How Higher Direct Mail Package Costs Can Increase Profits

When an organization needs to cut expenses, the direct mail budget is often one of the first targets.

And for executives not actively involved in acquiring, retaining or cross-selling customers, it’s sometimes difficult to understand why we’re spending so much on a direct mail package. Why not eliminate a component or two and get the costs down. After all, if we can maintain the same revenue levels and cut expenses, marketing profits will go up and everyone looks good.

At first glance, this argument may sound convincing but increasing profits by cutting package cost isn’t sustainable. In fact, direct marketers can typically do a better job raising profits by adding to the mailing package rather than subtracting from it.

Yes, there are ways to cut costs without hurting the effectiveness of the mailing. You can, for example, make small changes to the package size to make it run more efficiently on your printer’s press. Or you can test cheaper paper stocks, smaller formats, or dropping the brochure.

But don’t rush into cutting your direct mail package. Before making any changes, it’s good to remind everyone of the mailing’s objective. And for most of us, the main objective of a mailing is to make a profit-not to save money.

Eliminating package components, mailing cheaper lists, eliminating the premium may save money in the short term but slashing package cost is seldom the answer. Typically, we’ll do a much better job of increasing long-term profit by adding to our package. For example, you can increase your mailing’s profit-even as you increase its cost-by:

  • Feature an involvement technique. This could be a survey, membership card, petition, name stickers, a certificate-anything that gets the reader involved with the package. You can’t, however, just add the involvement device to the package and expect it to work its magic. It must be worked into the copy and given a reason for being included in the package.
  • Include a premium in your offer. I’m an avid believer in premiums and need a reason not to include one. You don’t need to spend lots of money for the premium-it can be as simple as a decal, white paper, or a paper bookmark. It does need, however, to have a perceived value to the reader. Some groups, believing that they cheapen the value of the organization, refuse to test a premium. Yet, most customers and donors respond well to them and, when used properly, a premium-despite its added cost-can increase the mailing’s net profit.
  • Try a larger format. Mailing a larger format can increase both your postage and production costs. Yet they grab attention and drive response. Today, fewer groups are using oversize formats because of their higher costs. But in past tests, when nothing other than the format size was changed, I’ve increased response by 100% with an oversize format.
  • Add an insert that draws attention to your guarantee. The mailing’s recipient has plenty of reasons-real or perceived-not to respond to your offer and the guarantee helps remove any doubt that might otherwise endanger the sale. And by highlighting your guarantee with a separate insert, you’re focusing attention to your promise for a good customer experience.
  • Feature a lift note. Have the lift note come from someone other than the main letter signer sign and print it on a paper stock that stands out from the main letter. Use it to customize the offer to particular list segments, present an endorsement, expand upon the offer and to give an added “push” to get the reader to respond.
  • Invest money in more sophisticated list segmentation techniques. Even the best mailing lists include names that won’t respond to your offer and every bad list includes names that will. And since the mailing list is the most important component of your mailing, there’s no better place to invest money than to refine your list segmentation techniques. List modeling/profiling isn’t inexpensive but with improved segmentation you can boost your response and even minimize your total costs by mailing fewer, but better targeted, mailing pieces.

All this isn’t to suggest that you should drop your efforts to reduce costs. But as direct marketers, we’ll do far better by shifting the discussion from how to cut costs to how we can make our mailings more profitable.