Cold, hard statistical data worth considering

Every year, the Direct Marketing Association (DMA) publishes an exhaustive statistical data book that reveals the direct mail lessons of the year from their reporting members.

For me, one of the most interesting sections of this annual report has to do with the cost of customer acquisition across different marketing media.

The data this year isn’t really all that different from past years since I started looking at this data. The marketing investment required to acquire a customer continues to go up, but the comparative costs across media are pretty similar from year to year (at least for the most recent few years, anyway).

What I also find fascinating in this data is the disconnect between how consumers SAY they’ll respond to various media, including making purchase decisions, and their actual response and purchase behavior. There is a similar disconnect between what companies are spending their money on, and what is actually working best based on actual purchase behavior.

Bear in mind that this DMA data is aggregated across ALL industries — finance, banking, retail, insurance, consumer goods — everything. What’s important for us to learn from this data is the relative effectiveness of various marketing media, and consumer response in each medium.

This year’s data shows significant differences in the cost of customer acquisition between telemarketing, Internet display ads, and all other media. Direct mail methods, including letters, catalogs, and postcards, along with email, Pay Per Click online advertising, and radio all have fairly similar average costs of client acquisition, all in the $50 to $67 range.

Telemarketing, on the other hand, was the highest — ringing in at almost $200 per customer. This is four times the cost of client acquisition for direct mail.

Internet display ads came in as the only other significantly more expensive method, at $138 per customer.

We already knew that telemarketing was significantly more expensive than direct mail. So why does the business world still use it?

Here’s where things get interesting.

According to the DMA data, cold telemarketing produces an 8.2% response rate. No other method reported by the DMA’s members comes anywhere even close to that.

The only other marketing medium that produces significant response rates is direct mail. Letters came in at a 1.28% average response rate, postcards are at 1.12%, and oversized mail came in at 1.44%.

What this is saying is that, while the cost of client acquisition via direct mail is lower, you have to do a lot more of it to make up for the reduced response rate.

The DMA data also shows that the response rates to cold emailing (aka, “spam”, even in it’s technically legal variety), is only 0.03%. Even when customers come from cold (non-optin) emailing, the average cost of customer acquisition actually exceeds the cost for letters, postcards, catalogs, and even Pay Per Click marketing.

Based on these results, you’d think that companies would put their marketing efforts into the methods that actually drive revenue, right? Nope. Website improvements, cold emailing (spam), and social media ALL outrank direct mail by a factor of 3x or more when organizations were queried about their marketing channel priorities for coming year. Telemarketing was ranked with half the priority of direct mail.

Do you see the disconnect here?

Now let’s talk about one of my favorite things: Direct mail in general, postcards in particular.

Here are some fascinating whammies from the DMA data:

  • Postcards are the most likely marketing mail pieces to be read by recipients. 52.5% of consumers report that they’ll read a postcard, compared to less than 1/3 that will open a letter-size envelope.
  • What age bracket is the most likely to respond to a direct mail offer? 22-24 year olds. I bet that blows your mind, eh?
  • 23.4% of consumers will respond to a postcard if the offer was relevant and of interest to them, compared to only 7.9% for letter size envelopes.
  • Consumers are 46% more likely to respond to an offer if it’s from a company they’ve heard of before (remember how much I harp on mailing more than once?)
  • Response rates to offers from a “house” list (prospect list) is approximately 3x the average response rate from “cold” lists (proof that you should have an ongoing follow up system to keep in touch with your leads).

Some interesting stuff there, right?

Here’s another somewhat esoteric piece of data that helps to back up what one tax resolution practitioner is doing in a unique way. Amongst the DMA members that are in a “financial” industry (the closest industry segment to ourselves), 92.8% of mail pieces sent by financial industry companies are addressed directly to a specific member of the household. This should not be taken as a direct indication of boosted response, but when credit card and insurance companies are doing it, it’s a reasonable assumption to state that they’ve figured out that doing this DOES boost response.

There is a metric boat load of additional interesting data buried in this report (it’s 213 pages). You can purchase the full report here if you really want to spend a weekend buried in numbers (I’m a nerd, so I love this stuff!).

I hope that briefly sharing some of this data with you reinforces some of the more common themes that I write about here. I realize that all statistics are open to interpretation, but I’m pretty happy that this year’s DMA data align pretty well with my own.

In my next article, I’ll be taking a cue from this data, and showing you a radical variation on the concept of using postcards to drive inbound phone calls.

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