There are a lot of misconceptions about Direct Response Marketing: mainly how it works and why it works. I will try to dispel some of these misconceptions, so you will have a better chance not wasting your hard earned money on your marketing.
One of the first things you learn in Direct Response Marketing is the order of importance. It is always 1. List, 2. Offer, and 3. Creative.
A lot of people don’t understand the differences when it comes to this:
1. The List is most important because you need to understand who your customers are. When ordering a list, you need to consider the demographics, things like age, gender, education, home owner, household income, etc. All are a determining factor who is most likely to respond to your Direct Mail Solicitation.
2. The Offer. How many times have you received a Direct Mail piece that was very pretty, but lacked a Strong Offer or a Strong Call To Action? Without a strong offer, the chances are good that no one will respond to your solicitation.
3. Creative. This is 3rd on the list but just as important as the other two. Without talking to the right person, and having a strong offer, communicating clearly what the offer is, is important. You must have a compelling headline. Something that will drive someone to open it up and read it. Once they’ve read it, and you’ve made a compelling argument, the offer should kick in and they typically will respond to it.
Here are two things you often don’t hear in general but are important facts of DR Marketing. The “Open Rate” and the “Take Rate.” The “Open Rate” is where someone gets your Direct Mail Piece and actually “Opens” it up. Most people stand over the garbage can when going through their mail.
A basic rule of thumb when it comes to Direct Mail is the average open rate across the board is 1% to 3%. Don’t believe anyone who tells you that they can get you more! It’s just not possible. You’re lucky if you get a 1% Open Rate. Then there is the “Take Rate.” This is when someone actually responds to your offer. The percentage from the “Take Rate” is about the same as the “Open Rate”. So for example, if you mail 20,000 pieces, 200 people will open it up, and maybe 2 to 6 people will respond to your offer. That’s good if your average price point is $5,000, but if it’s not, you’re wasting your time and money. Even coupon mailers that proliferate your mailbox fall into this category, they claim a very high response rate, but the reality is that less than 1% of these mailers are actually opened.
Finding the right vehicle to advertise in is key to your success. You need to know and understand which marketing & advertising vehicles can get you the “Best Response.”
Having an integrated marketing campaign, which means a mix of Direct Mail, Print, Radio or TV, and Even Out of Home (Billboards) will garner a larger market share for you. Another Rule of Thumb is budget. 1 to 5% of your gross sales maintains your “Market Share”, 5 to 10% of your gross profit grows your “Market Share”.
One other thing to mention is that you should always be testing your direct mail every month. Testing gives you the opportunity to see if your DM piece or ad can be pulling any better. Testing is key to your long term growth and gaining market share. You will also get a better ROI (return on your investment).