Monday, August 22, 2011

Profit Loss Of Direct Mail

Ampersand Graphics

Most of you know that direct mail is one of the 3 legs of a Larson Target Marketing Plan. If you have been following us for any length of time you know the 3 parts are Direct Mail, Social Media Marketing and Telemarketing.

Most of my clients and maybe even you want to shy away from Direct Mail. I understand, there are (necessary) expenses involved. Yet it is or can be a crucial element to a complete program working on multi channels and levels. So let’s take a look at the P&L of a direct mail program.

You need to start by measuring each individual marketing campaign as a unit not part of a monthly or quarterly figure. The application of overhead expenses depends on the nature of the marketing campaign and the elements you are using.

You want to know is Response Rate %, Average Order Value, Sales Per Piece, Complete Costs, Cost of Order Fulfillment. It is in finding out or knowing these fugues that you can make educated choices on what is happening, what to do, what to change and how to get and make it better.

By being able to analyze all the metrics you are able to implement the actions needed to either take corrective actions during the campaign or to take advantage of new markets that unfold as the campaign goes on.

Average Unite Price and Average Order Value. The average unit price is calculated by dividing your gross sales by the number of orders.

Response Rate and Service or Unites per order. This is a way for marketers to rapidly fix any P&L imbalances. You measure this by the total number of orders by the total number of mailed pieces. If you add in current clients, they should be higher than if you only use new clients or prospects.

Your Cost Of Goods or Services. As a main part of your success you need to be monitoring all the elements of your Cost of Goods and Services. These costs include things like, product/service costs, freight, shipping, mark downs, etc.

Fulfillment Costs. These costs include everything that is involved with not just receiving a client’s orders and inquiries but shipping them out as well. Remember the costs of returns as well.

Advertising / Production costs. In a direct mail or print campaign this can be the largest cost center. Creative costs, print costs, mailing costs. If you look at your response rate, as it goes up (or down) the % of the campaign as a % of sales goes up and down. This is the number that scares away most potential direct mailers from working on and with this channel.

General Overhead. Can’t get away from running the company and the costs involved. Even if you did nothing these costs exist. Do you know what your break even is, if you do NOTHING? Rent, salaries, gas, water, electric, waist removal.

Once you have identified all your costs you can start to go to work. As you do your first and them more campaigns you will start to have a personal company benchmark, until then you might be able to pull out competitors results or industry averages. With this benchmarking step you can evaluate your program and your current position.

Larson Notes & Satire: Start talking real numbers in sales. Don’t be using Monopoly money but real dollars that can make or (sorry to say) break your company. With knowledge comes power. If you’re going to jump into direct mail be smart about it. More and more the mail box is become empty. Why do you think the US Postal Service is losing money at such an alarming rate? No one is sending mail. This is why it has become, if for no other reason such a powerful channel you your overall marketing plan. If you do nothing else and have put a solid offer together you should expect 1.5% to 3% return. To me that is not good enough. All you need to do is put in a little telemarketing to call up each and every one of those mail recipients and your numbers should at the least double.

You got to hammer down your attack and make it pay, else go and blow your money, your competition will be happy to see you waist your efforts.

“We don’t sell lists, we find customers.”

Remember our 3 new programs for 2011
1st is our Virtual Sales Manager Program.
2nd our Sales Function Outsourcing Program
3rd our Virtual Business Consulting Program

Howard Larson
Larson & Associates
Target Marketing & Telesales Professionals for new account acquisition
Making good businesses great and great businesses even better

P.S. We make telesales for small business affordable by offering programs down to only 15 hours a week. Maybe you could add telesales into your marketing mix call today and find out.

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