| |
| |
|
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:
Google News |
|
|
|
RELATED ARTICLES
Mortgage Originator Marketing - Differentiate or Die One of the best ways to attract more clients is to quit marketing the same way your competitors do. Because when all mortgage originator marketing is essentially the same, it becomes nearly impossible to distinguish one loan officer from another. Using Direct Mail The advantages of using direct mail to promote your home-based or small business are: Selectivity-the ability to send your advertising only to people and organizations who can use and pay for your product or service. Flexibility-the freedom to use either the simplest or the most elaborate presentation, ranging from a single-sheet mailer to an entire package, and the flexibility to test all sorts of minor changes in your mailing pieces. Top 10 Dos and Donts for an Effective Business Referral Network! Every business - particularly small, entrepreneurial or professional businesses - must have a powerful referral network. It is very unlikely (and terribly expensive) to "advertise your way to success". Terrific Titles, Happenin Headlines You've probably heard the slogan, "You never get a second chance to make a first impression." It may be a sales pitch, but in the world of advertising and promotion, it's right on the nose. The Advantage to Buying Promotional Products Online Buying your promotional products and corporate apparel online provides five major advantages: a greater selection, better pricing, convenience, customer service, and faster ordering time.Manufacturers often display their entire line of products on the internet, providing you with a greater selection of products. Viral Marketing with a Powerful Twist What would you do with 500, 1000 or more additional visitors each day? Imagine how your web business will grow with an extra 2000, 5000 or MORE leads each month . . 2 Step Marketing Do it Right.I receive postcards all the time. 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. 15 Commandments Of Creating A Wealth Pulling Niche Niches are like bathrooms; you never notice them until you need one." - Primm (From NicheBrain. The Top 10 Ways to Market your Business or Professional Practice Without Networking While focused, strategic networking is usually the most efficient way to build your professional practice, there are many other ways to market your business. Personal networking may not be appropriate in some areas, or for certain types of services, and some people simply don't like to do it. You Must Get Going If You Want To Get Growing For many of service-based businesses out there, it's not that you don't know you should be marketing or don't want to get better at it. It's just that you don't. Quick and Instant Marketing Soup Everything happens Quickly and Instantly on the Internet. In the blink of an eye your easily transported around a whole planet. How to Put Law & Order into Marketing Your Legal Practice First in a series of three articlesRegardless of your law firm's focus - criminal, civil, corporate, family, business, etc. - the greatest challenge most small to mid-size firms face is the lack of a strategic and disciplined approach to business development. Mail Can Make You Money Are you still waiting for business to turn around before you start direct mail marketing? Waiting around won't get you any business. The time to start is now. How Your List Affects Postage Costs HOW YOUR LIST AFFECTS POSTAGE COSTS AND WHAT YOU CAN DO ABOUT IT!The quality and accuracy of address information in mailing lists is one of the areas least understood and largely overlooked by most businesses using direct mail. To get an advertising message delivered the address must be correct! Many firms that use direct mail neglect this vital aspect. Standards for Dry Washing and Pressure Washing in Mobile Car Care The industry standard for mobile washing is completing the car and removing the dirt so it is clean as promised to the customer. Some would say this is not a standard but rather the minimum required. 10 Effective Ice Breaking Questions Whether you go to a Chamber of Commerce event, a PTA meeting, the racquetball court, the local health club, or practically anywhere else, opportunities to network present themselves constantly. But there are fears which present themselves as well. The Beginners Mail Order Opportunity Guide The "Mail Order" business is not a business of itself, but isanother way of DOING business. Mail Order is nothing more or lessthan selling a product or service via advertising and the offersyou send out by mail. Independent Professionals: What Stands Between You and Your Artist Statement? What Stands Between You and Writing an Artist Statement or Professional Statement?Is it a dry creek bed, or the Grand Canyon? A closed door, or the Chase Manhattan Bank vault? Or maybe, it's the whisper of many doubts: Artist statements are so predictably icky. What can you say about your work that someone else can't simply see? What's the point of words for a visual experience? How am I going to be authentic, but not arrogant? Sincere, but not sentimental?And yet, you know that pros consider artist statements an essential part of a good portfolio (or About Me pages essential to a web site). 7 Simple Marketing Tips Here are 7 simple marketing tips to help you boost your sales and profits quickly. All are easy to use and work for any business.
|
| home | site map |
| © 2006 |
