The biggest mistake made in direct mail marketing is the same biggest mistake made in online marketing, print, radio and any form of marketing.
It’s trying to create a “self liquidating” offer instead of focusing on long term customer relationships.
By making this mistake, marketers think they’re being smart and avoiding losses, but in reality, they’re missing out on far bigger profits.
In this video, filmed at the Titanium Mastermind in Phuket, Thailand, Craig Simpson explains the mistake and how to avoid making it.
THE WRONG APPROACH TO MARKETING
Imagine that a dry cleaning business is considering running a direct mail campaign. They plan to mail out 10,000 pieces at 60c per piece, for a total cost of $6,000. They expect 1% of the recipients to take up the offer and pay for the dry cleaning service. They also know that the average dry cleaning bill is $35.95.
This campaign, then, will bring them $3,595 in revenue. That amounts to a $2,405 loss.
The less savvy marketers will look at those numbers and decide the campaign is not worth doing.
Or, they’ll try and look for tweaks to make the campaign pay for itself. In other words, they’ll try to make it “self liquidating.” They might think of increasing prices to cover the costs of the marketing, trying different tactics to increase the 1% response rate, or looking for cheaper ways to do marketing.
THE SMARTER APPROACH TO MARKETING
The smarter marketer will realize that they don’t need a “self liquidating” campaign. Out of those people who say yes to the dry cleaning offer, many of them will choose to do business with the same company again.
Suppose that the average customer spends $139.70 with the dry cleaning business over 6 months. This means that the direct mail campaign will actually bring in $13,970 in revenue over the long term, not just $3,595. That’s not a loss, but a profit of $7,970.
Companies that make over $100 million a year take this approach to marketing. They are OK with marketing campaigns that make a loss in the short term, because they can recoup those costs over the course of a year.
THE KEYS TO MAKE THIS WORK
There are a few caveats to make this approach work for your business.
Firstly, you must be able to make additional offers to your customers. If your customers typically buy from your business once and never again, you have a problem. Make sure you have a range of different products and services that you sell. The first sale must not be the only one.
Secondly, you need to know how much your customer is worth over a lifetime. This is not just the amount of the first sale, but the sum of all the sales you make to them over time. If, for example, you know your average customer will spend $700 over time, you can afford to spend $300 to acquire each customer.
The MOBE Gold Masterclass goes into more depth on this topic. It will show you how to find customers, sell to them and build a consistently profitable business using a Customer Acquisition Process. To learn more about the Gold Masterclass, click HERE.