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Direct Mail Resurgence Surprises SMBs and Delivers Marketing ROI

July 26, 2016  - Tips for Small Business
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Is direct mail part of your annual marketing mix? If you answered no, you may want to reconsider.

With so much in the media about social marketing campaigns, mobile coupons, and opt-in for multichannel marketing efforts, you may think direct mail marketing campaigns are disappearing like the dinosaurs. You would, however, be mistaken. Direct mail has adapted to the changes in technology and can give small to medium-sized business (SMB) marketers a cost-effective way to stay in front of prospects and clients while delivering measurable ROI.

Many small businesses face the daily challenge of how to spend their budget dollars wisely to ensure the best marketing ROI. They ultimately want to increase traffic to their website, storefront, or phone lines but the answer of where to invest marketing dollars to achieve this is not always easy. Investing in new marketing tools, engaging with an outside service provider, or continuing on the outbound marketing path may all generate new leads. Of course, you want to do all of the above – and more – to be effective with your marketing spend. When it comes to direct mail campaigns, understanding how to leverage this traditional advertising tool can make a big, and surprisingly cost-effective, difference for your business.

The Direct Marketing Association (DMA), in connection with Demand Metric, released their Response Rate Report in 2015. The study tracked performance and cost benchmarks for various advertising campaigns, comparing response rates for email, telephone, direct mail, social media, and paid search/internet marketing campaigns. The bullets and infographic below give the highlights of the report:

Cost per Acquisition (CPA) results, based on primarily house lists, showed:

  • Internet display as the costliest form of advertising at $41-$50 per,

  • Paid search following at $21-$30 per, and

  • Direct mail coming in third with a cost per response of $19 (includes cost for prospect lists)

  • Social media and mobile were less expensive at $16-$14 each, and

  • Email was the least expensive at $11-$15 (includes cost for prospect lists)

Response rates (measured by multiplying click-through rates by conversion rates) told a better marketing ROI story:

  • Email had the lowest CPA but it also generated a low response rate at 0.1% – the same level as social and paid search

  • Display was the lowest response at 0.02%, disappointing given it is the highest CPA

  • Telephone outreach had the highest marks at 9-10%, in direct relation to people liking a personalized touch

  • 44% of respondents use at least three marketing channels – typically email, social media, and direct mail

  • 50% reported using direct mail in 2015 – ranking higher than social media, paid search, online display, and mobile

  • Direct mail is over seven times more effective than all digital channels combined

  • 82% of respondents expect direct mail usage to grow or remain at current level

   direct-mail-infographic-0716

Given the high expense associated with telemarketing call center agents, relative to the reported 9-10% response rate, the CPA and response rate for direct mail makes it an important and still very relevant and effective marketing channel for many SMBs. Interestingly, as we look at the findings for direct mail campaigns, although results of house lists (current and former customers) remain level, prospect lists (rented lists of potential leads) have declined. This emphasizes the importance of cultivating current customers and maintaining a good house file.

You can see the difference in performance per format/metric represented in the MarketingCharts table:
direct-mail-response-rates
So, although there are more channels in your marketing tool kit today for lead generation, direct sales, or brand awareness – direct mail can still play an important role in your overall marketing strategy. If careful consideration is made to cultivate lists, test the size and type of direct mail pieces, and accurately track responses, you could find direct mail generating quality leads.

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