Direct marketing niches represent the various ways in which direct marketing is being used. As you will see, they have very little in common other than their use of direct response.
More often than not, they may have read a book or two on the topic, heard a speaker or attended a seminar – and now they’ve mapped out a plan to sell their product or build their business using direct marketing.
I understand their enthusiasm – which is why it pains me to give them my perspective.
Sometimes I feel a real dream-killer, but I have to be honest with them and tell them things like:
“No, 2% only works for certain direct marketing situations – not your situation.”
“No, a postcard works for certain types of direct marketing. You’ll need a much larger, more expensive package.”
“No, you won’t make any money with your first mailing. Your profits will have to wait until the second or third purchase from that same.”
Understandably, these people are annoyed, frustrated and more than a little confused by my advice. This is not what they wanted to hear.
What they fail to understand is that there is no one-size-fits-all solution in direct marketing. The so-called rules of direct marketing do not apply equally across all applications.
Direct marketing has multiple specialties and sub-specialties – and each one calls for different strategies, different offers, different creative approaches and different measurements for success.
With that, let me try to shine some light on these differences:
Lead generation is by far the most common form of direct marketing. It is used by companies of all types and sizes.
As the name suggests, the goal of lead generation direct marketing is to produce sales leads – to get people to raise their hands to show they’re interested. There is no commitment yet to buy anything.
Lead generation is often viewed as a business-to-business strategy, but there are many business-to-consumer companies using it as well.
Lead generation programs also vary. Some programs are designed to generate high volume response, while others are designed to generate fewer but higher quality leads. Of course, generating the lead is just the first step. Successful lead generation programs also include lead qualification and lead nurturing.
In lead generation, the actual selling takes place at a later date – often by a sales rep who has followed up and stayed in touch with the lead.
Because lead generation requires no financial commitment, you can often succeed with a short-copy format like a postcard or a short letter.
Order generation is the application used by catalog and mail-order companies. It is also known as direct selling or one-step selling.
Order generation is far more challenging than lead generation because your goal is to generate an actual sale. And to do that, you need to persuade the reader to not only raise his hand but also reach into his wallet.
As a result, the direct marketing package calls for longer copy – sometimes very long copy depending on the complexity of the message and the price of the product.
Response rates for order generation direct mail are usually very low – well below 1%. This often scares newcomers who quickly do the math and ask how anyone can make any money with those types of response rates. The answer is with follow-up sales. Many, if not most, marketers lose money on their first order, but make it back over the lifetime of the customer.
(Please note you may hear direct marketers talk about higher response rates for their order generation campaigns. Chances are these are mailings sent to their house list of past responders.)
A continuity program is a membership or subscription marketing program that continually sells and delivers its product or service until the customer decides to cancel.
In many ways, a continuity program is the same as an order generation program except that the commitment is month to month.
These programs typically start with a free trial or a heavily discounted price. Marketers don’t worry about making a profit on the first sale. Income from subsequent sales will more than make up for any loss that is suffered in the customer acquisition.
Free trials and discounted introductions for continuity programs are viewed as an implied commitment to continue after the trial or introduction is complete.
Copy length is significantly more than lead generation (because the commitment is higher) but not as much as a straight order generation mailing. The trial provides a relatively safe gateway to the product and also serves as the best vehicle for demonstrating the value of the product.
One variation of the continuity program is the use of sweepstakes. This type of mailing – which have become the face of junk mail – is usually used to acquire first time subscribers to multiple publications.
Retail stores and restaurants use direct mail to build customer traffic at their locations. The incentive used to motivate customers is often a discount, but it can also be a free gift with purchase or a free gift for just showing up.
Traffic building direct mail is also used to bring visitors to a trade show booth. Once again, incentives are used to motivate trade show attendees to seek out the trade show booth.
Traffic building direct mail is a relatively simple form of direct marketing. The most common format is the direct mail postcard which provides just enough information and is relatively inexpensive to produce and mail.
Retailers also use shared mailing programs (coupon paks and wraps) to build traffic. The cost is a fraction of your own mailing, but you’re also sharing space with other advertisers.
Fundraising operates the same way as order generation. Your mailings are designed to get people to open their wallets. The only difference here is that you are asking people to donate instead of buy.
The numbers are similar too. First time donors are often acquired at a loss with the understanding that as those donors continue to give, they will offset acquisition costs and actually generate real income for the cause.
These letter packages have proven over time to be the most effective for raising funds.
Fundraising packages can sometimes include premiums – or free gifts – as a thank you for donating. This can increase response but there is a cost involved which needs to be factored into the final analysis. These premiums may also hurt renewal efforts.
Some fundraisers also use a so-called “front end premium,” which is a free gift that is sent to everyone on the list (not just those who respond). You may be familiar with the pre-addressed mailing label campaigns.
Final analysis of all these options need to look beyond the initial response rate or even the cost to acquire a new donor.
Chances are you use one of these direct marketing niches. I hope this puts things in perspective for you.
Written by Bob McCarthy
Bob McCarthy is a direct marketing consultant and copywriter with more than 30 years in the industry.
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