January 4, 2014

Opt-In Email vs. Direct Mail

Eventually, every business reaches that marketing fork-in-the-road: Direct mail marketing or targeted email marketing? Each path has its pros and its cons. Each has been accused of becoming obsolete in the face of some greater marketing power, and each has alternatively been praised as the best, most effective form of marketing. With so many polarized opinions out there, it can be difficult to decide which marketing path your business will follow.  I will attempt to give it to you straight, based on my 23+ years of experience in the trenches as a list compiler, broker, and marketer.

Quite honestly there’s a healthy amount of misleading information out there on the web.  I’ve read opinions on the web from people that have zero experience actually using direct mail or email for their own campaigns.  You and your firm are at a serious disadvantage unless you have an experienced guide to help you wade through the BS.  (Bologna & Salami of course!)

Below is my attempt to give you the straight facts based on my experience.  I will list the main benefits and downsides of direct mail marketing and email marketing.

Email Marketing:

If you’ve done some research you’ve probably seen many articles both online and offline touting what a great medium email marketing is.  It’s true, it’s a great marketing channel.   Keep in mind that most of the hype and the positive reviews that you hear about email marketing have nothing to do with you renting, or buying an email list from a 3rd party.  Almost all the glowing reviews and statistics you hear about email are referencing a targeted email campaign to your own list of website visitors, buyers, subscribers or inquirers.

Also, it’s fair to disclose that list providers (like myself) earn more in commissions (not percentage wise) overall from email campaigns typically than on a postal list rental.   It’s more profitable for a list provider to sell you an email campaign than it is a direct mail campaign, unless they’re also selling you the printing and mailing services and profiting from those value added services as well.  Of course if you find a provider with your best interests at heart, all that matters at the end of the day is which channel (Postal or Email) returns the best ROI.

If your comparing the cost to get out a targeted campaign to prospects, email wins almost every time.   You don’t have the cost of printing, or postage like in a traditional postal direct mail marketing campaign.   Your costs for an email campaign could include the cost of renting or “blasting” to the list and the cost of your creative.  If you’re setting up landing pages for people to arrive at when they “click through” from your email message then you could add in that cost, I suppose.   On a per record basis, renting an email marketing list has the potential to be cheaper than a direct mail list but that really depends on the type of email list you get.

Most companies on the web that offer “Opt In” email lists available for purchase are a scam.  Yep, totally a scam if they’re going to give you the actual email addresses output to a file.  (Unless they are from a compiled business list)  No, I’m not talking about an email append to your customer mailing list, but instead, you find a company on the web and they tell you they will provide you a list of consumer email addresses in Excel via email.  Think about it for a second.  Once they release that list to you they have absolutely no control over how many times you use the list, or who else uses the list.  Conceivably you could take the list and spam it over and over again and they would never know.   They could maybe put seeds or decoy addresses in the list, but the damage would be done to the list.  What would that do to the quality of their list?  Also if the list was truly “Opt-In’ that means the consumers on the list gave someone (presumably the list owner and not necessarily the list provider) their permission to include them in the list.  Federal law says (CAN SPAM ACT) they must be able to Opt-Out and that the list owner and/or marketing firm must honor all requests.  How can they honor all those opt-outs if they give the list to you and others?  They can’t.  Not to mention that most companies today have a privacy policy that says they will not sell your information to 3rd parties for marketing purposes, but that at times THEY might send you offers from companies they think you’ll be interested in.  If the list is someones actual list of buyers, subscribers, or respondents (basically if it has any Value) they’re not about to start selling the list outright to any Tom, Dick, or Harry that wants to send an email offer to their list.   I’m telling you right now that any provider that is willing to release a consumer list of emails to you for a fee (in 99.95% of the cases) is either crooked or inept or both.  Anyone that’s worth their salt in the list business knows this to be true.  Part of the scam is the fact that the folks selling or “renting” you the list will tell you that it’s 100% Opt-In and Can SPAM Compliant.  Again, if you find someone that’s selling you a list of consumers and their email addresses it’s extremely unlikely that those consumers Opted in and asked to be on the list.   Usually the compilers of such lists will use what’s called a “Negative Opt-In”.   Basically the Negative Opt-In works like this.  I scour websites, newsgroups, and aggregate email addresses from other online sources and other “email list brokers” and then I will send out a blast (sometimes called a “Permission Pass”) and then anyone that doesn’t click the Opt-Out link and click through to the website and Opt-out has essentially Opted-In.   I mean after all, if they didn’t opt-out that means they must have wanted to opt-in, right?!  Even big nationwide compilers do this, especially when it comes to building Business to Business databases with email addresses.  Even if you do buy a list of email addresses, then what?  You think maybe you’re going to take those addresses and go to MailChimp, Emma, Constant Contact, Vertical Response, etc?   Ah, ah, ah…Not so fast.  You might want to read the Terms of Service with any of these companies before you get your firm blacklisted forever.   They all strictly prohibit you from using their services with purchased 3rd party email lists.  This means that unless you’ve done business with these people on your email list, or they’ve specifically requested to be on your list, you can not use their email broadcasting services.   If you thought you were going to buy a list of email addresses and just send them from your Outlook or Gmail account, that’s strictly forbidden as well.  Your Internet Service Provider (ISP) definitely doesn’t allow that, and if they find out you’re doing it they can turn of your service, no questions asked.

So how the heck are you supposed to send out an email campaign to a 3rd party email list?

How it really works with a real Opt-In email list is the list owner and their email service bureau NEVER releases the actual list to you.   Instead you provide them with all your marketing materials (your HTML creative and images, etc) and the list owner or their email service bureau sends that message to the targeted list of consumers on your behalf.   For example, let’s say you want to reach golfers.  You have a few options when it comes to an email campaign.  First you need to research which lists are available.   You could go to Golf Magazine subscribers that have not yet opt-ed out of emails from Golf Magazine.   Golf Magazine’s list manager says they have 238,059 “Active Email Addresses” available for blast.  They charge $150 per 1000 to “rent” the list which really means they will blast out your message to a minimum of (according to Golf Mag’s rate card) of 7,000 names.  They don’t mention on the rate card if they charge additional fees to facilitate the blast, so let’s assume they don’t.  $150 x 7 = $1050.00.  Not a bad deal, if you consider the fact that postage alone would likely be close to double that in a traditional postal direct mail campaign.  But the real story is how does it work?  Supposedly you provide your email message to Golf Magazine’s list manager (as I write this, the data card says the list manager in this case it’s InfoUSA, which really probably means it’s managed by Walter Karl a list management firm InfoUSA acquired years ago) and then they will blast out the message on your behalf to the 7,000 email addresses.  The problem with email is pretty simple, the response rates (at least when you’re talking about rented 3rd party lists like the Golf Magazine list) are mere fractions of what we’re able to generate using postal mail.  When it comes to marketing campaigns, I’m a response whore.  I don’t care which channel we use when it comes to promoting your offer, product/service.  I will use whichever one delivers the highest return on investment (ROI) for the campaign.  If that’s email, great!  I’d prefer email honestly because you can lead the recipient right into your website and a continuing digital sales presentation, you can easily cross-sell and up-sell and you can personalize the whole interaction on the fly.   Direct mail isn’t anywhere near as flexible.  If you have a good mail piece with a good offer, you might get a 10-15% open rate.  Your actual “click through” rate is going to be a fraction of that percentage.  So let’s say you had 700 opens (10% open rate on 7,000 pieces), that’s 700 people that actually viewed (not necessarily read the whole thing) your email message.  If your click through rate is 1-2% of your opens that would mean that 7 to 14 consumers that viewed the email actually clicked through on one of your links to your website or landing page.   What percentage of those consumers actually convert into an order or a lead (by giving you their info) depends on how well your landing page does its job.  So if you had a 2% click through rate of your 10% open rate your cost per click through would be $75.   We calculate that by taking your $1050.00 total cost of the mailing and dividing it by 14.   That might sound like a good cost per response, but to me that number doesn’t really matter.  All that matters is how many orders or leads your campaign generated.  If  25% of your click throughs become orders let’s say, then your cost for 4 orders is $262.50/order.    That’s great if it shows you ROI.  The cool part is that you can calculate the what if scenarios before you ever mail to a list and see how likely it is if you will break even or make money on a campaign.

One strength I really like about email marketing is everything the consumer does, or doesn’t do is extremely measurable.  I’d argue that it’s even more measurable than postal mail.  We know if they receive the piece or not.  We know whether or not they open it, and then if they do click anywhere within the email we will know exactly what they clicked on.  If we have several calls to action throughout the piece we can track which “Click here” or image was the most effective.  Then when they get to your website we can track how long they were there, what else they clicked on and if they visited any other pages within the site.  In fact the second they click through to the site we can use tracking software to know exactly who clicked and where they are located.  We could even send a follow up post card or mail piece to the individuals that went to the website, or we could send them a follow up email, even if they didn’t fill out a form on our site.  Direct Mail is getting better, with things like Intelligent Mail Barcode and PURL’s and phone tracking software like ifByPhone.com etc, but we can’t personalize the secondary and tertiary interactions with the responder without sending out another mailing.   Postal mailing campaigns can take weeks (sometimes months) to plan and execute, but an email campaign can be put together and be in the mail in a couple days from start to finish.

It’s a challenge even for experienced marketers to achieve ROI from rented 3rd party lists, but it can be done if you’re smart about it, and you realize that successful email marketing is a process not an event.  You can either figure it out for yourself, and make all the usual beginner mistakes, or you can hire a professional to guide you through the process.  Hiring a pro doesn’t guarantee you a successful campaign but it will sure save you from all the pitfalls the lie just around the learning curve.  When I work with a client that understands email marketing and has the budget for the testing phase, we will test several different email lists/providers at once, often with several versions of our email creative to each list to find out which mail pieces work with which lists.  Testing one list at a time is possible, but it’s a slow process.  When you go shopping for email providers ask what types of email campaigns they’ve done for other clients, what types of products and services have they offered.  Or if you call around ask if they know someone that has a lot of experience with email marketing.  Many companies out there will give you a referral if you ask them.  Knowing what I know, and having seen behind the curtain so to speak, it’s scary to think that most marketers are going to have a hard time navigating through the maze of unscrupulous providers out there.  I know some great companies that have resold email campaigns from a firm known by many to fake their email blasts and doctor the response reports.  Most of these firms are unaware what their provider is really doing and they continue using the crooked provider because they have great prices and a knowledgeable staff.   When it comes to 3rd party email blasts, it’s definitely a buyer beware type of landscape.  Finding yourself a good provider is actually more difficult than the actual email campaign itself.   I’ve talked more people out of doing an email campaign that I can count, simply because it wasn’t in their best interest.  We would have made money, but their mailing would have been a disaster and they would have been disappointed with the results.  A majority of the people you talk to work for someone else and I’m pretty sure company policy doesn’t allow them to “unsell” you from using their email marketing services.   Email marketing is popular because it works, but usually that’s because the list being used is an in-house list built by having actual interactions with the members on the email list.  When people buy something, or subscribe to your website newsletter they are actually saying YES, it’s ok for you to contact me.   When they receive your piece, if the timing and the offer is right, and if you don’t SPAM the heck out of them, they’re likely to be more receptive to what you have to offer them.   Someone that I don’t know sending me something out of the blue is pretty much just unsolicited SPAM.  I don’t know you, I didn’t ask you to email me and you’re just one of the emails that somehow gets past my spam filter in my personal email.   Sometimes, I’ll take a look at the email if the subject line sounds interesting, and every once in a while I’ll actually click through and check out their offer at their website.   It is possible to be successful with 3rd party email campaigns and if you can get through the testing phase of a campaign and actually generate a decent ROI, you’re in good shape.  One more thing, when used in the right context email marketing can be a very effective direct marketing channel.   However, until the anonymity of email addresses is eliminated (I know it sounds like a bummer) we will continue to have spammers selling Viagra from Canadian Pharmacies, and Phishing scams from hackers posing as your bank etc.  Anonymity makes it easier for these less than legit organizations exist and this hurts email marketing as a channel and will continue to play a role in the low response rates associated with email marketing.

Direct Mail Marketing:

On the upside, studies have shown that people are much more receptive to direct mail marketing; in fact, one study by Epsilon Targeting (they’re kind of a big deal if you’re unfamiliar with them) shows that the majority of Americans prefer receiving direct mail about offers or products over receiving emails.  This may be due to the fact that having something physical in their hands is more tangible than something they see on their computer screen.   Second, direct mail marketing gives you more leeway in terms of space.  Consumers are much more likely to read an entire letter delivered by mail than one delivered by email.  This means that your direct mail marketing campaigns can be more subtle and more detailed than those delivered by email. Third, as more companies try the email marketing route, there is more space in the mailbox, or less competition, for your direct mail piece.  Fewer pieces of mail means a higher chance that your direct mail piece will be read.  I’ve watched so many firms rush to try a rented list email marketing campaign, only to retreat to direct mail because they weren’t able to achieve ROI.

Everyone knows that direct mail is highly targetable and measurable.   The main downside to Direct Mail is it can be expensive if you don’t target your audience properly.  This can of course be avoided if you work with a list provider that knows how to get results.  Direct mail also takes longer to setup compared to an email campaign because it requires actual printing, and then mailing services, and then it takes time for actual delivery via the USPS.  This means your responses won’t be as immediate as with email marketing.   As a marketer myself I really dont care as long as it generates a larger ROI.

A properly developed direct mail campaign can be excellent as a lead generation tool.  However, if you don’t really know what you’re doing the likelihood of you being successful in direct mail (unless you’re selling umbrellas when it’s raining like some of the mortgage industry back in 2004-2008) is pretty slim.  You’re at a supreme disadvantage if you don’t do your own homework.  There are a lot of direct mail service providers out there selling everything from printing or turnkey mail services and yes mailing list providers that don’t know what they’re talking about.   They know just enough to sell you some printing, or a list, but they’ve never actually mailed anything themselves or built successful direct mail lead generation campaigns from the ground up.   It’s the blind leading the blind, it’s just they’re a bit more informed that you are.