Key Components For Increasing Profits From Direct Mail

Hello and welcome to the Magnetic Marketing Podcast. Today we get to listen to Dan Kennedy directly as he talks about why direct mail is still vital and not just important, vital. Dan Kennedy was recently quoted as saying at a recent event, direct mail is the one way you can get past all the censorship. It's the only piece of marketing where you are not constantly being squeezed by your message or who you're sending your marketing to. Direct mail should be the go-to for entrepreneurs. Now, a lot of businesses have concerns about how to actually use direct mail. That's usually around the inability to understand how to strategically use it to your advantage. How do you deliver a compelling and personalized marketing message that readers won't be able to ignore? Listen as Dan Kennedy reveals the 8 keys that will have the greatest impact on your result and profitability when correctly utilizing direct mail. Let's get into it.

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. 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. Good morning, everybody. Uh, topic of the call: increasing profits from direct mail. And so the, the order will go through things. I've got, um, the 8 things that, uh, that I know to do that have the greatest impact on the economic results, the profitability of using direct mail. And then Perry Sink, who's I'm sure on the call, made a specific request that we talk about differences between consumer and business-to-business direct mail, and we'll do that. And then we'll talk about a few special applications, and then we will go to your questions. So in order of priority, the things that have the greatest impact on the profitability of direct mail begin with number 1, the choice of who you target, the selection process. And what I would say about that for starters is that often rather mediocre marketing messages that land in the hands of very well-selected prospects will get exceptional results, but even the most magnificently crafted marketing message landed in the hands of poorly selected prospects will often get no better than mediocre results. The battle is won or lost more with the selection than with the content or the offer itself. And often you'll find big mailers who are making huge mistakes in this area and then wondering why their results are poor. AARP, for example, the American Association of Retired Persons, has a historically abysmal rate of response from their mailing campaigns, and one reason for that is that they deliver them to an awful lot of people who are not yet 50 years old and cannot qualify for AARP membership. There's enormous slop and waste in their lists. In all probability, just about everybody on the call who is not yet 50 has probably received an AARP pitch one or more times. I know people who began getting them 20 years before they could possibly buy. So selection of lists and careful analysis and culling of lists and good use of lists is extremely important, and generally speaking, money spent there is money well spent as opposed to spending the money the way AARP does in the mud-against-the-wall approach. When you get involved in selection, if you're a consumer marketer, the process has an opportunity to be somewhat more sophisticated than if you're a business-to-business marketer, but there are some parameters or criteria worth noting in both cases. If you're a consumer marketer, of course, most people start with demographic information— ages, genders, head of household, occupation, household income, marital status, that sort of thing. All of that data is typically available in both compiled lists, meaning lists that are compiled from public records, as well as response lists, lists of subscribers and buyers of various products. When you're thinking about demographics, what you want to think about is under ideal circumstances matching up against biases within your present customer base so that you're leveraging your experience. And a lot of people don't even go analyze their own customer base with this in mind, but just about everybody has demographic biases within their customer bases. Just about everybody will have one or more of these where they are more effective at selling to one gender versus the other, or one gender is substantially better in terms of long-term customer value than another, or the same with ages, or the same with household incomes, or the same with marital status, or the same with whether or not they have kids. So you want to look to your own customer base and what works for you. And who you are most effective with and who you are least effective with and use that to make demographic decisions now about who you would mail to if accessing commercially available lists or who you would target if doing lead generation advertising. The second thing on the list is psychographic information, which is behavioral, and the theory that current and recent past behavior predicts the next behavior. And so this is data more typically found in response lists than in compiled lists, and it has to do with what they've spent money on, what they buy and what they own, the magazines they subscribe to, the products they've bought, the products that they own. And some things to keep in mind there, for example, are price point. If you sell a— let's say you're in a weight loss business and you run a weight loss center and so you sell a $500 program. If you have two lists of weight loss buyers but one bought a $12 item and one bought a $199 fitness gadget, you're probably going to test and prove better with the $199 buyers than with the the $12 buyers because they're closer to the amount of money that you need to get. Then you want to look for geographic biases. If you're a national marketer, geographic biases can be extremely important in the profitability of direct mail. For example, just as a big general rule of thumb, California is typically a much more responsive state than say the Northeast states, Maine, Rhode Island, Massachusetts. And sometimes you can be barely breaking even or losing money mailing the entire nation, but if you carve out some of the lowest response states and eliminate them and never mail to them, you take an unprofitable campaign and make it a profitable campaign. To pay them. And so again, you want to look at your own— if you have experience, if you're not in a launch state, you want to look at your own customer base for where are they clustered, and also are they worth more to you if they're in one place than another? And you may be able to carve out states that you don't mail at all, or you may be able to carve out zip codes that you don't mail at all, or you may find that you would invest more in mailing more repeatedly or more elaborate packages to certain geographic areas versus others. So there's geographic biases. There are also in many businesses what I call hidden biases that Only through careful analysis of your list and your customer records will you uncover these things, but sometimes they can be extremely useful. I'll give you an example. In Joe Polish's business of selling to carpet cleaners, list analysis revealed that there's basically two types of company names. Keep in mind this is an industry with a lot of mom-and-poppers. And so a lot of the company names are John and Mary Smith Carpet Cleaning or Smith Carpet Cleaning or the Smith Family Carpet Cleaners, that sort of thing where the proprietor's name is the business name. Then there are the company type names, ACME Carpet Cleaning, Greater Phoenix Area Carpet Cleaning, Arizona Carpet Cleaners, etc. Analysis of his list indicated that the non-proprietary names, the Acme's versus the Smith families, the Acme's are roughly twice as responsive and purchase the higher-priced packages at a greater rate than do the others. Further, those that have incorporated in their name, so now it's Acme Carpet Cleaners are even more responsive and even more likely to buy the higher-priced packages and services. Now, knowing that is one thing. Doing something with it, of course, is another. And what you would tend to do with it is you would first of all use it to make economic investment choices, meaning you might mail a more elaborate package or you might mail more steps in a sequence to the Acme's than you would to the Smith's because you can afford a greater investment in the Acme's. You might, for some offers, you might completely omit the Smith's and only mail the Acme's.. Then there's creative or offer and content decisions where you might use fundamentally the same sales letter and the same pitch but change the offer and the pricing so that the Acme's only got offered the two highest price options of three options and the Smith's got offered the the two lowest price options of three offers. You might create a completely different product or offer for the Smiths versus the Acme. You might even build a product only to sell to the Smiths and never mail an offer to the Acme. All of those are strategies that overall will increase the return on investment, will increase the profitability of the direct mail. So you want to carefully examine your list for these hidden biases, and you want to continually be looking for them and be alert for them. In business-to-business marketing, the demographic information is different in that it's for the company rather than for the individual, but again, the principles are the same. And so in business-to-business, you tend to segment by maybe the sales volume of the company or the number of employees the company has or whether it has multiple sites or a single site. Obviously the nature of its business. One thing that's sometimes useful in business-to-business marketing is to segment out those that demonstrate they're aggressive and progressive by their behavior. And there is psychographic information for business-to-business marketing just as there is for consumer marketing. First, there's psychographic corporate behavior. So for example, if I'm selling advertising information, and let's say I'm going to use a list of all of the businesses in a given area of a particular size and of a particular type who bought some kind of a book about advertising. I might want to cross that only with those who have large ads in the Yellow Pages, which indicates that they're pretty aggressive about trying to advertise.. Or I might again want to spend more money, make a bigger investment in marketing to those who demonstrate that they're making an investment in advertising versus those who aren't. Then there's the psychographic information about the owner of the business or the title holder, head of human resources, vice president of sales within the business who you are targeting. What do they subscribe to? What do they buy and read? What associations do they belong to? What events do they attend? What's their behavior tell us about their likely interest? And in both of those cases, the place to begin doing your research is with Standard Rate and Data Service, SRDS. And I suspect that most if not all on this call are familiar with that and know how to do it, so I'm not going to spend time on it here other than to say that this is not the place to be lazy and think you can just call a list broker, and it's not the place to be cheap. If you have to get 5,000 names and throw out 3,000 of them in order to get to get the 2,000 you want, or you have to get 4 lists and merge/purge them and pay for a lot of names you don't use, again, it tends to be money well spent. So the first thing on our list of 8 is selection. The second thing on our list of improving profitability with direct mail is to create better margin in what is being sold via the direct mail. And another way to say that is tilt the economics so far in your favor that it is almost impossible to flop and then work from there once you have established an acceptable level of return. For example, I had a conversation yesterday with a longtime client— excuse me— with a longtime client, all excited about a new direct mail project and getting ready to spend $30,000 or $40,000 on the test, and he had based all of his economics on a projected 2% response rate. And I said, not smart. We're mailing cold lists. We don't have a prior relationship. We're testing a matrix of a lot of lists. We've got a product and an offer that there's no real likelihood of apples-to-apples comparison on pricing. So let's tilt the economics. Let's adjust the pricing so that we can break even at 0.5% return, which probably if you had a national average for for all mass cold direct mail, you'd be in the half a percent range. And so let's try and figure out our costs and figure out our pricing and figure out our profitability of the product and all of that so we can live with a half a percent. If we get 1%, fine. If we get your 2%, terrific. But if we don't, we're better off. So being very pragmatic and being very conservative about expectations of response is a good place to start in planning your economics. Then you want to look at when you've decided or have forced upon you what it is that you're going to market, how you might somehow improve the margins any which way you can. For example, you know, a lot of cases you'll see the offer of a basic and a deluxe or an A, B, C option rather than just a single option. And even if in a given situation only a small number of people choose the highest priced option, the margin on that put into the mix could make up for a quarter of a percent or a half a percent swing in response. Bundling. If you have a relatively low margin product or service, maybe you can bundle something in with it that has a much higher margin. So first is selection. Second is margin. Third is improving the total customer value if you're doing customer acquisition with direct mail. Again, this is pretty elementary math, but if a customer is worth $100 to you and you can figure out a way to make that customer worth $107 to you on average, that extra $7 can allow you to spend considerably more on the direct mail to acquire the customer. Try it. Cost to call, do the math, all costs being the same, what it costs you to rent a list, what it costs you to print your direct mail piece, what it costs you for postage, and then do a matrix with $100, $107, $112, just incremental improvements in customer value, and see how much lower a response percentage you can live with when you make those kind of adjustments. Fourth on the list then gets into content. And the most important thing about content that I can tell you in improving the profitability of direct mail, it has to do with message-to-market match. As a big thumb rule, the tighter the message is matched to the market, which means the more that the recipient perceives it is just for them, the more you're in sync with them in vocabulary, in language, in shared experiences, and in emotion, the tighter that message-to-market match is, the better the response. Conversely, the fuzzier the match, The bigger the net you try and cast, the lower the response, and obviously the response percentage directly impacts on economics. So under message to market match, again, a quick checklist. One is vocabulary. You know, there's tribal language, and every market has its own tribal language and its own tribal customs. Customs. And not only do you want to be in sync with that, but if you misspeak, if you identify yourself as not understanding the tribal language and the tribal customs, you can really shoot yourself in the foot. I was just with— on Saturday we had our final meeting for my copyrighting coaching program members here in Phoenix, and one of the attendees, one of the members is beginning marketing campaigns to chiropractors and dentists. And he said— and now it's possible he wouldn't have translated or transferred this error into print, but he could have. And if it's in your mind, it may spill out at an inopportune time or in an inopportune turn away. He said on 3 separate occasions the following phrase: chiropractors, dentists, and doctors. Now, to the person not familiar with how chiropractors and dentists view themselves and the rest of the world, that phrase is innocuous. And harmless. It's not technically correct, but that's not what's important. What is important is that it is incredibly, jarringly offensive to both chiropractors and dentists. And you could have a 32-page sales letter and have that phrase buried in it only once, and it would leap out at them as if you walked up to them and hit them in the forehead with a hammer, and it would destroy the response even if everything else was done magnificently. They are technically doctors, no different, no distinction from an MD, which is what he really was saying, was chiropractors, dentists, and and medical doctors, and they are extraordinarily sensitive about it. So it's very important to be in sync with the vocabulary and the customs. There's the Robert Collier principle, another message to market match issue on your checklist. The Robert Collier principle is entering the conversation already taking place in the prospect's mind. This requires you to understand what's going on in there and to be particularly sensitive to timing and timeliness. What's happening right now? What trend is occurring? What trauma is occurring? What seasonality is occurring? Are they getting ready to go to a big trade show in their industry? Did a law just change? Did a merger just occur? Take place, what's happening that you can link to that they're likely to be thinking about. Another thing is shared experiences. Copy, you know, a good word is resonates. Copy either resonates with somebody or it doesn't. And in direct mail, copy is king, so the shared experience The fact that you sound like somebody who has lived what they live is extremely important. There are also some biases by target market, by personality types or buying styles. These are expressed a lot of different ways by sales trainers. Many of you have probably heard the analytical, the impulsive, the emotive, however it is that you classify them. Certainly some groups are significantly biased in their buying style, their response style. Accountants versus salesmen, for example. I just finished an item, you'll get it in next next month's newsletter about age biases as they relate to credibility versus believability. All of this affects the quality of the message. So we got selection, margins, total customer value, quality of message. Fifth thing on the list would be the exterior of the envelope. Direct mail, Obviously useless if the envelope does not get opened. Same comments apply to the exterior of a self-mailer as well, although as you know, I'm no fan of these. And so we face the argument, the debate with envelopes of APOW versus BPOW, and all of you are very well versed, I'm sure, in what Halbert calls A-Pile mail, what I sometimes call the sneak-up approach, where it's pure white mail, no company identity, either just an individual's name or a return address, live stamped, individually addressed, probably done so it looks like it was on a typewriter or hand addressed, and nothing on the outside to give away in any way, shape, or form that this may be commercial mail, and this is often taught and advocated and used. However, the truth of the matter is that statistically, campaigns using teaser copy on their envelopes are much more common and much more likely to become controls than the sneak-up approach. And so the smart marketer in every situation will test. You'll test the sneak-up versus the very best blatantly commercial envelope you can design. Then sometimes the best strategy is a hybrid. And the hybrid is a sneak-up envelope with just a tiny little bit revealed that this might be commercial. For example, individual name and return address, individually addressed live stamp, all looks like it was done on a typewriter or hand addressed. Then there's a rubber stamp looking imprint either on the front or the back or some kind of garish colored sticker with one piece of teaser copy on it. If you use something like confidential for recipient only, then of course you have to be concerned with congruency when they open it. You have to justify what you did. But even oddly, and you would think this doesn't make sense, but I've seen successful controls where the envelope is pure sneak-up and then there's a big sticker on it that says, "Open immediately for choice of free vacation, VCR, or television," or something like that. Another hybrid is the envelope that we see, we know it's commercial, but we can't detect the identity of the company that sent it or the content, but it's a window envelope and it's a phony check. You've all seen them. You've all got them. You may think they don't work anymore, but they do, and a large number of control campaigns use that approach. There's also Another type of hybrid is like a pure sneak-up envelope sent inside a phony express mail envelope or actually sent by FedEx. Another hybrid is a sneak-up that once you open the sneak-up, there's a very brief lift note for congruity with that envelope, and then there's an envelope inside with teaser copy all over it, and it forces them to open two envelopes. So do not necessarily make the presumption that pure sneak up is going to be the best in your situation. The correct answer is to figure out a way to test. So we got selection, margins, total customer value, quality of message, and now the envelope or the exterior of the mailing. The 6th and 7th items are in terms of copywriting, or if you want to use the word creative, the 2 most important jobs when you do direct mail, and they essentially affect the very beginning and the very end. The first, number 6 on your list, would be compelling readership when the envelope is opened. Our first task, of course, is always to figure out how we can get direct mail delivered. Our second task is to get it open. And then we have to realize we have a very tiny window of time, seconds, to stop the person from moving on, from discarding. When I speak at the Peter Loew events, and many of you have been there, and you've seen the stampede when I first take the stage of exiting patrons, the first few minutes of what I do, I have no alternative but to devote it to trying to stop some of those people and have them reverse their decision, and in many cases their physical movement, and decide to stay. Similarly, when someone opens an envelope, as soon as they can determine it's not from Aunt Martha, in many cases their behavior is to find a reason to get rid of it as quickly as possible, not to have to deal with it, not to have to read it. And when you understand that's what they're trying to do, your job is to stop them from that thought and in many cases the physical movement toward the wastebasket and force them to read that piece. At the other end of the letter, the 7th item on our list would be effectiveness at creating urgency. Direct mail is not media like, say, print ads in a magazine where somebody may skim through a magazine and then they may go back and read a couple articles in it and then it may lay around it for a while and then they look at it again and 2 people in the household each read the magazine, and so you have multiple chances that an ad may produce a response. Direct mail is more like a telemarketing call or the car salesman having the person in the showroom. You either get them then or you don't get them. Pretty rare for somebody to read it, set it aside, think about it, about it. I mean, it happens, but you don't want to depend on it. And so your effectiveness at creating urgency and making people respond immediately is as critically important as compelling readership when open. And then the last thing on the list, the 8th thing on the list, would be actually controlling costs in direct mail. If we're talking about improving profits, we absolutely have to talk about controlling costs. And so a few quick thoughts for you. One is you can control costs by the nature of the pieces themselves. For example, you've all seen the newspaper tear sheet type of piece, and not enough people use this. They allow you to present a lot of information They allow you to use a format that encourages readership, and they're dirt cheap to print, and they don't weigh much. The same type of paper, the newsprint paper, can be used for booklets. I've done 16-page sales letters, 8-page sales letters, 24-page sales letters on newsprint instead of on regular paper in order to keep the weight down as well as to keep the cost Another option is to consider postcards or oversized postcards as self-mailers in lieu of envelope mail. And often, if you have a direct mail piece that works in say a 4-page letter in an envelope, that can be made to fit on an oversized postcard and probably should be tested on that format. Another is if you're doing substantial quantities, home worker type labor versus commercial services. A mailing list house will cost you more than a bunch of soccer moms who will stuff envelopes and address envelopes and put stamps on while they watch their kids or watch Oprah. At one point in time, Jeff Paul and I had as many as 25,000 pieces of mail going out a week from Naperville, Illinois, all hand-addressed, all individually stamped, all done with home worker labor. Another thing to consider in reducing direct mail costs is co-op mail. For many local businesses, media like Valpak and Money Mailer is underused, and keep in mind you're not limited to their format. They will let you put like an 11x17 4-page letter folded down into their co-op mail. And again, a lot of businesses underuse that. So, selection, margins, total customer value, quality of the message, the envelope, compelling readership when opened, creating urgency at the end, and controlling costs. I want to briefly talk about Perry's issue or question, and that essentially is— well, in fact, I'll just read his question. As you know, one of the common objections to cutting-edge direct mail is you can't use it in professional business-to-business selling, which of course really is not true. However, I still think that in business-to-business sales, you have to exercise some caution, and perhaps there are things you can't get away with as as easily as you can in consumer marketing. In particular, I'm planning a direct mail marketing campaign that will target high-level VPs, presidents, engineering managers for the high-tech seminar, etc. I'd like some help on being attention-getting or outrageous versus being taken seriously and getting a response. Okay. First, let's not talk specifically about direct mail. Let's quickly talk about offers. Again, this is fresh in my mind because It was Saturday morning at the copywriting coaching meeting. There's a fellow there who sells $150,000 pieces of medical equipment to doctors and hospitals. And most recently, his most successful offer initially expressed in lead generation broadcast fax is no payments until 2001 and no interest until 2001 and no money down. Now, as I said to him at the meeting, that's a classic pitch. You see it on TV used by furniture stores typically selling to people with troubled credit, the low end of the consumer market. And here it is being being used to sell to doctors and hospital administrators a $150,000 piece of equipment. Point being, a great offer is a great offer is a great offer, and they move from consumer marketing to business-to-business marketing or in the other direction without any necessary modification. Then let's take the direct mail itself. Some months ago, maybe even last year, in your newsletter— probably last year right after the Superconference because he brought them to the Superconference— one of our members by the name of Tom Hubiar, who is a business-to-business marketer, had taken me up on a dare and had done a couple of letters. You may remember seeing them and you may be able to go back and find them. That emphasized sex and talked about how his particular products and services relieved the CEO of all of these various and sundry worries and concerns so that his mind was clear and he could have better sex at home. Several other business-to-business marketers took me up on the same dare., and all of them had successful results to report. Point being, I really do not believe you have to exercise any caution. I don't think there's anything you can't get away with. I don't think there's fundamentally any difference between consumer mail and business-to-business mail, and I think it's very important to remember we all use it as a shortcut, shorthand terminology, but in a sense business-to-business is in and of itself a misleading term because businesses don't buy anything. Human beings within the businesses buy. Human behavioral psychology is human behavioral psychology. Can you do something so outrageous, so goofy, or so blatant, so weird in its color or format or delivery or style that it undermines your credibility and causes you not to be taken seriously. Maybe, but my contention would be even in such situations, the trade-off is probably in your favor. The heightened response from those who are not negatively affected by it probably exceeds what you lose. I'll tell you one quick aside that's interesting about this. You may have noticed last month's newsletter— it was either last month or the month before, but I think it was last month— I showed a sales letter I'd received from 1-800-MUTUALS and I criticized it., in kind of a, I don't know, insulting and intending to be funny way. I accused its writer of wimping out at the end, made some remark about manhood and Viagra, and so forth. One of our— actually, two of our 2 different Kennedy Inner Circle members who both know the CEO of this company sent this to him. And he called them and has booked a day of consulting and we are probably on our way to a client relationship. What I immediately did is earmark the copy. Has something that might be used in another project where I'm working with a client on selling anti-advertising agency information to Fortune 1000 CEOs. It's not the kind of copy you would typically put in a letter to a CEO or that most people would typically put in a letter to a CEO, but I certainly will.

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