Don’t Try This at the Office
The cost of the project overshadowed the return on investment (ROI) calculation. Let’s assume that one order yields $700 gross demand, and further assume a 70 percent gross margin (or $490). Mathematically, $200,000 divided by $490 means 408 orders (or 0.81 percent) to cover the cost of the mailing.
Knowing that 24-month customers historically respond at three to five times this rate, the sticker shock should be tempered with the anticipated ROI. And to be more fiscally responsible, you can calculate the contribution to overhead by revising the formula to incorporate the 12 percent fulfillment expense. (If you don’t know your company’s fulfillment expense-to-net-sales ratio, use an industry benchmark ranging from 11 percent to 15 percent.) Deduct 12 percent fulfillment expense from the 70 percent gross margin, leaving 58 percent.
Now redo the calculation as $700 times 58 percent for $406 in contribution margin. Divide $200,000 by $406, and 493 orders are needed for the program to break even (or 0.986 percent response rate).
Understanding the expense investment is important, and the senior manager should have contrasted this analysis with the cost to acquire a new customer. If reviewing historical response rates for prospects indicates 1 percent is possible, coupled with further indication that a first-time buyer yields a lower average order value, it quickly appears that reactivating customers is a better strategy for the investment.
Mistake #3: Repurpose Copy
Too often conventional wisdom dictates that reusing copy from the catalog, Web site or product flyer is fine, rather than writing copy specific to the solo mailer. But successful single-item mail pieces actually are designed around the copy — which is opposite of how successful catalog pages are created (meaning, catalog copy is written to space allocation based on the page spread layout).
A solo mail piece should get new copy written to highlight the product’s features and reveal its benefits. To accomplish that, use techniques such as headlines, subheads, call-outs, editorial, testimonials and bullet points. Each copy element helps guide a customer through the decision-making process. Existing copy from a catalog or Web site usually doesn’t have enough depth to support all the needs of a solo mail piece.