| |
| |
|
Marketing Information |
|
|
|
Break Even On Your Next Direct Mail Campaign...And Still Generate Huge Profits
With direct mail, you can break even and still claim success. The reason for this can be understood only when determining the lifetime value of each customer brought in and the likelihood of those customers responding to subsequent offers. Here is a concrete example to illustrate my point. Joe's Civil War Shop Joe owns a Civil War souvenir shop. Yes, believe it or not there is a rather large market of Civil War nuts who collect anything from old bullets, to swords, to manuscripts written by confederate generals. Joe's sales have been slowing since he is located in Virginia, the capital of Civil War memorabilia because this market has saturated itself from having close local stores to buy collections from. So, Joe decides he wants to sell nationwide through direct mail. He goes out and gets the best Civil War nut list he can find (no offence Civil War lovers...), hires the best copywriter he can afford and sets out on a little campaign of his own?a direct mail campaign. His sales letter sizzles. Orders come in at a respectable rate, but after he tallies the results he discovers the cost of the mailing just about breaks even with the orders that came in. My question to you is this: Should Joe abandon this project or continue? This is a big decision he has to make. What would you do? Continue If Your Existing Customers Will Buy More From You The correct answer is really very simple if you understand the lifetime value that each customer on average brings you. Let's say, on average, Joe's customers pay around $65 for each order they make. But Joe knows Civil War nuts normally can't stop at just one item. Once Joe establishes a strong trust with his customers by shipping promptly, providing products that match expectations and satisfies the desires of his customers, then on average those customers are likely to buy 2, 3 or more times per year from Joe. So lets say on average a customer buys 3 times a year from Joe. This comes to about $200 a year. Now after Joe "breaks even" a few times, he will have accumulated a good set of loyal customers provided he shipped on time, provided a great product, offered strong guarantees and gave prompt assistance whenever questions came up. Now Dig The Gold From Your Loyal Paying Customers Now, lets go back and see what happens when Joe sends a sales letter to ONLY his core customers that actually bought his products. What do you think his response and order rate will be? His customers already have shown to be hungry for his products. He has more to offer. If he throws in a special offer to his "best customers", his response rates could be 30% or more. So by "breaking even" Joe has built a strong customer base loyal to him. Now I ask...did Joe really break even? Of course not, he will make more money later on reselling to the customers he captured on the break-even mailings. At this point he would be stupid to stop after the first mailing. Does Your Customer Base Fit This Profile? If you want to use direct mail to expand your customer base, keep this in mind and ask yourself: "What can I afford to spend to bring in customers who will continue to respond and buy my products at a rate that more than justifies the cost of the mailings and brings a worthwhile profit. Each business will have different ways of calculating this?in Joes case I'll step you through it. Let's Crunch The Numbers To See How To Profit We'll use a starting 1000 mailing list as a base. Lets say it costs $800 for the mailing. $200 for copywriting, $100 for the list and $.50 for postage and cost of shipping. The total cost is $800 ($100 + $200 + ($0.50*1000)). Now to break even Joe would need to sell 12 products at $65. $12x$65 is approximately $800. That would be at a 1.2% response rate. So Joe just broke even...now lets see what happens if Joe sends 3 mailings to those 12 customers at a 30% response rate... 30% is about 4 customers. If each order is $65 then 4 x 65 = $260. Now this time sending mail costs only $6. So this time Joe made $254 dollars mailing to only 12 customers! Let's Try It On 10,000 Mailings Once we use 1000 customers to find our winning sales letter that gets just a 1.2% response (of course a better response will mean more money), lets see what happens when we roll this out to a real list of 10,000. With 10,000 mailings and 1.2% response, sales = $120*$65 = $7800. The sales letter has already been written, so no charge. Therfore, $7800 (sales) - $5000 ($.50 for each letter -- 10,000 letters) = $2800 in sales. 30% response on future mailings to 120 customers is 40, so 40*$65 = $2600 in sales! Subtract out the cost of the mailings of $60, then the final sales is $2540 from just 120 people! Now do this 3 times a year and you'll likely make $7620 or more extra per year! Test, Decide, Profit With a few test mailings to 500 ot 1000 people in your market, you can determine what your profits will be when you roll it out to 10,000. In this case, if you market is made up of 100,000 people, you stand to make $76,200 per year with this campaign. And let's say the average product is $130 dollars...you can make $152,400 per year! I hope you can see the power of careful testing followed by controlled follow-up with your customers. Use the simple calculations I showed you in this example and see if they may work with your own products. Remember, test your first mailing on a small list of 500 or 1000. Do this until you get a response rate that justifies rolling it out to more people. Also, know your market. Calculate how much the average customer is likely to buy over the course of a year. If it all adds up?go for it! Next article I'll show you another way to leverage your existing customer base to make even more money. Stay tuned. (Disclaimer: The information contained herein is meant for educational purposes only. The reader is solely responsible for any actions made based on the information contained in this article. Many factors affect success such as product, mailing list, offer, sales letter, etc.) © Copyright 2004-2005 JM Marketing, All Rights Reserved Jay McKee is a freelance copywriter and marketing consultant located in San Jose, CA. Jay specializes in all forms of direct response marketing. He also provides marketing advice to small businesses located in San Jose. To improve your direct response ads or to learn more about how you can use direct marketing to get more customers, sell more of your product, and boost profits without spending more on advertising go to: http://www.jaymckeemarketing.com
MORE RESOURCES:
Marketing - Google News |
|
|
|
RELATED ARTICLES
Direct Mail Personalization A colleague who does work for a nonprofit organization contacted me asking if I could do research on the success rate of personalized direct mail letters (Dear Joe) versus generically addressed letters (Dear Friend). Surprisingly, I didn't find as many statistics as expected, but I found information stating that personalized letters outperform generic letters. How To Achieve Success With Your Own Money Making Newsletter Writing and publishing a successful newsletter is perhaps the most competitive of all the different areas of mail order and direct marketing. You can still publish newsletter through regular mail. How To Be A First Class Marketer? Did you now how to follow up a new customer with less phone calls?First thing for you to know that you only have about 5 minutes for first follow up in the phone. The rest of that is a meeting arrangement. Twelve Places to Buy a Mailing List ©2004 Jeffrey DobkinThere are two types of lists, determined by their origin: compiled lists and response lists.Compiled lists are a common source of names and records that have been gathered, collected, and entered into a database. The Marketing Secret Every Child Knows Little Kids Ask Until They Get What They Want.Mom, Mom, Mom, Mom, can I have an ice cream? Can I, Can I, Can I, Can I? Please, Please, Please, Please. Loan Officer Marketing - How Branding Shapes Your Prospects Perceptions Social scientists have proven that people experience what they come to expect. It's like the first time you watched your favorite movie. Do Not Consider Running the Same Yellow Page Ad until You Read This Grant Businesses have a love-hate relationship with the Yellow Page directory On the one hand, business owners know they need to be there - even though everyone they compete against is there, too. They rightly fear their ad won't get noticed. Common Exhibit Marketing Mistakes: Ten Tips on How to Avoid Them The key to great exhibiting is marketing. But marketing is a very inexact science that leaves room for a multitude of errors to occur. Are Corporate Awards and Corporate Gifts Beneficial for Your Business? With the increased challenges that all companies are faced with, many corporations have implemented various initiatives to continue to grow corporate earnings and shareholder value, some have discovered the strategic value of corporate awards and corporate gifts. From the boardroom to the frontlines to the client across the country, corporate awards and gifts offer many benefits to enhance performance. Design Direct Mail Postcards Back-to-Front to Boost Response Rates Conventional wisdom says that the front of a direct mail postcard is for the picture and the back is for the address, stamp and a short message.But some savvy direct marketers design their postcards the other way around-and boost response rates as a result. 8 Lessons in Strategic Marketing A La Daddy Daycare I bet you thought the movie "Daddy Daycare" was a kiddie comedy, right? Wrong.. Linking Features & Benefits I'm sure that you've had those Eureka! moments, too. When a piece of information suddenly helped you see or understand something that hadn't been apparent before. Discovering The Benefits That Hook Your Prospect Benefits! They're what marketing is all about. No doubt you've heard the mantra over and over: "Benefits, not features. Mortgage Marketing - What Your Client Wants Your business depends on the success of your marketing efforts. If your marketing works, you'll get rich. Image is Key to Your Marketing Success In virtually any business first impressions are lasting impressions. Most people have heard this statement for years, and yet some people completely ignore the first impression they are conveying to potential customers or clients. The Power Of A Story If you want your marketing to be effective, you absolutely must connect emotionally with your prospects. And one of the best ways to do that is by telling a story. What Does Your Logo Color Say About Your Business? And not only your logo, but also your website, your brochure, your business cards and any of your marketing materials for that matter.Yes, colors do matterThey communicate feelings and emotions. Seven Common Marketing Problems Solved by Marketing Operations Corporate marketing groups - especially bandwidth-challenged small-to-mid-sized departments - can be so focused on tactics and fire fighting that they jeopardize their marketing investment. There is a tendency to overreact to events, to tackle symptoms rather than underlying fundamental problems and to jump at the opportunity to please the boss. Renting Your Mailing Lists to Others RESOLVING THE "PROPRIETARY" DILEMMA.. For Ongoing Success, Make Marketing a Habit Make Marketing a Must, Not a MaybeWhen business is booming, it's easy to put marketing on the back burner. Why focus attention on getting new customers when you already have all you can handle? The reason is simple: when things slow down, you want to have new clients in the pipeline.
|
| Good Credit Loans | home | site map | School Bus Clothing | Florida Pool Heating |
| © 2006 |
