Company presidents and marketing directors often make a costly blunder.
Instead of looking at the cost per lead and the cost per sale, they look at what the overall marketing costs are.
This can be said in regards to the creation of a conversion series, email, banner ads and retargeting, tv, radio and much more.
The intelligent approach to marketing is to keep costs low, obviously.
But an effort to make sure that you have the lowest cost per lead and cost per sale may actually cost more, looking at the cost per lead and cost per sale. It’s counter-intuitive.
A traditional direct mail piece will have five components:
1. An envelope.
2. The letter. The letter size often for the selling of a product could be two pages, more likely four. In some cases, six to eight. Mercedes and other auto manufacturers, Obama and other Presidential fundraisers, investment and health newsletters often find a 12 – 16 page sales letter best.
3. The response device. Some response devices are very short and small and some are a little bit more extensive.
4. The lift note. The lift note will often increase responses 25% – 50%.
Then there could be other components, a brochure, a buckslip, or value added piece.
Which one would you eliminate? How would you downsize? Elimination of a piece may seem easy. But would the marketplace react negatively to it? Would you get less response? Will a downsize have a profound effect on your cost per lead and your cost per sale? Let’s take a look…
Much of direct mail is counterintuitive. Over the years you have probably wanted to cut direct mail costs. For example, by eliminating a lift note. On the surface, this might make sense.
Common ways to cut the cost of a mailing package are:
- Shorter letter
- No value-added piece
- Smaller response device
- No business return envelope (BRE)
Even though it’s tempting, you should really think through the idea of cost cutting.
Why? Because it can be very counterproductive. Each of the above cuts will almost always depress your response, not justifying the cost reduction.
Here is an example of what I mean:
Your cost per lead is the money you must spend to acquire one lead.
Let’s say you mail to 50,000 prospects at a cost of $0.95 each ($47,500 total) and get a response rate of 1.0% (500 leads). Then your total cost per lead is $95 ($47,500 divided by 500 is $95)
Now let’s say you cut a value-added insert. The inserts cost $0.08 each, but taking it away decreases your response rate from 1.0% to 0.7%. Here is what happens:
- Your cost of mailing is now $43,500 (good!)
- Your response rate decreases to 0.7% (bad!)
- So the number of leads decreases to 350 (bad!)
- Your cost per lead has increased to $124.29 (bad!!)
So you see that by cutting an insert that costs you $.08 each, you increase your cost per lead by $29.29. Even though it may appear that your total costs have decreased, your actual cost per lead has increased by over 30%!
If you would like some more tips on how to have a successful and profitable campaign please contact me at (310) 212-5727 or at firstname.lastname@example.org.