Targeting prospects with direct mail

Nation's Business, Sept, 1997 by Howard Scott

Ever wonder if those direct-mail sales pitches you receive are really effective? Many are -- as companies and marketing experts can attest.

Direct mail generated about $390 billion in sales last year, according to Nicholas Diehl, spokesman for the Direct Marketing Association, a trade organization based in Washington, D.C. Sales figures for direct mail are expanding, he says, at an annual rate of 7.1 percent in the consumer market and 10.3 percent in the business-to-business market. Direct mail accounts for 14 percent, or $34.6 billion, of advertising expenditures in the United States, says Diehl.

Here are experts' suggestions for firms considering direct mail as a marketing tool:

Develop a plan. John Horton, president of Horton Associates, a Providence, R.I., direct-mail consultant, says a business owner should start by describing the company's ideal customer: "Ask what motivates the individual. What are his buying habits? Income level? Age? Work? What makes him buy from you? If you don't have your customer down right. you'll never obtain a high-enough response rate."

Entrepreneur Webster Bull thought a lot about his ideal customer before launching his first direct-mail marketing campaign nine years ago. His two-person firm, Memories Unlimited in Beverly, Mass., writes family histories. He decided his ideal candidate had to have money and the time to reflect on life.

A Harvard University graduate, he examined alumni-profile studies at the Harvard Business School library and concluded he should focus on the school's graduates over 70. He bought his first Harvard Business School prospect list from a list company. He now sends mailings almost weekly to Harvard alumni.

Get a list. Finding a good list company often starts with the Yellow Pages under "Mailing Lists." List companies develop databases of names and offer customized list packages, such as private-school graduates in a particular area, consumers who buy from gourmet-food catalogs, or medical practices with revenue over a certain figure.

A good list company will discuss your needs with you, determine exactly what you are trying to accomplish, and design a customized list, says Jeff Johnson, a sales representative at A.A.C.S. Inc./Accudata America, a Cape Coral, Fla., list company.

The list company that you engage should deal with your type of customers -- whether consumers or businesses -- and have experience with your line of products.

Lists can be rented or purchased. First-time users should rent lists to try them out. Depending on the list user's specifications, a list rented for one-time use might cost $50 to $75 per thousand names, while a multiple-use list may cost $25 per thousand names for each mailing.

A typical first-time mailing for a small firm is 3,000 to 5,000 names. A response rate of 2 to 3 percent on a direct-mail offer is considered good; 1 percent is average.

Gary Allison, owner of Gazebo Craft, a Chicago firm that distributes gazebo kits, obtained a list that fell short of his target. It had 5,000 names of owners of homes valued at around $250,000. Says Allison: "We obtained 2 percent inquiries that resulted in less than 1 percent sales. My next list will include only higher incomes and addresses in upscale communities. With this finer targeting, I hope to do better."

Create a package offer. The piece of mail -- the mailer -- that you send to a prospect should make an impact, but it need not be an expensive blockbuster. Says Horton: Don't sell your product; sell a deal. Get right to the point. Avoid baloney. Be personal. Give the reason why the customer should respond. Make it easy to respond."

Don't give up. Chuck Wells, president of the Wells Insurance Agency in Palmyra, N.Y., says that when direct mail doesn't work for business owners, ifs usually "because they don't stay with it." Wells sends identical postcards every other month for up to three years. He explains: "The first time, the customer might toss the mailer. But the third or fourth one, he might read. Then, when he has a problem with his agent -- an unsatisfactory prices, a rude clerk, whatever -- hell call me when he gets the next postcard."

Make changes as necessary. Consultant Horton says that tinkering with a direct-mail formula over time is what produces success. Memories Unlimited, for example, improved its return when it began including testimonials in its mailings. Wells Insurance found that enclosing a reply card was less effective than simply including its phone number.

Total costs of a 3,000-piece mailing would come to $1,435, Horton estimates. List rental would be about $225, he says; printing, $550; design and typesetting, $150; and bulk-mail charges, $510.

But if you follow the experts' suggestions, you could find such outlays to be money well spent.

Howard Scott is a business writer in Pembroke, Mass.