How Much Should You Spend on Direct Marketing?
By Alan Rosenspan, Alan Rosenspan & Associates

In my consulting, I am often asked that question, in many forms. How much should we spend on the package? How much on the offer? How much on the fulfillment materials? Where can we afford to cut expenses?

There’s only one answer to all of those questions.

Let the value of the customer determine every marketing decision.

Let me give you an example: I did a project for IDG, a major technology company. The client had asked for only flat mail, no dimensional pieces. I showed them a number of choices, and included one box mailing.

The client said, "But we told you we couldn't afford to send a box."

I asked, "How much is a new customer worth to you?" The client answered, "It depends – it could be anywhere from $100,000 and up."

"So let me understand," I continued, "If a box generated one more customer, then it would pay for the entire mailing, right?"

The client went with the box mailing – which was extremely successful.

Customer value should influence more than just the format of your mailing.
It should dictate what you offer – whether it's a Bic pen or a Blackberry.
It should affect how often you mail.
It should affect your strategy.

Several years ago, a major university wanted to build a library. They needed to raise $10 million dollars (which shows you how long ago that was.) Instead of doing the ordinary and requesting $100, $500 or even $1000 from their alumni, they did something different.

They sent out a letter asking for just one person to donate the entire $10 million.

The letter virtually forbid smaller donations. You had to be willing and able to give the entire amount, or they didn’t want to hear from you.

The university sent out 20,000 pieces and they received a terrible response rate.

Only four people said “yes.”

Did the mailing succeed? Absolutely.

People often talk about ROI (Return on Investment) which is another way of looking at it – but that sounds complicated and difficult to measure.

However, if you always take into account how much a customer is worth – you won't go wrong in direct marketing.

---Source: Alan Rosenspan, president of Alan Rosenspan and Associates. Email him at ARosenspan@aol.com.