Marketing, Sports

The Deal: With Six You Get Egg Roll

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In spring, a young man’s fancy turns to…testing.

It’s a sure sign that Spring is on the way. The March issue of Golf magazine arrived, and after the most dismal stretch of dull weather in recent memory, the green pastoral images of fairways and beach-like bunkers beckon irresistibly.

But among those pages floats another stimulant. Golf blew in 4 different subscription order cards. These 4 x 5-1/2 reply cards exemplify the art of mail-order merchandising.

One would ask, why do we need any cards? I am already a subscriber!

Golf Tees

 It’s all in the numbers.

True, for the longest time I used to let my subscriptions expire so that I could re-up and get the free gift. In the past our home was filled with calculators, phones, binoculars, hats, world maps and globes… all manner of stuff with somebody else’s logo on them. Not only did we like the goo-gaws, but it was fun to get them in the mail.

But Golf’s four order cards demonstrate the great science of offer testing. And there is practical beauty in that:  when you understand what excites the buyer’s brain, you make more money.

Analysis

Each of the cards has exactly the same deal. One, two or three years for hefty discounted pricing off of newsstand. With each, the same gift premium is offered: a “Golf Distance Finder”.

I couldn’t use the distance finder. It would be perennially set at “Too Far” with only occasional gauging at “Fat Chance”.

Anyway, the cards are all different.  The result of long, worried debates in Golf’s conference room about how to best wring a dollar out of a new sub, there are four gradations.  Each effort targets a different dark corner of the golfer’s bunkered mind.

Card One: It’s blue, with giant GOLF titling.  In simple fashion it provides the basic deal with a mention of the discounts off newsstand price.

For the unassuming habit-driven: "yep, sure, whatever."

For the unassuming and habit-driven: “yep, sure, whatever.”

A small un-captioned picture of the gift is featured with, “yours free”. This card is the control sample, and wins or loses on brand loyalty.  Ideally suited for the unassuming, doubtless, committed player.

Card Two: It’s grey, with a smaller GOLF title, same deals but highlights “Your Price $16.00”. Understanding that some may not know what the gift is, “FREE Distance Finder” is inserted below the picture.

"The distance between me and the cup, and between me and Jupiter is negligible."

“I may never hit the green, but I can see Jupiter.”

This card is for the cash-strapped grinder who is figuring one year is just long enough to suspend the inevitable realization: golf is just a good walk in the wilds ruined. Or they figure $16 bucks is the right price for a telescope.

Card Three: It’s powder blue and screams to the wealthy and permanently, irrevocably, hopelessly optimistic, driven player: “Tomorrow will be a better day and the BEST DEAL! is a 3-year commitment.”

"This will be my year. Well, maybe, then again, sometime in my lifetime."

“This will be my year. Well, maybe, then again, sometime in my lifetime.”

The distance finder is featured, but it’s the 83% discount that grabs.

Card Four: This is the gutsy guarantee card. “Lower Scores. Lower Price.” is for the duffer who has journeyed through four painful levels of acceptance and will now  admit they couldn’t hit a basketball with a broom in a closet.

"This year I will not tear up my score cards."

“This year I will not tear up my score cards.”

They figure literature, technology and a little learnin’ might be the answer. If that still turns out to be a whiff, then they are ready to go for the money refund.

Results

At the end of the test, which could go on longer than the season, the Golf sales department will look at the results for each card, which got the most orders,  which deal worked best for each card, which got the most email addresses, and which got the most money up front.

This is not a double eagle fantasy for statisticians.  Rather, the results of this inexpensive test will predict which offer is worth rolling out in other media with the promise of the highest return on investment.

While solo direct mail may be proud of a $20 cost to get a new subscriber, the numbers may dictate that direct mail is still stronger than web display ads, email or simple on-page advertising.   Knowing which deal is strongest can shave a few pennies off acquisition cost.

Long ago, we used to puzzle over the best offer: “buy one get one free” vs. “two for the price of one” vs. “50% off”.

It isn’t easy, but you can test.

Thanks for reading!   Direct marketing tests are a way of life, and you never know when a new angle won’t build your margins unexpectedly.  I swing at the ball with the same giddy optimism.

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direct mail, Economics, Marketing, Media

Awakenings: What Happens When USPS Cuts Prices

Spoiler Alert: This Is All About Direct Mail Math

It was not a well publicized announcement, 10 days before Christmas, that the USPS will most likely cut the price of a first class stamp by 2 cents, April, 2016.  That’s a 4% cut!

Whether the consumer figures out that a letter will mail for only 47 cents is a question, but for the direct mail community, the news is big.

First of all, direct mailers don’t talk cents. They communicate in thousands. (‘000’s.) A 2-cent drop in mail cost is worth $20 per thousand pieces mailed.

Hopefully the marketing folks at USPS have now awakened to the merciless mathematics of direct mail. In the civilian world, when we experience a cost of living increase, we suck it in, or look for a raise in pay to compensate.

In direct mail however there is a brick wall facing an increase in mailing costs.   The reality is, mailers don’t manage by total program cost. Rather, they manage by cost per response.

For instance, if a charity spends $1,000 to mail 3,000 letters, it is because they expect to get a 2% response…60 donations, at a cost of $16.66 each.

That cost per response (CPR) is bedrock..an anchor around which all other budgeting decisions are made. So when the USPS issues a 1% increase in postage, the CPR goes up, which is unacceptable.

The Story Behind The Story

When the post office raises its prices, we experience the inelasticity of direct mail performance, because mailers must preserve that cost per response.  The only way to do that is to spend less on something else, and that is exactly what happens: smaller envelopes, fewer pages, cheaper paper, less ink, for example.

The bogeyman in this reduction process is that the cheaper the package, the lower the response, which drives up the cost per response again!

The end game option in this vicious circle is to cut out lower responding markets, by mailing fewer pieces, and diverting funds to other direct media.

None of this helps the USPS.

Mail Trends 2008-2015 Prove The Point

In 2007 the USPS delivered 104 billion pieces of direct mail, its highest performance in a 240-year history.  Next year, the U.S. economy had a collapse, and there was a 4.3% drop in direct mail.  In 2009, there was another drop of 16.8%, eroding 21 billion pieces over two years.

Slide1

From 2007 to 2015 Direct Mail volume shrank 24 billion pieces.

Revenues likewise fell from $20.8 B in 2007 to $17.3 in 2009.  $3.5 billion dollars–gone.  Looking for cash, the USPS raised its prices nearly 13% from 2006 to 2009.

The bottom line is that the USPS has held direct mail revenues in the $17 B tier ever since, with three more price hikes from 2009 all the way up to 2015.  Its actual revenue per piece has gone up from 20 cents to 22 during that time.  Direct mail volumes have stabilized around 80 billion pieces, down 23% from its stellar 2007 year.

What You Don’t See

Slide2

Revenue per piece grew 10% while weights decreased 13%.

While the USPS has been able to weather the economic storm, the quality of mail has deteriorated.   In 2007 the average piece weighed 1.83 ounces.   In 2015 that shrank to 1.60 ounces, a 13% decline in paper, ink, pages and envelope.  More post cards, fewer envelopes, fewer flats.

The irony in this is that the USPS is actually earning more money for every ounce delivered: 11 cents in 2007, versus 13.8 cents in 2015, a 25% increase.

The Good News

A 4% reduction in postage in 2016 may not mean much to the consumer, but to the direct mailer, it opens the door to better creative, design, and production.  These lead to better response, lower cost per response, which drives up mail volumes.  Whew!

This price cut is good, good news.

PS: Kudos to you for getting through this important math lesson!  Please share.

PPS: You can check all the numbers by reviewing the USPS Revenues, Pieces and Weights report which they faithfully publish very quarter.

 

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direct mail, Economics

All That Glitters

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The solid gold gift pack. Gotta open it.

Our mailbox opened this morning to present a gorgeous golden Flat from Veterans of Foreign Wars.

It is highly improbable that the recipient of this gilded kit would toss it in the bin without at least checking to see if there was a $10 dollar bill waiting inside, too.

Just might have been too, considering the total payload we discovered:
-12 Christmas cards and envelopes

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12 Christmas cards and envelopes, a big offering.

-1 gift bag

-1 pen

-1 calendar card

-1 set of gift & address labels

Of course, there was also a letter/donor form and BRE.

But two unusual items cropped up.

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The gift bag, big enough for a ham sandwich.

First, the headline alerted us: WOUNDED VETERANS ARE IN CRISIS.

If you are at all disposed to the plight of these warriors, as countless Americans are, you are going to open this labeled treasure chest to see what the crisis is.   Foreclosure on the home?   Withdrawal of benefits?   Family disintegration?   What is the crisis?

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Crisis: a powerful set up.

Inside, the letter launches in to a completely different train of thought: “When we began sending out these free special edition Christmas cards and other gifts, people said we were crazy.”  Only three paragraphs later do they mention the main focus of their cause: the wounded Veteran.

Version 2

The non sequitur: handwringing debate about cards.

While this may seem nitpicking, the golden rule of good headlining is to pay it off.   VFW brings the reader to the edge of their seat, and then chats away on the frivolity of costly free gifts.  Crisis takes a back seat.

The second wrinkle is more about economics, and a good lesson is taught here.  This 6.8-ounce kit probably cost $2-$4 dollars each, all in.   Conventional marketers would roll up their eyes, cross themselves and close the garage door before spending that kind of money, especially when the response might not break 5%.

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Labels and stickers, a fitting complement.

But what if it does?   The real question is, what’s the average gift, and how long before it pays itself off?

So assume for a moment this scenario:

Mailed 10,000 at a cost of $40,000.  700 donors, at a cost of $57.14 each. Response, 7%.  $17,500 in gifts.  Average gift, $25.

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Cello-wrapped pen.. not since Time magazine!

What does VFW have? 700 new donors at a net cost of $32.14 each.   What are the odds that over the next five years, the group will turn in another $100,000 through renewal mailings, bequests and planned giving?   Pretty good, actually.

Version 2

This compliant disclosure gives pause to the reader.

It’s all speculation, of course.   For some background on VFW’s fundraising success, check their website for its latest financials.   Total gifts, $66.8 million, fundraising expenses, $25.6 million.  Roughly 2.6/1.  By comparison, its major competitors turn in gift/fundraising ratios of 3:1 up to 7:1.

The challenge is knowing in advance what the numbers can, and need to be.  Here is a formula worth knowing–witnessed by a fly on the wall of VFW, where for a fictional moment, you are now working.

Budgeted Cost per Piece

Your boss went sideways over the cost of the Gold Lame’ package.  Piqued, she said the gross cost per response can’t exceed $32.14.  You blurt out,

“But that’s the net cost on our Vanilla kit.   Gimme a break.”

“Give you a break? I have to explain this gold cadillac to the board.   If it doesn’t beat Vanilla, I will be back in community service, and you will be on the phones while you are licking envelopes.   Got it?”

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Gifts up to $500. If you don’t ask…

So you have a ceiling: the cost per response must not exceed $32.14.   Historically, you have generated a 3% response on the Vanilla conventional mailing format.   The all-in cost of the Gold Lame’ must not exceed $32.14 times 3% = $0.964 each.

Impossible.  The vendor stares through you with crocodile eyes.  Three bucks without postage, he grins.

But you feel strongly about Gold Lame’.  Your all-in piece cost totals $3.75.  Divided by the boss’s ultimatum, $32.14, you need 11.67% response.   Phew.

At this point, you wake from this disturbing nightmare.   Will Gold Lame’ quadruple Vanilla response?   We may not know, but at least you know the formula to weigh the risk.

Remember: ($ piece cost) / ($ response cost)  =  % response

Now, back to our piece.

  1.  Fix the headline to set up the letter, or change the letter to pay off the headline.
  2. A bold choice of cards: an unabashedly Christmas theme.  Just make sure your list is of that persuasion.
  3. The donor form offers 8 gift choices, from $10 – $500.   Good!
  4. Lastly, the prepaid BRE is worth it.   Whole campaigns can falter for want of a postage stamp.
  5. Mail it.   Whatever the response, whatever the gift, if you don’t test, you will never know.

Lastly, find a good quote to share with your boss, something like Teddy Roosevelt’s, “better to have failed while daring greatly than to live with those cold and timid souls who have neither known victory nor defeat.”

A little wordy, but it may work.

 

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direct mail, Marketing

Why Some Envelopes Get Opened Faster

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Uh, no parking after 5, please.

Life deals ironic hands to all players.  Timing is everything.

Last week, a fast moving car barged through the corner of our house leveling three rooms. Radiator coolant ended up on our coffee table.

Physicians 2015-04-16 594

“More than you know, Mr. Brown!”

This week, we received a mailed life insurance  offer from Physicians Life Insurance Company.

Regardless of circumstances, this envelope would get opened, and here’s why.

Physicians 2015-04-16 593

“Please Keep It In A Safe Place” is an arresting instruction.

Your Beneficiary Card is Enclosed. Please Keep It In A Safe Place.

The #11 envelope starts with the cautionary instruction above, and has a tiny die-cut window revealing a scannable OCR-A number, the inferred key to wealth for my beneficiaries.

It takes an iron-hard constitution not to open the envelope to see what is inside.   And true to their word, Physicians has attached a varnished card to the letter enclosed.

Physicians 2015-04-16 597 CARD

The card is a token, and as promised on the envelope, to be saved. Note the 800-number.

Let your beneficiary know you’ve applied for up to $10,000.00…

The bold, 16-pt. font is positively encouraging. Congratulating us as Illinois residents, aged 45-80, which suits my wife and I respectively to a tee in her opinion, that we are guaranteed a Secure Promise Plan.

They prompt us to ask our beneficiary to keep the card in a safe place.   (But in your case Mr. Brown, not in the back of the house.)  It didn’t actually say that, but the suggestion is uncontrollable.

Physicians 2015-04-16 597 Johnson

The headlines: we are eligible for a guaranteed policy. Details to follow.

These are powerful words, usually reserved for protecting wills, social security cards, PINs, firearms and Pokemon.

The following letter reverts to 12-pt courier, fixed space font, as if it came off the very typewriter we keep next to the rotary phone on our vestibule in the front parlor.

Physicians 2015-04-16 596

Straight forward benefit headlines. Orderly, easy to read.

It is only moments later that my suspicions are confirmed that we don’t actually have a policy yet, but if we just apply by May 4th, we are golden.

The Bottom Line

Physicians 2015-04-16 597

Courier font: back to the 60’s! But it works.

Physicians wrote perfect copy, presented by a hard working envelope.  Most important, the enclosures pay off the reader’s expectations, and have shifted into second gear with an orderly sales presentation.

Everything is according to the rules, and you can bet the Physicians legal crew spent hours in the office before retreating to the golf club lounge vetting the whole kit, extending their discussion out to the first tee about the careful use of commas.

Physicians 2015-04-16 595

Policy details on varnished filigreed paper. Impressive, but not pretentious.

From the prospect’s point of view, life insurance is not an impulse decision for most people.

Still, for those who might be teetering on the edge, like us and the lucky folks in the car, the Physician’s package gives pause to consider.   And the sale is entirely dependent upon the envelope getting opened, which this piece accomplishes.

Radio, TV and web don’t hold a candle to direct mail when it comes to delivering all of the decision-making tools…on workable, readable, paper.   The deal, the sales support, the application, and prepaid reply envelope, complete with return address are presented for thoughtful consideration.   But it’s the envelope which kicks it off.

Let's put the meter by the commode.

Let’s put the parking meter by the commode.

Meanwhile, we are rebuilding our house!

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direct mail, Economics, Marketing

USPS: The Annual Report Nobody Sees

The USPS has published its quarterly Revenues, Pieces and Weights report (RPW) and some trends for both optimists and pessimists will start you thinking.  First off, understand that the post office doesn’t observe the normal calendar year, so the numbers shown here are normalized to January-December.

Revenues for the year, up 3.3% Slide1
First Class Mail, which includes all the bank statements and financial releases, plus personal letters and cards saw a 2.7% increase in revenues.   Pretty good, considering that the class took a 5% increase in price.

Standard Mail which is entirely promotional and non profit mail boomed 5.5%.   If nothing else, this is an indicator that the market was ready to invest in Direct Mail.

Periodicals revenues were flat, indicating the continued effect of online access to reading material.   Parcels were down as a result of a drop in media and library mail.

Pieces down, virtually flat -0.7% Slide3

The big win for the USPS was its ability to bag an increase in pricing without a significant drop in pieces.   In 2014 the post office delivered 152 billion pieces of mail, magazines and parcels, down a billion… but what’s a billion?   Fundamentally, piece count is the physical evidence: choosing to mail hard copy versus an alternative, such as email.

Drilling in to the numbers, Standard Mail grew a billion pieces, or 1.7%.   As can be expected, First Class dipped 1.5 billion.   Interesting, in Q4, which includes Christmas, volumes were up in all FCM categories except for single cards and letters.   Despite our best hopes, the Christmas season didn’t materialize on the kitchen tables of America as stacks of holiday greetings mail.

The most worrisome segment of the pieces category is Periodicals, which illustrate the rapid decline of magazine mail, the real victim of web communications today.  Periodicals dropped 4.7%.

Tonnage down 3.2%

Slide4While pieces are down slightly, the total weight hauled took a big dip: 500 million pounds or 250,000 tons.  For the record, the USS H.W. Bush Super Carrier weighs 100,000 tons.  Can you imagine losing 2-1/2 aircraft carriers in the mail?

But to the point, while mailers only backed off mailing pieces by 0.7%, they were much more careful to lower the weight of each package.   So the USPS still walked as many routes as last year, but their trucks didn’t use as much gas.

Slide5The drill down shows that Standard Mailers lowered their kit weights by 4.4% to 1.59 ounces on average.   Given that the postage is the same for up to 3-plus ounces, it is likely that printing costs drove down the weights.   That, and fewer Flat-sized kits.

Periodicals dropped 1%, which translates to fewer page counts, and less advertising.  Parcels and packages were down to 2-1/4 pounds.

Only First Class mailers upped their weights.

The Cost of A Stamp Up 4.1%

Slide6First Class postage took a real price increase of 5%, and watched its volumes decline 2.2%.

Standard Mailers took a 4.2% increase and grew their volumes 1.2%.   This is a clear indication that Direct Mail is enjoying the effect of its financial results in the market place.

Only Packages saw a price decrease, which spelled a slight increase in volume.

What’s Next?

We’ll see how the postage increase affects volumes and revenues after April, 2015.   Mean time, it’s a safe bet that Direct Mail is headed in the right direction, and may ultimately be the driving force in USPS revenue stability going forward.

Kudos to the USPS navigating its way through these changing times.   If you would like to see the RPWs they are available here…  http://about.usps.com/who-we-are/financials/welcome.htm

If you have a question, comment or observation about this report, let me know!

 

 

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direct mail, Economics, Marketing, Thank You

Ten Reasons You Should Thank The USPS

Teddy StampWe are all cheesed that the USPS is looking for a 1.97% increase in postal rates.  But before we run to our social media to complain, let’s open the envelope.  What are we getting?

1.   Door-to-door, pick-up and delivery.   Not only does a real person come to your home to deliver mail, but they are charged to pick it up, too.   Beats driving downtown.   And they do this 6 days a week.

2.   Equal representation.   The USPS is probably the only government institution which situates an office based on population density, rather than political handouts.  For sure, it’s the only federal presence in your community that isn’t there to administer laws and levy taxes.

3.   Legal authority.   A USPS postmark is an official seal, and when your letter is in the system, it’s a completed act.

4.   Jobs.   The USPS employs over 600,000 people.   It’s also the network that directly supports another 1.3 million people who use the mail to make a living, according to the Direct Marketing Association.

5.   The Grid.   There are 142,000,000 delivery addresses in the United States which are visited daily by the mail person.   The USPS grid is like a vast capillary system that beats nationwide, touching the most distant extremity.

6.   Innovation.  Maybe hard to believe, in the face of digital networks, but the USPS has refined and streamlined delivery to the point that it is cheaper to mail a letter today than it was 10 years ago.

7.   Protection.   Your mail is protected by federal law.   The space inside your mailbox is federal property.  The blue boxes situated across your community are safety deposit boxes, in effect.   Drop your mail, and it’s secure in the system.

8.   Culture.   What other government body continually picks new designs to celebrate on the face of a stamp?   Rock stars, writers, artists, scientists, athletes, discoverers… and they are BIG stamps too!

9.   Resilience. Despite a whirlwind of communications technology advances, the USPS still has cache, delivering nearly 500 million pieces a day.   When was the last time you saw a public phone booth?

10.   Fiscal control.   Yes, it has a $5 billion budget deficit.   Works out to $8,333 per employee.   The federal government has a $483 billion budget deficit.   $112,013 per federal employee.   In the bigger scheme of things, go figure.

Nobody likes price increases, but it is a sure thing that the USPS has done leagues more work to control costs than any of its government cousins.  In light of its value, can you really complain?

By the way, the price of a first class stamp remains at 49-cents after the hike.   Good anywhere in the nation.  Buy a bunch, they’ll last forever.

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direct mail, Economics, Marketing

How You Make Personalization Pay Off

Boystown CALENDAR HANGER

A 24-page color calendar, replete with country roads, cabins, barns, flowers and birds…lots of birds.

Personalizing a mail piece comes with expense. You are about to see the motherlode.

Gracing the letter with the reader’s name is one thing, but it’s quite another to match that to the envelope. For the fully committed direct marketer, there are personalization payoffs, and Father Flanagan’s Boystown shows us how.

Boystown Envelope

An outer envelope promising lots, and delivering, too.

BoystownBooklet Bird Jan

January.. from the 36-pager booklet, with more birds…growing in numbers.

Just before Christmas we received a 9 x 12 envelope from Boystown announcing their 2015 appeal. The donor acquisition kit weighs about a third of a pound, which is huge. The outer envelope calls out, by name, that FREE Special Edition Gifts are enclosed.

“Free Gifts” is right. They send three calendars: a 24-page hanger for the wall, a 36-page purse calendar booklet, and an 8-1/4 x 10-3/4 calendar card.

Boystown    color labels

The color label sheet. High quality and keepable.

The whole collection is covered in Sam Timm nostalgia art: winter ponds, chimneyed log cabins, old trucks, old boats, old canoes and birds…. enough birds to awaken Alfred Hitchcock one last time.

Boystown    028VGF Calendar

Another calendar, this one with a stylized street sign.

But the overwhelming effect comes from the personalization. Father Flanagan has managed to personalize 8 pieces in this whopper kit: the envelope, the letter, the reply form, the reply envelope, two sets of very nice address labels, a certificate and a calendar card.

Boystown  Certificate

It’s only an acknowledgement, but hey, it’s framable.

Over the top maybe?

Boystown Johnson Box

A Johnson Box, personalized and tinted, captures the gist.

Not really. Remember, good direct mail is designed to be indispensable.   It is extremely difficult to throw out a kit when your name is woven into its making so admirably.   The proof: this is a control package, or very similar to past controls. So it is working.

What’s the math that supports this?

The kit itself probably cost around $1.80. Postage for a 6-ounce Flat at non profit rates is actually a bargain, add another 30-cents. Total cost in the mail, probably $2.25 after adding list and processing.  This is a guess, only, having not spoken directly with Boystown.

Boystown Gift Certificate

Individualized gift certificates, one of three.

Now, the hard part: getting paid. Assume the average gift is $15. To break even, we need a 15.0% response. ($2.25 divided by $15.00 = 15.0%)

And the really hard part: they probably won’t get 15.0% response.   More likely, they might achieve 8-10%.   Let’s say 10%.  So given that, every response came at a cost of $22.50 ($2.25 divided by 10% = $22.50).

Boystown Donor Closeup

A strategic gift choice, Goldilocks-style. Let’s go for $15.00!

Is a new donor worth $22.50?   The answer is, “yes”!

By Father Flanagan’s 2012 financial report, they derived nearly $5 for every dollar spent in fundraising.  A very acceptable payback according to industry standards.  By the numbers above, the new donor will continue to give over time, well in excess of $113.00.

Boystown B&W Close Up revised

A set of stylish B&W labels in case I don’t want to give away the birds.

BoystownBangtail Reply

Personalized donor form and reply envelope. Note the QR code for tracking!

Again, this analysis is my perspective only, but a donor will continue to give to a worthy cause, especially one as well branded as Boystown.   And not only will they give today, but some will most assuredly make bequests after passing to keep the institution providing its valuable service.

So personalization plays a big part in winning support, and the savvy marketers at Boystown have done their jobs well in making it pay for their cause.

Thanks for hanging in to read all those numbers!   FYI, Boystown provided nearly $192 million in services in 2012, and in 2013, served 122,000 children and families across America.

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