Newcomers to the field of direct mail often use the terms "direct mail," "direct marketing," and "mail order" interchangeably. Perhaps the best way to distinguish these three similar, yet different, terms is to remember that direct mail is simply an advertising medium like print or broadcast media. In print media, advertising messages are delivered through the printed word, usually in newspapers or magazines. In broadcast media, messages are delivered through the airwaves, on television or radio. In direct mail, advertising and other types of messages are delivered through the mail.
By way of contrast, mail order is simply a way of doing business, just as retail and personal selling are other ways of doing business. A mail-order business delivers its products through the mail. It may also use direct mail to send out advertising messages, but many other businesses use direct mail without being in the mail-order business.
Direct marketing is a broader term that refers to a type of marketing that utilizes a variety of advertising media. Direct marketing is distinct from other types of marketing in that it makes an offer and solicits a direct response. Direct mail is simply one advertising medium that direct marketers employ, although it is the one most frequently used.
Direct mail is the most heavily used direct-marketing medium and the one direct marketers learn first. Despite increases in the costs of postage and paper, direct mail continues to grow. According to Direct Marketing magazine, direct mail accounted for some $37.4 billion in advertising expenditures in 1997, up from $31.2 billion in 1995. While most advertisers use third-class mail (reclassified in 1996 by the U.S. Postal Service as Standard Mail [A]), a significant number of mailings are sent first class, making it difficult to arrive at accurate statistics about the volume of advertising mail being sent. For fiscal year 1997, the U.S. Postal Service reported that the volume of Standard Mail (A)—which includes advertising letters, flats, and small parcels—increased by 7.8 percent over 1996. In his book, Profitable Direct Marketing, Jim Kobs noted that 714,000 businesses had bulk-mail permits and sent out more than 63 billion pieces of advertising mail a year. The catalog industry, a specialized area of direct mail, generated $75 billion in sales via direct mail during 1996, a figure that was projected to grow to more than $87 billion in 1998.
The primary application of direct mail is to reach consumers with offers of traditional goods and services. Some of the earliest examples of direct mail were seed catalogs sent to American colonists before the Revolutionary War. Aaron Montgomery Ward (1843-1913), regarded as the first of the consumer-goods catalogers, started his catalog business in 1872, while Richard Warren Sears (1863-1914) mailed his first flyers in the 1880s. L. L. Bean of Freeport, Maine, utilized direct mail to send out his first flyer advertising Maine hunting boots in 1913.
More recently, consumers have been sent direct-mail packages offering a range of financial services, coupons offering discounts on packaged goods, and letters requesting donations to and offering memberships in a variety of nonprofit organizations.
Direct mail is also an effective medium in business-to-business marketing. Since business orders are usually larger than consumer purchases, it often takes more than one mailing to make a sale. Imaginative packages are often used to get through to hard-to-reach executives whose mail is screened by their secretaries. In addition to making sales, business-to-business direct mail can be used to generate sales leads and reinforce the personal selling effort.
The direct-marketing adage that says success depends on making the right offer to the right person at the right time in the right way touches on the three key elements of direct mail: the offer, lists and databases, and the direct-mail package.
Making an offer is one element that distinguishes direct marketing from general advertising and other types of marketing. Offers are designed to motivate the reader to take action: place an order, request more information, etc. According to Kobs, "The offer is one of the simplest and most dramatic ways to improve results."
In Successful Direct Marketing Methods, Bob Stone gave this example of how the same offer can be presented in three different ways: I) Half-price! 2) Buy one—get one free! 3) 50 percent off! All convey the same offer, but statement number two pulled 40 percent better than statement one or three. Stone wrote, "Consumers perceived statement number two to be the most attractive offer."
An offer can be structured around marketing's four Ps: product, price, place (or distribution channel), and promotion. Some basic offers include optional features (product); introductory price or quantity discount (price); free trial or bill me later (price); order by mail, phone, or fax (place); premiums or sweepstakes (promotion); special conditions of sale and types of guarantees (promotion).
In direct mail the offer can be tailored to fit the characteristics of the individual recipients. Direct mail allows marketers to target individuals with known purchase histories or particular psychographic or demographic characteristics, thus affecting how an offer will be made. Even geographic considerations, based on zip codes or other criteria, may affect how direct marketers construct their offers.
Mailing lists and databases offer direct marketers the opportunity for more selectivity and personalization than any other advertising medium. According to Standard Rate & Data Services in Direct Mail List Rates and Data, there are more than 50,000 mailing lists to choose from, and that's not the only list of lists available. Jim Kobs estimated there are 5,500 consumer lists available for rental. Some 9 million businesses can also be reached via direct mail through compiled lists.
Lists can be categorized in different ways. Two basic types of lists are in-house lists and external lists. In-house lists are not usually available to competitors for rental and are based on responses to previous mailings; hence, they may be called response lists. External lists are typically compiled for rental by sources outside the company.
Compiled lists are either lists of consumers or businesses. Some examples of compiled consumer lists available for rental are buyers of certain vehicle models, different types of collectors, subscribers to various periodicals, organic gardeners, and golf enthusiasts. Business lists are typically categorized according to the Standard Industrial Classification (SIC) system, where various types of businesses are assigned two-, three-, or even four-digit codes, with two-digit codes for major business groups and four-digit codes for more specialized business types.
In direct mail, lists are rented from a list source for one-time use. When multiple lists are rented, a technique known as merge/purge is used to eliminate duplications. The job of list brokers is to match their clients, the list buyers, with the appropriate lists. Although representing both the list buyer and the list owner, list brokers are usually paid by the list owner. While list brokers represent the buyer's interest in finding the right list, a list manager is more like an agent who represents one or more specific lists. The list manager handles the rental and billing procedures for the list owner. The list manager works with list brokers and list compilers as well as with heavy mailers to get them or their clients to use the list.
List costs tend to vary with specificity. That is, a list of subscribers to a particular magazine may rent for $50 per thousand (lists are typically rented on a "per thousand" basis). For a list of women subscribers who live in certain zip codes, however, the cost may increase to $100 per thousand.
Direct mailers employ a variety of selectivity techniques to better target their mailings. Traditional segmentation techniques look at past behavior, including time since most recent purchase, frequency of purchase, and amounts of purchases (known as the RFM formula, recency/frequency/monetary). More advanced segmentation techniques employ formulas that help predict future behavior.
One such technique is list enhancement, or the process of overlaying social, economic, demographic, or psychographic data obtained from other sources on a mailing list. Adding such data to an in-house list allows mailers to develop a customer profile based on such factors as age, gender, car ownership, dwelling type, and lifestyle factors. Once that process is undertaken, the in-house list becomes an in-house database, or collection of information about customers and prospects that can be used for marketing purposes. Modeling techniques can then be applied to the in-house database to help predict response rates from externally compiled lists whose individuals share some of the characteristics of the company's customer profile.
Direct-mail packages come in all shapes and sizes, making it one of the most flexible of the direct-marketing media. A standard direct-mail package, which itself may be done in a variety of sizes, includes an envelope, a letter, a brochure, and a response device. A variation on the classic format is the multi-mailer, a package with a number of flyers each selling a different product. Another popular format is the self mailer, any piece that is mailed without an outer envelope.
More complex direct-mail packages are three-dimensional; that is, they include an object such as a gift or product sample. These three dimensional mailings can be effective in reaching top executives whose mail is screened by a secretary, and they are practically guaranteed to be opened by consumers at home. Catalogs ranging from six to more than 100 pages are used to sell a variety of goods. They are also used to sell services, such as seminars. A variation of the catalog is called a magalog, which combines a certain amount of editorial content along with sales content to give the catalog the appearance of a magazine. A specialized field of direct marketing, catalog marketing is a discipline unto itself and accounts for a significant part of all direct-mail activity.
Looking more closely at the classic direct-mail package, the envelope's job is to motivate the recipient to open the package. The recipient's decision whether to open, set aside, or discard the mailing piece takes just one or two seconds. Regardless of the volume of mail a person receives, whether at home or a place of business, the envelope must distinguish itself from other mail by its size, appearance, and any copy that might be written on it. Envelopes that take on the appearance of an invitation or telegram might grab someone's attention faster than a plain number ten envelope. Other choices that are made concerning envelopes are color and texture, window or closed face, and whether to use a preprinted indicia or a postage stamp.
The letter is a sales letter and provides the opportunity to directly address the interests and concerns of the recipient. In a sense the letter replaces the salesperson in face-to-face selling. The letter typically spells out the benefits of the offer in detail. The more personal the sales letter, the more effective it generally is. The letter writer must be intimately familiar with not only the product or service and its benefits, he or she must know and understand to whom the letter is addressed.
While the letter tells the recipient about the benefits of the offer, the brochure illustrates them. Illustrated brochures are used to sell services as well as products. Brochures come in a range of sizes and different folds. While the use of color may increase response, the brochure's look should fit the product or service it is selling.
Finally, the package must include a response device, such as a business reply card or coupon, that the recipient can send back. Response rates are generally higher when the response device is separate from, rather than part of, the brochure or letter. Toll-free numbers are often prominently displayed to allow the recipient to respond via telephone. Since some customers will not use the phone to place an order, however, a response device should be included in addition to a toll-free number. The key to a successful response device is to keep it simple and easy to fill out.
A "lift letter" is often added to the package to "lift" the response rate. The lift letter often carries the message, "Read this only if you've decided not to accept our offer," or something similar to grab the recipient's attention one more time.
Other enclosures that may be added to the direct-mail package include gift or premium slips, article reprints, a business reply envelope, and a variety of involvement devices. Involvement devices such as stamps, stickers, pencils, and rub-off messages motivate the recipient to become involved with the response device and, hopefully, continue to take the action required to make a purchase.
Since large expenditures are involved in mailing lists in the tens of thousands or even millions, direct mailers take advantage of the medium' s testing capabilities. Every element of direct mail—the offer, the list, and the package—can easily be tested to avoid committing major resources to unproductive mailings. In Successful Direct Marketing Methods, Bob Stone recommended testing in six major areas: products and services, media, propositions made, copy platforms, formats, and timing. The point is that tests should concentrate on meaningful components.
For products and services being sold by mail, pricing and payment options are often tested. A test may reveal that a higher price actually produces a better response. While the product and the price are considered the main offer, premiums and other incentives that enhance the offer are also subject to testing.
List testing is basic to direct mail. Experts recommend testing different segments of a particular list, preferably testing the best segment first. The appropriate size of a test sample is dependent on the anticipated response. The smaller the anticipated response rate, the larger the necessary list sample should be. A rule of thumb is that the list sample should be large enough to generate 30 to 40 anticipated responses.
While list testing may clearly identify winners and losers, it will also reveal that some lists are marginal, or near breakeven. In that case, the list may be discarded, or another test may be conducted using different selection criteria on the list to make it pay out better.
The direct-mail package is subject to a variety of tests that usually focus on format and copy. If the mailer has established a control package, then one element at a time is tested to see if it lifts the response to the package. Another type of creative testing is sometimes called breakthrough testing, where an entirely new approach is developed to sell a product or service.
Lists, offers, and packages can all be tested in one mailing when done properly. A test matrix consisting of individual test cells is constructed. Each test cell contains a unique combination of elements being tested and makes up a portion of the overall mailing. After the entire mailing is dropped, responses from each test cell are tracked to determine the performance of the tested elements.
Direct mail offers marketers several advantages over other advertising media. It provides a high degree of measurability, one of the hallmarks of direct marketing, that in turn allows for extensive testing. Of course, for direct mail to work well the direct marketer must be able to identify the target audience and be able to create or rent the appropriate mailing lists.
Direct mail gives direct marketers the opportunity to present one on-one communications and motivate the recipient to act. Direct mail gives marketers greater control over the sales message and allows them to say a lot about a product or service in the sales letter and brochure. Repeat mailings can be done to take advantage of the product's or service's potential for repeat sales as well as to sell related goods and services to the same lists. Other positive marketing features of direct mail include its three-dimensionality (as compared to electronic mail) and its ability to appeal to all of the senses of the recipient.
While direct marketing has grown over the years to employ a variety of advertising media as they became available—such as the telephone, broadcast media, and print media—it is direct mail that remains the most heavily used medium in direct marketing today.
SEE ALSO : Database Marketing
[ David P. Bianco ]
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——. Open Me Now! Chicago: Bonus Books, 1995.
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