Direct Mail campaigns can be a powerful marketing channel for any sized business, when executed properly.
To make the most of this Direct Mail marketing strategy, it’s important to have a clear understanding of your goals, audience, and budget. In this chapter, we’ll explore the key steps involved in planning a Direct Mail campaign, including acquisition and retention strategies, budgeting, frequency, testing, tracking methods, and integration with other channels.
Defining Your Direct Mail Campaign’s Audience
The first step in planning a Direct Mail marketing campaign is determining what you are trying to accomplish, and which audience you are marketing to. This fundamental choice drives the strategy and the plan for the entire campaign.
Understanding your target audience is a key element in any marketing campaign. Investopedia defines a target audience as “a group of people that have been identified as the most likely potential customers for a product because of their shared characteristics such as age, income, and lifestyle.” For a Direct Mail campaign, it’s best to start by determining the type of campaign you wish to run: Acquisition or Retention.
If your campaign is for Acquisition, then the goal is simply getting new customers. Focus on the list-building approach via targeted, modeled data, or saturation lists, depending on your budget and business.
If your campaign is for Retention, you can segment your existing customer database (known as a “house file”) in different ways to carve out distinct profiles used to match a relevant message and offer.
Direct Mail campaigns have been proven over time to be effective at reaching prospects who have never purchased before and converting them into brand-new customers. Whether these consumers are aware of your brand through other advertising or are being newly introduced, acquisition campaigns are designed to drive response and incremental revenue from first-time buyers.
When starting an acquisition campaign, the first thing to understand is how much you’re willing to spend to get a new customer. This is called Cost Per Acquisition (CAC), and for each business that will be different. To understand your CAC, you need to know the Lifetime Value (LTV) of your customer, because that determines the appropriate amount you can spend to get a New Customer.
If, for example, a customer buys an item for $100, with a Gross Profit of $50, and then typically buys from you 3 times per year, that’s $150 in Gross Profit per year. And, if they typically buy for 3 years, then that’s $450 in Gross Profit.
So how much are you willing to spend to get that customer who delivers $450 in Lifetime Profit? A good rule of thumb would be from 10% up to 30%, which in this scenario would be from $45 to $150.
Knowing what you’re willing to spend to get a new customer helps you develop your budget based on how many available prospects are in your target market, budgeting for the right Direct Mail format, and other strategies like increased mail frequency or digital integration.
Retention & Winback Strategy
Within your house file, you should consider two different programs for for Direct Mail: Retention – meaning more recent and active customers, and Winback – meaning lapsed or eroded customers who either haven’t ordered in a while or are reducing their frequency or spend.
Analyzing this “Golden Vault” within your own house file can help you target different segments with different strategies, messages, and offers. For example, use seasonal patterns to identify likely-to-buy customers; use past purchase behaviors for more informed cross-sell or upsell campaigns; use a determination of Retention or Winback to adjust offers or products you’re promoting.
Understanding how your own customer database can reveal a target-rich audience unlocks new opportunities to drive more sales with Direct Mail. Ask a Direct Mail Expert for advice on how to review your database.
Once you determine if the strategy of your campaign is Acquisition or Retention, the other aspects of planning the Direct Mail campaign fall in alignment:
Direct Mail Campaign Budgeting
This should be determined by the goals, your expectation of sales, and how this Direct Mail campaign fits within your overall marketing budget. Most Direct Mail programs range between $0.45 to $0.60 per piece, which includes postage (if your program is Every Door Direct Mail, which does not have a postage fee, it would be less). Higher-volume programs would also have a lower per-piece as well.
Your budget should be focused more on the Cost Per Acquisition, or the cost-per-reorder, that is appropriate for your product and customer value, along with other marketing efforts you’re doing alongside the campaign.
There’s no hard and fast rule about budgeting, but the Small Business Association guideline notes that an average overall marketing budget usually ranges between 7% – 10% of a business’s top-line revenue.
For example, if you have $10M in revenue, 8% of your marketing spend would be $800,000. If you allocate 15% of your marketing spend for Direct Mail, you would have a $120,000 annual Direct Mail budget. Your remaining budget could be used for other marketing programs or multichannel campaigns and would allow you to test various Acquisition and Retention programs.
The budget should allow for some kind of frequency or repeat marketing. Just like you never send only one email to subscribers, or never drop a single Facebook ad, Direct Mail Marketing is best planned with multiple touches. The longer “shelf-life” and high engagement rate of mail means that people keep the promotion around and visible in their homes until they respond or discard it.
Plan multiple touches based on concrete, customer-centric reasons, such as seasonality, events, timing with other marketing, new product or service launches, or even countering busy holiday sales.
A testing plan is critical to understanding what works. Just like multi-variate tests on Facebook or Display ads or A/B testing on emails, your Direct Mail campaign should have a single test of either offer, format, list, creative treatment, or call-to-action.
With larger Direct Mail campaigns, a test could be a “cell,” where out of 20,000 mailings, you test 5,000 with a different treatment (The “Test”) and 15,000 with the creative you’ve seen work best in your less expensive digital channels (The “Control”).
For more advanced marketers, having multiple test cells also works, to determine response rates across different mailing list segments and learn faster.
Direct Mail Campaign Tracking Methods
Like all marketing methods, being able to measure response via QR codes, offers, calls, purchases, and matchbacks is a key element of the overall plan. Before you begin, you should have a mechanism or process to measure response and determine the rate of success.
If the original goal at the beginning relies on knowing your Cost Per Acquisition, then tracking response informs if you were able to reach that goal.
While no single measurement method is foolproof, plan to have a way to collect and understand the response data from both Acquisition and Retention programs.
Adding Retargeting or Trigger Campaigns
In addition to the traditional – and highly effective – Direct Mail Campaign, new technologies enable brands to use precise digitally-fueled data to launch highly targeted, daily, or weekly mailings. These programs are usually budgeted as an ongoing marketing channel to take advantage of website traffic or customer behaviors.
Direct Mail Retargeting sends cards to website visitors who leave without buying. These prospects expressed an interest by visiting your website and are more likely to respond to a Direct Mail offer.
Trigger Campaigns are driven by data sources such as CRMs or specific files like New Homeowners, where recency is important. These highly effective marketing mailings launch daily or weekly and are determined by customer behavior.
Adding Integration with Other Channels
A Direct Mail campaign doesn’t exist by itself: any marketing co-exists with all the other marketing channels a brand is using. Harvard Business Review explains that, in response to changing consumer behaviors, successful companies are becoming increasingly clever. “Rather than merely reacting to the journeys that consumers themselves devise, companies are shaping their paths, leading rather than following.” Direct mail integration is an excellent way to shape the customer’s journey.
By making sure the Direct Mail is smartly integrated with a digital program, you’ll find a lift in response amongst all channels.
- Time your mailing with matching email marketing campaigns to existing customer segments
- Promote similar offers on your website or landing page
- Use similar message, branding, and offer for Digital Advertising like Social Media, Geofenced Addressable Display, Connected TV, or Google Display Ads
Creating a Direct Mail campaign plan that covers these aspects will help you and your team make the most of the campaign and take full advantage of the high-response nature of Direct Mail.
By Chris Foster, VP New Business Development