So, you’re considering adding direct mail to your marketing efforts? Great choice.
Yes, direct mail testing is risky. However, knowing the risks associated with direct mail marketing—and how to mitigate them—will help you better plan your testing and growth strategy to take full advantage of this dynamic offline channel.
What are the possible risks when investing in direct mail?
Experimenting with any new marketing strategy, including direct mail, comes with a variety of uncertainties. Budget, performance, expectation and sundry risks should be acknowledged when reviewing overall risk tolerance, and prior to green lighting the channel.
Budget risks
Direct mail marketing is an investment, especially when compared to digital advertising. When budgeting for a solo mail campaign, you must acknowledge the upfront costs associated with consumer data, paper, ink, printing, and postage. Although these initial costs may be higher than other direct response channels, direct mail is known to produce higher returns.
2022 ANA research shows direct mail’s average return on investment and response rates outperforms the most popular direct marketing tactics. There are a variety of ways to trim these production costs, including leveraging an agency’s network of design, data, print, and delivery vendors.
Performance risks
Although the mail channel is known to generate returns, there are a variety of campaign elements that can hinder performance, resulting in a low response rate and wasted resources.
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Poor targeting: You can choose from a variety of data sources to build your mailing list, but if you do not target your mailers effectively, you may be sending them to an irrelevant audience. Partnering with a trusted data provider, or an agency who can give you efficient access to several of them, can significantly de-risk this issue.
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Confusing creative: Designing for direct response is a skill. If your mail piece is unclear, or unappealing, it can lead to poor response. Leverage creative professionals who specialize in direct response design to ensure your piece is optimized to sell.
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Weak offer: Your offer is critical to performance, and often the tipping point to incentivize conversion. The offer must be relevant and significant to your target audience.
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Incomplete tracking: If your campaign performance is not tracked effectively, and your KPIs are not accurately measured, it can lead to poor decision-making and the misallocation of future financial resources. Ensure you have a reliable process for tracking performance and calculating incrementally.
Expectation risks
Setting realistic and achievable expectations of your initial testing efforts will help to manage risk by aligning stakeholders, ensuring campaign success, and sustaining long-term growth. With a test and learn mindset, you can evaluate the success of a new channel against established benchmarks, while identifying promising channels and future investment allocations.
Unfortunately, testing costs and strategy are among the biggest barriers a marketer must face when venturing into new direct marketing channels. Recent industry research found implementing a sustainable testing strategy was the most challenging aspect of managing direct mail marketing campaigns in-house.
Choosing a knowledgeable direct mail agency can help you manage the complexities of building an effective direct mail testing program.
Sundry risks
Lastly, you must recognize how miscellaneous external factors will impact your direct mail investment. Your competition may also be mailing, meaning your campaign will be fighting for the attention of your potential customers.
Economic fluctuations, consumer behavior, and data privacy regulations can also affect your campaign’s performance. These outside factors may not be large enough to warrant individual attention, and are typically reduced when working with an experienced direct marketing partner.
5 best practices to mitigate direct mail risk
There are several best practices you can employ to mitigate risk when investing in direct mail. Before we dive in, it’s important to consider how your risk mindset can impact new marketing strategy investments and campaign elements.
To ensure your campaigns are effective and generate a positive ROI, you should work to find a healthy balance between risk aversion and risk tolerance, as a risk-adjusted marketer. This can be done by applying the best practices below.
1. Do your research
The types of direct mail risks we shared above may be minimized by working with the right partner. Before investing in direct mail, thoroughly research any direct mail agencies or services you plan to use. Look for reviews, ratings, and testimonials for a thorough understanding of their reputation, capabilities, and experience. Asking the right questions up front will help you find the partner that will represent your brand, best.
If you decide to launch your direct mail program in-house, there is additional research that must be done that a direct mail vendor would traditionally do on your behalf. You’ll need to:
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Research your target audience to understand their demographics, interests, and behaviors.
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Review your potential sources for mailing lists, such as your CRM data, list brokers or data providers, for data quality
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Analyze successful and unsuccessful direct mail campaigns from your competitors and use this information to inform your campaign strategy
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Study typical response rates for direct mail campaigns in your industry to set realistic performance expectations.
2. Set realistic goals and expectations
Setting realistic goals and expectations for your direct mail campaign can help you avoid disappointment and frustration. It will also ensure your future strategy decisions are data-driven—mitigating your risk for future campaigns.
Clearly define your financial goals and campaign KPIs before launching your mail program, ideally in phases. Determine what you hope to achieve through your campaign, such as increasing sales, generating leads, retargeting leads, or simply building brand awareness. Identify the metrics that will point towards success, the most common being response or conversion rates.
Most importantly, gain leadership agreement with these objectives and how you will leverage any learnings for future investment decisions. Once you’ve set clear expectations, determine how you will track your performance.
Direct mail is just one part of your overall marketing strategy, and there are many ways a recipient can respond to your mailing. Including a directly attributable element on your mail piece (such as a unique offer code, unique website URL, or scannable QR code), is an easy way to track campaign results, but typically only captures 20-35% of direct mail responses.
The most reliable signal for mail’s impact is via matchback, a process where untracked sales or orders are matched back to the campaign’s mail file to indicate some level or credit for the sale. Patience is key when tracking direct mail performance, as a matchback result provides the most comprehensive baseline for its impact but takes around 90 days to conduct.
3. Use targeted lists
Up to 60% of your campaign success is based on your mailing list data. A high-quality, targeted mailing list helps to ensure you reach the right audience for your product or service, which can increase the chances of success and protect your investment from waste.
To determine who your ideal customer is, review your customer database to identify demographic patterns and trends (i.e., age, gender, location and income). You can also analyze the behaviors of your highest lifetime value customers to determine what motives them to make a purchase.
Your customer feedback surveys and customer service interactions are valuable resources to reveal customer preferences and interests. Combining your first-party data with additional quality data sources will help you build a strong performing mailing list.
As a marketer, you have access to several sophisticated consumer data sources to use when targeting. This includes demographic, geographic, psychographic and behavioral data. Leveraging multiple data sources to build lookalike models and personas allows for superior targeting capabilities and more intricate audience segmentation, outside of individual list capabilities.
Credible direct mail partners can match, append, and test data performance from an array of third-party sources to create relevant and diversified mailing models to continue to expand your audience and scale your mail program.
4. Test before scaling up
To find the perfect balance of short-term growth and long-term sustainability, you must test the channel. There are a variety of affordable ways to test the mail channel, including via a shared mail program or utilizing a direct mail automation platform. Digital pre-testing is also a way for brands new to mail to evaluate targeting effectiveness and creative elements that may perform well in a subsequent mail campaign.
Beginning with lower-cost campaigns like this allows you to evaluate the viability of the channel. If you’re seeing positive results and incremental lifts, then you can increase your investment to scale up to a larger mailing list or a solo campaign.
The most common direct mail testing techniques are A/B (split-testing) and multivariate. Although A/B testing is rather easy to execute, it is time-consuming to determine your campaign controls because you are comparing two versions of a single variable (such as your offer) before moving on to the next variable. Multivariate testing involves testing multiple variables simultaneously but requires a larger investment due to an increased samples size and a more sophisticated infrastructure.
Some direct marketing agencies offer hybrid testing strategies that provide the success rate of a full-scale multivariate test for a similar investment to an A/B test. This type of testing allows you to identify the best performing combination of the campaign attributes you need to test (list, offer, creative, and digital integration) to quickly maximize your campaign’s performance.
5. Diversify your investment
Diversification is how you find the greatest scale. Not only should you be diversifying the data sources you use to build your mailing list, but you should also be diversifying your direct marketing channels to limit risk and maximize performance.
In addition to sending a mail campaign, activating your mailing list data in digital advertising channels such as social media, email, display, native, web video, connected radio and CTV|OTT, allows you to create a multichannel campaign. Surrounding your target audience with multiple touchpoints will increase your reach, improve your engagement, and drive conversions.
An additional benefit of direct response channel diversification is that it can reduce your customer acquisition costs, further protecting your direct mail investment. For example, a leading financial services brand was struggling to reach relevant prospects with its siloed digital campaign due to the limited data variables available during audience selection.
Direct mail was a performing channel for this brand, so it activated the prospect mailing models online to create a coordinated and targeted campaign. This diversification strategy resulted in a 23% lift in sales rate, generated 36% more revenue, and reduced campaign CPAs by 12%.
Direct Mail Marketing: The Risk is Worth the Reward
With a risk-adjusted mindset and an understanding of the risks associated with launching a direct mail campaign, you can make data-driven decisions on how to invest in direct mail and manage potential risks and rewards. Balance risk-taking with risk management strategies to optimize your direct mail programs and achieve the best results.
Contact a top-rated direct marketing agency to help you navigate the process of direct mail advertising and reach more customers