficult to estimate without specific context around a particular direct mail campaign, benchmarking statistics are available. The Direct Marketing Association's 2010 Response Trends Report disclosed these findings:

  • Response rates for direct mail have held steady over the past four years.

  • The average response rate for direct mail across the 10 industries and markets surveyed was 2.61 percent.

  • Letter-size envelopes achieved a response rate of 3.42 percent for a house list (developed internally by a company) and 1.38 percent for a prospect list (purchased or rented from a list broker).

  • Nearly 60 percent of direct mail campaigns in financial services aimed to produce a direct sale; the other approximately 40 percent intended to further the sales process.

  • Financial services response rates were comparatively low, averaging 2.66 percent for a house list and 1.01 percent for a prospect list.

  • Business-to-business campaigns yielded greater success than business-to-consumer campaigns for financial services companies.

In my business, the response rates I've experienced using "cold" prospect mailing lists hover between 0.5 and 2 percent. With a highly targeted house list, an attractive mailer and a compelling offer, I've seen much better response rates, sometimes as high as 10 percent or more.

So why are response rates important? They matter because they help determine whether a campaign will be cost effective. The first step involves figuring out the break-even response rate. This can be done by calculating the number of leads that will need to be generated by the direct mail piece and funneled through the sales cycle before the campaign pays for itself.

If your break-even response rate is too high, you might want to consider less expensive lead generation methods such as email marketing, pay-per-click advertising, events and so on. If the break-even rate seems feasible, streamline direct mail costs by obtaining competitive bids for printing, production and fulfillment. Also examine ways to reduce postage and shipping expenses.

When your promotional material is ready to mail, start with a small campaign to test its response rate. You don't want to continue investing in a bad campaign if the response rate is low. Also try to make improvements to your campaign to increase its effectiveness, perhaps by tweaking your call to action or making your offer more attractive.

Once the response rate is acceptable, increase the number of direct mail pieces you send out. Remember to keep your expectations reasonable. It's better to be conservative and exceed expectations than to forecast tremendous success and be disappointed.

Regarding frequency, it's more effective to hit a small, targeted list repetitively than it is to send to a large list only once. The marketing rule of thumb is that it can take up to seven touches, or contacts, involving a buyer and seller to make the sale.

Sending repeatedly to the same list not only increases brand recognition and establishes credibility, but it also improves the odds of reaching prospects when they are ready to buy. Failure on an initial campaign may just mean that you have to reach out a few more times to achieve success.

Six steps to success

To ensure the best results with your direct mail campaign, make sure you:

  1. Target the right audience: Who you mail to is the most important aspect of a direct mail campaign. It's all about the list; it will make or break your mailing. Target potential prospects based on the characteristics of your best and most profitable customers (standard industrial classification code, location, revenue, years in business, credit worthiness, etc.). If you target businesses that aren't interested in what you are offering, it doesn't matter how wonderful your campaign is, it won't produce the results desired. You must reach the right audience who has the need you're addressing.

  2. Choose your words wisely: Write to the recipient of your mailer and don't overdo the text. Be clear about what you are promoting and the message you are sending. Sell benefits, not features. Communicate effectively and appeal to your intended recipients, so they understand what you can do to help them and why they should act. Don't forget to include your company's phone number and website address.

  3. Develop an enticing offer: Don't forget the call to action. Make an irresistible offer. Entice response by offering valuable content such as payment processing tip sheets or secrets on how to increase sales. You might want to offer a free gift, a discount or even a rebate on processing fees for those who become customers.

  4. Create an attractive mailer: Make sure the creative design fits your audience and your offer. Develop a colorful, professional mailer that reflects your corporate brand identity and sends the right message to potential customers. Don't use boring corporate stationary.

  5. Test and analyze your results: Learn from your campaigns. Which campaigns produce the best return on investment? Sometimes the campaigns with the highest response rates aren't the most successful. Examine response rates, average sale and costs to determine what works best so that you can make adjustments and improvements.

  6. Repeat and follow up. Remember the seven touches marketing rule of thumb. Touch your list multiple times with direct mail, or use an integrated approach with a combination of direct mail and other marketing tactics such as email marketing, telemarketing and advertising.

    Hopefully, you now know enough about direct mail marketing and how it can benefit your company to give it a try. Your sales pipeline should swell with the results. end of article

    Peggy Bekavac Olson founded Strategic Marketing, a full-service marketing and communications firm specializing in financial services and electronic payment companies, after serving as Vice President of Marketing and Communications for TSYS. She can be reached at 480-706-0816 or peggyolson@smktg.com. Information about Strategic Marketing can be found at www.smktg.com.

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