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Plan an effective mailshot

This briefing outlines:

  • how to work out your direct mail objectives
  • how to calculate the cost of your mailshot
  • how to calculate your break-even figure

1. Work out your direct mail objectives

Working out exactly what your objectives are is an important part of the planning process. If you don't know what you want to achieve, it is impossible to assess how well you have done or how you can improve in the future. Here are some examples of typical mailshot objectives:

  • attracting 100 new enquiries in a month
  • encouraging customers to visit your business or your website
  • introducing new products and services
  • increasing sales to existing customers
  • securing 500 new customers in six months

If, when you analyse your results, you find your mailshots underperform, either you set your sites too high or some element of your campaign is just not working. If you think your mailshot might outperform your objectives, you need to plan carefully for increased response.

Think about whether you are you going for long-term goals, such as building the reputation of your business, or something more immediate, such as turning customers into repeat customers?

2. Calculate the cost of your mailshot

You may well have thought of using direct mail in the past but imagined it would be too expensive. But the cost of a mailshot depends on a range of factors, including:

  • how many people you want to reach
  • how much material you want to send them
  • what sort of material you want to send

Like any other business decision, direct mail is all about cost and return. It is only worth undertaking if the income generated is greater than it costs you to design, produce and deliver.

The difficulty comes when the return on your investment is harder to quantify. If, for instance, your objective is to build customer loyalty, working out exactly what this is 'worth' and how much money this loyalty represents can be tricky.

Direct mail can be very cost-effective if you decide to do the writing and design yourself, use your own mailing list (rather than buying one), and print the leaflets on your own printer. Here are the typical costs for a mailing to 1,000 people:

Item

1,000 mailings

List rental

nil

Copy and design fees

nil

Artwork and print

nil

Paper

£18

Envelopes

£20

Postage

£600*

Total cost

£638

Cost per mailshot

£638 / 1,000 = 63.8p

*Based on a First class letter, 60p/item up to 100g.

If you employ professional help to create your mailshot, your costs will rise. No matter what your final print run, some costs are at a fixed rate. For example, the cost of artwork commissioned would remain the same for 5,000 mailings as it is for 1,000 mailings, as it is a one-off fee. But for items such as envelopes, printing, and list rental, the prices rise when the number of mailings increases.

Once you have done the sums, you will be able to work out whether a direct mail campaign is worthwhile for your objective.

3. Calculate your break-even figure

Unless you are happy to send out a mailshot with no eye on the profit or loss you will make, calculating that your campaign covers its own cost is important. Break-even analysis works out exactly what you need to make to cover costs, in terms of response rate, profit margin, mailing size, number of sales and average order value. It is a useful way to organise your mailshot budget.

Here is an example of a break-even analysis for a mailshot of 1,000 mailings:

Size of mailshot

1,000 mailings

4% response rate

40 replies

25% conversion rate

10 orders

Average order value

£150

Total order value

£1,500

30% profit margin

£450

Resulting break-even budget (total)

£450

Working out your break-even budget involves making some assumptions, such as conversion rates (the percentage of people who buy, compared to the percentage of people who respond). So, for example, if 80 people respond and 12 actually buy, your conversion rate is 15%.

The figures in the table assume that of the 1,000 people mailed, 40 responded, a quarter of whom bought the product. If each sale is worth £150 at a profit margin of £45 per sale, you will make £450. If the costs for the mailing exceed £450, you will fail to break-even. If they come in at under £450 or you get more than 10 orders, congratulations, you are in profit!

You control how much you spend on your mailshots, because you control how many people you send your message to. Even if your budget is tight, mailshots are worth sending because they are a great use of resources. You can create your own simple mailshot for little more than the price of a piece of paper, an envelope, and a stamp, so if you wanted to send a message to 100 of your best customers, you could do it at relatively little cost.

Make sure you are geared up for the response to your mailshot by speaking to your suppliers (to ensure that you can get enough stock) and all your staff. Not fulfilling your customer's expectations or even partially fulfilling them can have dire consequences for future sales and your reputation.

For more information on effective mailshots, you might like to read: