During times of crisis – like what we’re living through now, with the COVID-19 pandemic throwing everyday life and economies into disarray – it’s easy for company presidents and marketing directors to make a costly mistake.

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 for 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.

And in hard times, you want to cut expenses wherever possible.

But in an effort to make sure that you have the lowest cost per lead and cost per sale may actually hurt you in the short term. Cutting marketing budgets is even more damaging for your future.

It’s counter intuitive. So, let me explain with an example of direct mail …

A traditional direct mail piece has five components:

  1. An envelope.
  2. The letter … typically two pages, but 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- to 16-page sales letter the most effective.
  3. The response device … some are short, and some are a little bit more extensive.
  4. The lift note … which often increases responses 25% – 50%.

Then there could be other components – a brochure, a buck slip, or value-added piece.

 

So how can you cut costs without impacting results?

 

Let’s take a look…

  • 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. It’s dangerous and counterproductive in marketing.

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 100,000 prospects at a cost of $1 each ($100,000 total) and get a response rate of 1.0% (1,000 leads). Then your total cost per lead is $100 ($100,000 divided by 1,000 is $100).

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 0.8%. Here is what happens …

  • Your cost of mailing is now $92,000 (good!)
  • Your response rate decreases to 0.8% (bad!)
  • So, the number of leads decreases to 800 (bad!)
  • And your cost per lead has increased to $115 (bad!!)

 

So, you see … by cutting an insert that costs you 8 cents each, you increase your cost per lead by $15. Even though it may appear that your total costs have decreased, your actual cost per lead has increased by 15%!

As we navigate the pandemic, be very strategic with your direct mail pieces. But don’t just slash costs. You will pay the price in the long run.

We can help. We’ve been doing this for 40-plus years. If you would like some guidance on how to have a successful and profitable campaign please contact us at 615.933.4647 or at johnny@cdmginc.com.

 

 

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