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The Dollars & Sense of Direct Mail Advertising for Publishers

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Direct mail advertising has certain distinct advantages over other forms of advertising. You can pinpoint your target markets with precision. You can get personal and intimate with your potential customer, relating the benefits of your products in a friendly, relaxed and conversational atmosphere. And you can control every aspect of the advertising effort, from designing the copy and layout to choosing when you want the mailing to be received. But in the world of profitability, only dollars make sense, and there are times when using direct mail advertising to generate dollars makes no sense at all.
Let’s take a look at the actual cost of a direct mailing to 10,000 carefully culled, precisely targeted prospects. At the minimum, you will need:

 

Basic Costs for Our 10,000-Prospect Direct Mailing

 

A Rented Mailing List of 10,000 Names $ 650
10,000 Unprinted #10 Envelopes 90
A Return Address Rubber Stamp 20
10,000 8 1/2 x 11 Cover/Sales Letters printed black one side 265
10,000 8 1/2 x 11 Four-Color Flyers printed one side 550
Bulk Rate Postage ($2.35 each) 2,350
Total Minimum Cost $3,925

Additional costs will include a postage meter and a bulk mailing license, four-color film separations, wages for envelope stuffers, and the beauty costs associated with designing a better mailing package such as purchasing preprinted envelopes, hiring graphic designers, etc. But for the purposes of this article, let’s assume that you can have it all for just $3,925. At roughly 39› per potential customer, direct mail advertising doesn’t sound like such a bad deal at all. But the real question is not how much does the advertising cost per customer reached, but rather, how much does the advertising cost per sale?Let’s take a look at the actual cost per sale of a direct mailing to 10,000 prospects.

Cost Per Sale for Certain Rates of Return

If the Rate of Return is: The Cost Per Sale is:
1% $39.25
2% 19.63
3% 13.08
5% 7.85
7% 5.60
9% 4.36

Or in other words, if you had a profit margin of $10 per each single-copy sale, you would need a rate of return of 3.925% just to break even on the cost of the advertising itself. Compare that to the cost per sale of the same amount of advertising dollars spent on a one-time, 1/4-page, four-color ad in a highly targeted magazine with a circulation of 225,000. The rate of return necessary to break even on the cost of the magazine advertising works out to about a measly 0.17%. Looking at the numbers, it becomes obvious that direct mail advertising doesn’t make much sense for a small publisher who is trying to sell a single title to a single customer.
But this is not to say that direct mail advertising has no place in the marketing plans of a small publisher. For example, let’s say that your mailing list is made up of 10,000 carefully culled, precisely targeted specialty retail stores that cater to your specific audience. And let us assume that each retailer who orders has agreed to purchase a minimum of 10 copies for initial stocking. Ah, now direct mail advertising begins to make sense. With a profit margin of $100 per each 10-copy sale, you would only need a rate of return of 0.3925% to break even on the cost of the advertising. And each new account holds the promise of future orders to come. By redirecting your mailings toward nontraditional specialty retail outlets that cater to your specific audience, you can significantly reduce the advertising cost per sale.
Each advertising media offers its own distinct advantages and disadvantages in reaching your targeted market. But no matter how you choose to spend your advertising dollars, take the time to make sure that your choice of advertising media makes good business sense.© 1999 Alexsandralyn Stevenson
All rights reserved. No portion of this article may be reproduced in any way without the express permission of the author.

Alex Stevenson got into publishing so she could: (1) Change the world, (2) Make several million dollars, and (3) Because it was the least expensive way she could become a venture capitalist. She is a self-taught publisher, writer, game inventor, entrepreneur, and occasional car mechanic as well as being good at taking care of a few other odds and ends. She can be reached at 2501 W. 12th St., #116, Erie, PA 16505; phone 814/838-7029; fax 814/835-4968.

This article is from thePMA Newsletterfor June, 1999, and is reprinted with permission of Publishers Marketing Association.

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