The beauty of direct mail is that it is a cost-effective advertising medium, so a campaign can soon pay for itself. But direct marketing is most effective when it is developed over the long term as part of a commitment to relationship marketing.
Direct mail can help you to get to know your customers, tell them about your products, communicate your brand values and establish a relationship that brings long-term loyalty.
For new companies, a little planning and patience is required. You have to begin by compiling your database, because you need the right levels of information to target your best prospects. And you may have to create a rapport with those prospects before you can sell to them.
Direct mail or door-to-door?
Your first big decision is how to deliver your direct marketing messages. Businesses that rely on local trade may be able to reach almost all of their prospective customers in a door-to-door delivery exercise. For example, Ikea delivers its catalogue to homes within 60 minutes' drive of its stores.
Door-to-door enthusiasts include retailers, charities and fast moving consumer goods (fmcg) companies, such as HP Foods. Lots of industries use direct mail extensively; for example, the utilities industry spent £11.9m on direct mail in 2010, while almost 25% of all post which lands on your doorstep is direct mail from financial services companies.
The main advantages of door-to-door delivery are cost and the breadth of coverage. And, by delivering items with a reply mechanism, such as requests for information or competitions, companies can use the responses to build their own database of prospects.
The best response rates from direct mail marketing are achieved when items are enclosed in an envelope and delivered with the morning mail. Typical items involved in direct marketing include samples, coupons and catalogues.
In 90% of door-to-door deliveries, some kind of targeting has been used. For instance, specialists such as TNT Post use address mapping and postcode systems to select which houses and areas to target. The Royal Mail also offers a door-drop service.
Direct mail marketing does have advantages over door-to-door, even when the majority of customers are located within one area. It provides much more precise targeting, allowing different messages or offers to be sent to different types of prospective customer. Recipients often prefer the personal touch, with letters correctly addressed to them rather than to the occupant.
Make sure that you keep an accurate record of the success of your direct marketing campaigns. Therefore, as response to the mailings grows, so does the information held on the database, allowing further targeting and ultimately boosting sales. Direct mail is used by all sectors.
Many homeowners now choose to opt out to opt out of direct mail, and this has led to a gradual decline in the volume of material delivered; according to figures from the Direct Marketing Association, around 3.6bn items of direct mail were sent by British companies in 2009 - around 800m less than were sent in 1999.
However, a gradual improvement in targeting has led to a steady improvement in direct mail response rates. Only around 4% of direct mail received a response in 2003; now, the figure stands at nearly 5%. This clearly illustrates the importance of homing in on your target audience, rather than adopting a scattergun approach.
Setting objectives and managing costs
To get the most out of a direct mailing, it is vital to set your objectives. This will help you to evaluate the results and manage the costs. Your ultimate objective will be to produce sales but your mailing could be the first step on the path to sales success. It could be designed to simply introduce your brand and give out information.
Mailing samples, for example, can bring a long-term sales lift as consumers are converted to a new product. And mailings that require a response – such as special offers and competitions – will highlight those consumers that are warm to your product and should encourage you to mail them again.
One of the benefits of direct mail is that you can measure the response, which in turn allows you to manage your costs and maximise sales.
The cost of a mailing is made up of the following:
• The cost of renting or compiling a mailing list.
• The cost of the raw materials - paper, envelopes and stamps.
• Any labour costs arising from the production and dispatch of the mailshot.
A mailing to 3,000 to 4,000 addresses could cost just £500 and for every £1 spent on direct mail, an average of £14 is generated. However, the response you are seeking will depend on the value of what you sell. A furniture maker could cover its mailing costs with one or two orders but a stationery supplier would need to bring in a lot more custom.
The direct mail industry has undergone a raft of regulatory changes in recent months. Some could have a positive effect on the industry, others negative.
On the one hand, the Royal Mail recently removed the requirement for each piece of direct mail to carry a postal address; this means that the mail need only be addressed to a specific carrier route, and the postal carrier will deliver it to each household on their route. This subtle change could be great news for direct mailers who send large volumes of mail, and, until recently, had to buy mailing lists of addresses to do so.
On the other hand, Royal Mail has also announced a 10% increase in the cost of higher volume business packets and mail, which will surely impact companies which send out direct mail in bulk.
Time will tell what effect these changes will have on the industry, and indeed whether the industry will thrive or wither as new advertising channels come on stream.