Direct Mail Strategies From The Experts

Hello everybody, welcome to episode 67 of the Magnetic Marketing Podcast. Today we're going to listen to Dan Kennedy and Craig Simpson as they discuss direct mail strategies, both beginner and advanced. Now we all know Dan Kennedy's pronounced expertise in this field, but Craig Simpson is the person that people go to when they want to get their direct mailing just right. He's a direct mail consulting coach. This is what he does. And so This is like sitting down with the experts and letting them explain the process and letting Dan ask questions that really take your direct mail to the next level. If you've been wondering if direct mail is actually something that you should be doing or how you should go about it the most effectively, this is the call you want to listen to. Now, we're not just going to talk about the basics and the advanced pieces. We're going to go through merging, purging, overlays, testing matrices, all these different things. And if you stay till the end, we'll even talk about the financial management. This is how to get your campaigns set up right so that way you are focused on making that ROI. Let's listen in as Dan Kennedy speaks with Craig Simpson about direct mail strategies.

I don't think there's anybody that has had a bigger impact in the field of direct response than Dan Kennedy.

The legend of Dan Kennedy should be ignored at your own peril.

They're not really lessons, they're kind of laws that you live by. Dan opened my eyes to what small business marketing looks like. Dan teaches strategic direct response that is timeless. His ripple effect touches people who don't even know his name.

The world as we know it was changed because Dan Kennedy became obsessed with marketing.

Welcome to the Magnetic Marketing Podcast with your host, Dan Kennedy.

Welcome to our monthly call. We have, and we'll get to momentarily, Craig Simpson, Titanium member of mine, somebody I work with a lot for projects of my own and clients on direct mail. And we will use our call to talk about direct mail, or as I am taking to calling it now, real mail. Let's dig into mail, and Craig, thank you for being with us and making the time.

My pleasure. I'm glad to be here.

I'm not going to— I'm going to try not to tread sort of basic or 101 stuff. I'm assuming that most people on the call are our users of direct mail are relatively knowledgeable about direct mail, and so I'm going to ask you some pointed questions for hopefully some advanced-level answers. But before we get to that, for anybody who is not familiar with your fame, maybe you can give me the— give everybody sort of the thumbnail bio. How you came to be the direct mail guy that you are.

Okay, sounds good. One of my big starts was working for a large financial publisher called the Ken Roberts Company. Through that, I worked with Ken for about 10 years, and I learned direct mail through doing large mailings, selling courses and books and seminars. I mailed out millions and millions of sales pieces. Some years I've mailed up to 30 million sales pieces at a time. My largest mailing was 5.7 million pieces of mail, so there was definitely some large volumes to those mailings. Since then, I've mailed out hundreds of millions of sales letters. I haven't kept track. I know it was— I stopped counting at about 200 million. I've sold hundreds of millions of dollars in products and services through the mail. I currently send out about 250 to 300 mail campaigns a year. Primarily, those campaigns are for acquiring new customers and prospects using direct mail. So that's kind of the thumbnail approach. I can go into more detail if you want to talk about some of the things with Ken Roberts or how I got my start. We can definitely talk about those things.

Just real quick, maybe if you don't mind mentioning some clients that folks on the call might know. I know you're working with a couple of mine and with a person they would see on PBS and so forth. So maybe you could drop a few names. Sure.

You know, one of my largest clients right now is Beachbody. If anybody's familiar with P90X or Insanity, I work with them. They've got a face cream line called Derm Exclusive. So Beachbody is probably one of the more prominent clients that I have. I've worked with a brain doctor that's famous on PBS and his name is Dr. Amen. If you ever watch PBS on a Saturday morning, you see a guy on stage talking about your brain and the function of the brain, that's who he is. Work with— I think a lot of people know Steve Adams with Pet Supplies Plus. He has over 20 pet food stores. I work with them as well. Work with information marketers like Michael Kimball. I work with clothing company. Software companies, medical doctors, contractors. There's just about somebody in every niche that we're doing mailings for right now. I actually got my start in direct mail before I even worked at Ken Roberts. I got my start selling rocks through the mail, out of all things. I had built this 20-foot-high rock climbing wall in my backyard, and I didn't have enough money to buy the little holds that you put on the wall.. And so I made some by hand and everyone that climbed on the wall absolutely loved those rocks, loved my rocks. And they said, hey, you should try selling these. And so my very first campaign that I did for direct mail was 250 pieces in which I put together, licked the stamps, handwrote the addresses, and mailed out trying to sell these fake rocks through the mail. And my first campaign actually bombed. I didn't get a single response even though I thought phone was going to ring off the hook. But from then on, I kept testing and changing things, and I got to the point where I'd sold over 4,000 rocks through the mail. And that's what got my start into the business and got me into working with the financial publisher Ken Roberts and got my start in this business.

There is sort of an addictive reaction to opening the mailbox and finding money. Yeah. That's a very appealing thing.

Yeah, you know, it's funny, on that note, I was manufacturing these rock climbing holds and I loved the fact that I was selling stuff. So the phone would ring or the mailbox, you know, I'd go to the mailbox and I'd receive checks and I loved that part. But then my stomach would turn because then I had to go out to my own sweatshop and build these rocks by hand using resins and stuff, and I hated that part. So I was so glad to get out of the manufacturing side of the business and just get into the side of the business which is fun, and that's the marketing side and doing the mailings.

All right, so I'm going to tackle mail by sort of categories of work involved. So I'm going to— we're going to talk about lists. We're going to talk about list segments, how you actually get money out of lists, and mistakes that people make. And then we'll talk about the mailings themselves, formats, steps, and then I want to talk about money management, how you track, how you evaluate. How you test, ultimately how you get from the start of a campaign to a campaign that you can live with and use again and again and again over a long period of time. So let's back up and talk about lists and mostly let's focus on what most people don't know about lists and the sort of the biggest mistakes that business owners make in choosing who they mail to and obtaining or organizing lists that they mail to?

I think a few of the biggest mistakes are made is one, when they identify who they think they should mail to, they base it on too broad of characteristics. So if it's males 50+, they'll go out and run a list based on men who are age 50 or over, but they're missing out on a lot of other characteristics about those men. And so what happens is they get a list that's too broad because really there's millions and millions and millions of men that are age 50+. They really need to take a look at who their best customers are and find out more details about them, you know. Are they subscribing to a special magazine? Do they like to travel? Do they have kids at home? Are they married? What's their income level? Are there specific, you know, parts of the country that they live in? Are there certain regions? Do they like to travel to resort destinations? You know, the more we can know about who your best customers are, the better job you can do at finding prospects that look like them. Like them. So I think one of the biggest mistakes made is just being too broad and assuming that, oh, it's just men 50 plus and that everyone who is a male and over the age of 50 is going to buy your product or service when that's entirely not true. I think another mistake, a very common mistake that most businesses make is when they're going and looking for a list, they'll go to, you know, Sales Genie or InfoUSA and there's times where both those sources are great., but oftentimes they'll go to one of those sources and they'll get a broad compiled list, and the list is made up of maybe prospects who look like some of their best customers, but it's just compiled. The people on the list haven't responded to anything. They have not raised their hand to a prior direct mail campaign, and when we're mailing to people, we really want people who are known to be direct response driven. They've responded to some kind of direct mail campaign, radio campaign, TV campaign, that they've done something and taken an action and raised their hand and either pulled out a credit card and spent money or made a telephone call or went online and did something, but ultimately we want responders. We don't want just people who are compiled and thrown on a list. We want people who will actually have responded to a prior marketing campaign. So I'd say the two biggest mistakes is not being targeted enough with your list, and then when you go and get that list, it's going after compiled prospects rather than those who are response-based.

Now, give people just a sense, in case they're unfamiliar, of the size and scope and diversity of the universe of lists that can be rented?

There are, you know, at least 100,000 mailing lists on the market, and then within each of those lists, there are multiple segments you can take. So let's say it was a magazine list. Well, you may have a list full of, say, Entrepreneur Magazine subscribers, but you could also narrow that down by SIC code and narrow it down by businesses. By attorneys and medical professionals or those who are on the IT world. You could also narrow things down by age and income. So not only do we have this vast group of mailing lists up to 100,000 or more, but each of those lists have segments that you can narrow it down. So you could go out and rent entrepreneurs' lists and segment down to males and income and— and even job type. Not all lists have all those segments, but a lot of them do.

To that point, I learned very early, fortunately more by having things shown to me than having to burn through my own money, that the quickest way to go broke with direct mail is to mail the whole list.

Oh, yeah. Right?

Definitely. Hardly any successful mailer does that with hardly any list, right?

That's exactly right. In fact, when I'm testing a list for the first time, let's say the list has 20,000 recent names on it. Well, I may only take 3,000 of those names and test it. That's a small percentage of the entire list. Now, even if the list seems to be a perfect match, I'm not going to go out and take all them because I don't know. I need to test it and then take a few more, but I'm never going to take the entire list.

And then the last thing before we move out of the list that I think perplexes a lot of people, so if you could talk through it, is the merge purging of more than one list to get to ideal prospects.

Yeah, recently, just this last week, I received a postcard in the mail. I received actually 5 postcards that were all identical. They all came to me on the same day with the same address with the exact same copy. What that told me is that that person doing the mailing did not run what's called a merge purge. A merge purge will remove any duplicate names within the list. I was on this guy's list 5 times. If you were to run a merge/purge, he could have removed my name 4 times, but he didn't do that. It's just because I was on 5 different lists, and he didn't know that, obviously, so he mailed me all those pieces. A merge/purge will basically help you clean up your mail file. It will remove the duplicates. You can remove bad addresses. You can run the national change of address, which will correct addresses that they know where somebody's moved. Or they'll toss out addresses where if the person has no new forwarding location, it'll toss out those names. You can even include extra files like the National Deceased File, so you can remove people who have been deceased off of the list, or those that are in prison, or the National Do Not Mail list. The merge/purge can remove a lot of bad addresses and bad names and really clean it up. In fact, when I'm doing a mailing, if I'm mailing, say, 20,000 pieces, I count on getting rid of about 20% of those names in the merge purge, because there's going to be that much duplication and bad addresses. If I'm mailing 100,000 pieces or 200,000 pieces, I sometimes remove 30% or 40% of the list because of duplicates, bad addresses and those kinds of things. So the merge code is one of the—

go ahead. You can also do overlays.

Yes.

So an example that I'm pressing a client to do would be to take certain occupations, dentist, CPA, etc., cross them with opportunity seeker lists. And take the dupes for a particular opportunity offer. So sort of explain that process to people.

Yes, so you could go out and you could rent, say, 20,000 business opportunity seekers. Somebody's bought something showing that they're in the business opportunity world, and if you're only marketing to professionals, like you suggested, maybe CPAs and medical professionals and maybe dentists or attorneys or whatever, you could then get those lists, lists with those types of professionals, and so now you have two totally different groups, but when you merge and purge them together, you will find duplicate names, somebody who's on both lists. If they're on both lists, they're gold because now you've got someone who's into business opportunity, but they're also an attorney, which gives them that professional group that you're looking for. So that process really, you know, helps you bring about and find the best prospects that you could actually go after.

And I lied. I got one more list question because— Okay, sure. It's the one you will get— I get and I'm sure you get from more small business owners than anything else is— You know, my business is local, not national, and every time I start to try and figure out lists, I can't— I can't rent lists, I can't use lists because there's too few names in the 30-square-mile radius around my store, office, practice, etc. So That's probably 30% of the people on the call have already got to that mental spot either by theory or by some past experience. So what can you do to help them?

Well, really two things. One, I would say is look for more than just one list. If you are in a small area, try and find 3 or 4 different lists. Now, as you said, there's not going to be enough names on those lists. List, and the list owners will still rent you the names, but it's— you'll have to pay a minimum amount. So if it's a 3,000 name minimum and you only have 500 names on there, well, you'll have to pay for 3,000 but only get 500. But you've got 500 people on that list that are very targeted to what you're looking for, and so my recommendation is to still go ahead and go after those groups because they are— there's probably no one else in your market doing it, for one, because they're looking at the list too and thinking, well, there's not enough names, so I'm not going to mail them. But you can stand out in the crowd by doing direct mail to those groups.

All right, let's move on to mailings.

Okay.

So without getting into copy, let's just talk about sort of different approaches and formats to direct mail. Things you like a lot, and again, the most common mistakes people make when they have now decided to mail to somebody and are putting together a mailing.

All right. I would say, you know, one of the hot trends right now, and I send out almost 100 mailings a year for this, and that is to drive— take offline and drive customers online to an online video, online sales letter. Dan, you and I work, you know, with a few clients that do this and do it extremely well in mail or constantly in the mail driving customers from offline to online. And I— like I said, I do about $100 million a year in this. And there's a couple formats that I have found that work extremely well for this— for that— for driving customers online, and that's the oversized postcard, which is basically, you know, anything that's 8.5 inches by 5.5 inches and up. I also really like what's called a 4-page self-mailer, and that's simply just a sheet of 11 by 17 paper folded in half twice, and it basically folds down to the same size as your oversized postcard. So the postage on it is exactly the same as what you'd pay for a postcard, but you get significantly more room to write copy and there is more real estate to put information about what you want them to do. So the format thing is really key. I mean if you were to write a 12-page sales letter to drive a prospect online, well you could do that and it would probably work, but it is a bit of an overkill because you don't need 12 pages of copy to get them to go online because we are not asking them to buy anything at this point. We're not asking them to pull out a credit card. It's a really simple step. We just want them to go online, and once they're online, they can take the next steps. They can find out more about your offer. I really like those short formats for driving prospects online. I think it's one of the easiest ways to get into direct mail is if you've got a proven online sales funnel. We'll take the prospects from offline, put them online, and use a 4-page self-mailer or a oversized postcard.

Just to this point, one of the questions— I'm preparing for wealth seminar, and one of the questions people all just ask me, I get it all the time— if you had to start over knowing what you know now and could only do one thing, what would you, you know? And I get this question, and it's, you know, it's a crappy question. But I mean, if I was forced to answer it, this is exactly what I would do. I would do offline direct mail to a well-targeted list, different formats but same message, driving to an online sales presentation. If you were going to limit me to one marketing strategy, this would be it. So go on with other formats.

Okay, and then a couple of formats that I really like is there's this digest, which is something I've been mailing probably longer than any other format. I started with that in the early '90s when I was first getting in direct mail, or mid-'90s. It's a digest like the size of a Reader's Digest magazine. They are usually multiple pages. I mean, I've mailed up to 88 pages of a digest format, which is roughly a 6 inches by 9 inches. One of my most successful pieces was 88 pages long like that. I use that format for selling a lot of financial newsletters and courses and expensive information products. I think the digest is one of those great formats where you can tell the full story and you can really use all the copy techniques that you want in there to really engage the prospects. I love that format for selling a course or a newsletter. We are asking for a credit card number at the end. We're asking them to make a phone call. We're not asking them to go online or anything like that. We strictly want to keep them on the— we want to strictly get them to the phone. It's interesting because we've done split tests where on this long-form sales letter, we'll give them the option of either going online and ordering or calling an 800 number. If we give them the option of calling or going online versus another sales piece that just drives them to the phone number, the one that just drives them to the phone number always brings a higher response rate. And I've tested this over and over on a large scale, and every time I continue to see just keeping them offline works better when you're making a direct sale and the whole purpose is to get the credit card number. I think part of that is when people go online, they start price shopping or they start looking at other things that might be available and they miss out on the whole order process of what they were engaged to do anyways.

The equivalent of— I always tell people, so they're in your store. They have stepped into your furniture store. Why would you lead them out the back door over to the swap meet? Uh, that's a great way to put it. Uh, and turn them loose, uh, to 600 other sellers of furniture. It makes no sense, right? In fact, not only don't you lead them out the back door, you lock the front door. Uh, but for some reason, people behave totally differently when they drive them through a mail piece. So my experience is exactly the same as yours. If you're making a direct sale and you're starting with direct mail, you want to end either with mail or with the phone or with in-person, but you do not want to move them to the web. If you're doing lead generation and you're going to make your store the web, then that's a different story altogether.

Exactly.

It's surprising.

I actually have a hard time explaining that. I'm going to have to use your story with the furniture store. That's a better way of putting it. It's amazing how many businesses just feel like, "Oh, we've got to drive them online because we've got this cool website." They're really missing the point here.

By the time they're done— The newest stupidity is not only do they put the website on it, they got, "Here's where to go see us on Facebook." here's where to go see us on Twitter, here's like 5 different places you can go, right? Exactly. YouTube symbol, here's all this when we're trying to make a sale. I mean, you know, it's just— but the reason you just heard the furniture store bit from me is because I keep trying to find new ways to explain this to people who don't get it. So I'm not sure it's that effective, it's just my latest attempt.

Well, I'm going to try it because I like it. That's to me, that's a clear way, an easy way to describe it. I'll see if I have any luck with it. I'll mention one other format that I really like and that's the magalog. That's more like a magazine. It looks like a magazine. It's glossy. That's one of those that works extremely well in the alternative health niche. If you're selling supplements, it works well. If you're in any any of those niches and the only downside with it is the postage on that is extremely high but it's a very effective piece and it works really well, really well in the alternative health niche.

Okay, so let's talk about now like the top couple of mistakes that people keep making again and again and again. When they have lists and now they're going to mail?

Okay, so let's see here. I think they've got lists, they're going to mail, what are the big mistakes they make? I think some of the bigger ones have to do with setting it up in the beginning and whether or not they're going to— how they're going to track the campaign. I can't count the number of companies I've talked to who they did a mailing, they may have gotten a good list, but they have no clue no clue where the results came from. Not sure which list it came from. I think it's important that whenever you— if you're going to spend money doing any kind of direct response campaign, you've got to have your tracking set up in advance. You've got to make sure that you know where these new customers or prospects are coming from. If you don't have it set up, don't waste your money on it because you have to know. If you're mailing, say, 5 different mailing lists, you may have 3 that are home runs and 2 that are dogs. Well, the next time you mail, you want to toss out those dogs and go after more lists like the ones that worked. So it's really important to track response. I think another— one of the other biggest mistakes made, and I don't know if this is something we're going to talk about later because it has to do with the financial side of direct mail, but it has to do with how you calculate the profit or loss and whether or not you include include the long-term value of the customer. Are we going to dive into that a little bit later, Dan, or should we talk about that now?

No, let's loop back to that. I'll come right back to it. Okay, okay, good. In front of it, I want to talk about testing. Okay. And I want to talk about what I call a test matrix, and I think people are just often horribly, you know, unrealistic and unreasonable and dysfunctional about how they approach this process of getting from the starting gate to a reliable stable of lists and a reliable stable of pieces that can be mailed to those lists on an ongoing basis. So as you said, you know, we have shared clients, we have separate clients, we have shared clients. You mentioned one who's been mailing that one piece for at least 3 years again and again and again and again, and now we finally beat the control with this new piece. And so, you know, sort of the utopia position is that we got 2 or 3 pieces and we got X number of lists that we can mail those pieces into in rotation, in sequence, and we can keep doing that again and again and again, whether that's to feed our pet stores or to feed our local restaurant or to feed our national company. So with that as the objective, could you talk a little bit about what the starting position looks like? And how we get to that objective?

Sure. I hope I'm going down the same path you are on this, but if you do have 3 different pieces that you're testing, you have to make sure that you set up the right matrix or testing variables in advance. So if you have 3 different, say, sales piece tests that you want to roll out with or test, and you have 10 different lists, you would not split those those tests up, those formats or sales copy tests up, giving each one, say, 3 lists and one 4 lists. You would want to actually make sure you set the matrix up in advance where you mail every— all 10 lists, all 3 pieces, so that you can see equally how the results perform on every single list, and they all have the exact same variables. You don't ever want to just segment lists out and just say, okay, I'll mail list A, copy A, and list B, copy set B. You want to make sure that it's done in a way in which you can measure the results on an even apples-to-apples level. I think something else, I just talked to a guy earlier this week and he had— he's in the survival market, you know, selling survival foods and goods and things if you're a survivalist., and his first mailing in March was phenomenal, and so he rolled out a second mailing of around, I think, 90,000 pieces, and he did an A/B split test on it, and he had the control piece in which he mailed 45,000 pieces, and he took his test version and mailed 45,000 pieces of the test. Now, that sounds like on paper splitting it 50/50 would be a good thing, but there's a downside to it, is if that test version version ends up bombing and it does terrible, well then you've just wasted half of your mailing. So what I would do instead would, okay, let's mail 70,000 pieces the control and the remaining 20,000 pieces the test, or you could even do 75 and 15, and still mail it across every single list, but don't put yourself at so much risk with your mailing. Instead, keep your testing variables a little bit smaller because you can still look at it on a response percentage basis to know what works and what doesn't. So Dan, did I come close to hitting what you were talking or did I miss it completely?

No, you got it. The thing that I would add, which is a mistake that people make, is that they want to test sequentially instead of simultaneously. Oh yeah, totally. And if you've got 3 possible offers with different prices or bonuses or whatever and you've got 3 different possible creatives, so you could talk about the debilitating pain of chronic headaches or you could talk about the wonderful liberation of living headache-free. Or you see you got 3 different messages, you got 3 different offers, and you've got 3 different formats, and then you got X number of lists. If somebody sets out to test those sequentially, in almost all cases they are going to run out of patience before they get everything thoroughly tested. And if they pull 2s and 3s with the first few cards, they'll end the game before they ever get to the aces. And so it's just, it's really important to test as many of your choices of significant variables as possible across the board simultaneously. Rather than trying to test one or two at a time.

And it also makes all your results that much more valid by doing it at the same time, because as, you know, the seasons change and you mail at different months or different times of the year, response rates are going to look a little bit different. So if you run one test in the first quarter and response rates are up and you mail the other one in the summertime when response rates are down, you're going to have two totally different sets of variables that weigh in on the overall result of the campaign.

All right, so let's go from there to money, and we can go back to where I stopped you, and we talk about the financial management aspect of all this.

Okay, so I would say, and this is really hands down from what I see one of the biggest mistakes made with direct mail, and this may be applied to other marketing avenues as well, but when I'm talking to a company and they're looking at the results and they say, well, Craig, we did this mailing, it did not work out. You know, we're selling these widgets for $50 and it cost us $65 to sell each widget, therefore we took a $15 loss on every person we brought in the door. Direct mail just doesn't work. And that's what they'll say to me. And then I'll ask them about, well, what's the long-term value? How much is this customer going to spend with you over the next 6 months, 9 months, a year? Well, you find out that they're going to spend $150, $200 or whatnot, and all of a sudden the numbers look different. And I think if companies would take a close look at the long-term value of their customers and calculate that into their direct mail campaigns, they could be more aggressive and they'd be more profitable because they wouldn't just be looking at what they brought in today., we could see, well, what are these customers going to bring in 6 months from now? And if you know that your long-term customer value or lifetime value is, say, $400, you then know how much you can spend to acquire a customer. You could say, well, I'm going to put my threshold at $200. I'll spend $200 to acquire a customer knowing that I'm going to make $400 off of them within 6 months. So looking at the long-term long-term value of a customer is a huge part of direct mail, and you really got to calculate that in whenever you put together a campaign.

Yeah, and look, the bigger the game, the smaller that margin has to be in order for you to still do very, very well. I had a client years ago who was mailing nearly a million pieces a month. And bringing in about 1,000 customers a month. And total customer value less all of those acquisition costs left him about $10 per customer. And his answer was, I want to find a way to mail 10 million a month so I can get 10,000 customers that By the end of the year, I make $10 debt on each one. Once, once I know the number and it's a positive number, then I just want as many $10 bills as I can get. And a lot of people can't wrap their head around this, you know. They just, they can't grasp that, A, where else would you put money? That you will get this kind of return on? And B, why would you not want that profit if that profit exists?

With the Ken Roberts example that I gave you when I mailed 5.7 million pieces of mail, we were in that exact same boat of, well, how can we do more of this? That's what led to that size of a mailing. We were selling the course for for $195, and at that time I was willing to pay $300 to $350 to acquire a customer. We actually took a significant loss on the front end, but each of those customers went on to spend over $1,000. Who wouldn't want to give me, trade $350 for $1,000? It was like, how can we expand this even further?

Yeah, I mean, yeah, the analogy I try to use with people is nobody drills an oil well and gets all the money back the first day. Yeah, uh, but it doesn't stop people from drilling oil wells. Um, and so if you view a customer as an oil well, then maybe you can look at this a little differently. Um, Craig, thank you for being on the call.

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