I often tout direct-mail postcards as some of the most powerful marketing tools you can take advantage of to boost profits; however, not everyone is sold on postcard marketing. That's understandable, especially since marketing with postcards requires an initial – albeit relatively small – investment. That investment scales according to the number of postcards you mail. In order to justify postcard marketing, many small businesses first need to get a feel for the potential profits afforded by this type of marketing. So, how much can you make from postcard marketing?
First things first
Before we can answer that question, we first have to make the assumption that your postcard campaign is well-planned. By that, I mean you have to develop a compelling offer customers will want to take advantage of (this is often a time-limited discount), and you have to develop a highly targeted mailing list comprised of those who meet your best-customer demographics.
You have to package your offer on a postcard that features good copywriting and dazzling design: your copy should use a bold headline to command attention, create desire by listing benefits to your customer, and motivate response with a winning call to action. Your design should be eye-catching and help the copy create excitement for your product or service.
Keep in mind the 40/40/20 rule of direct marketing, which states 40 percent of your success is dependent on your offer, another 40 percent on the quality of your mailing list, and the remaining 20 percent on everything else. While it's impossible to accurately predict the success of your individual postcard campaign, it's worth noting that a well-planned campaign should be able to at least earn average responses.
Finally, we're going to assume you're sending postcards to a rented or purchased mailing list comprised of "strangers"; an in-house list you create yourself should generate better results than those depicted here because it is comprised of customers who already know and trust your brand.
Response versus conversion
One of the most overlooked aspects of postcard marketing is response versus conversion rate. You'll hear time and again that 2 percent is the average response rate for marketing; in 2013, the average response rate for postcard marketing was 4.4 percent. However, that doesn't mean that 4 out of every 100 people you send postcards to will become customers. The important piece left out is the conversion rate.
Some postcards present a discount offer in which the only response is a customer purchase, but many postcards campaigns instead focus on lead generation by offering something for free in order to collect data and begin the sales process. In the former example, average direct-conversion rates drop to around 1 percent. In the latter example, those who respond must be converted into customers after their initial response. For our purposes, we're going to assume you can convert 10 percent of leads, since they've already expressed interest in your product or service.
Lifetime value of a customer
Another important consideration to make is the lifetime value of a customer. Some postcard campaigns might promote a single, one-off purchase. A good example might be an awning company. When an awning company sends a postcard, it is seeking a single, individual sale with a large upfront price. A cable TV company, on the other hand, is seeking a monthly commitment with a low recurring price that might be paid for years.
So, the awning company might have a lifetime value of a customer of approximately $2,000, paid once, while the cable TV provider might have a lifetime value of a custom of approximately $6,000, paid in monthly installments of $50 for an average period of 10 years. Assuming a 100 percent markup on all products and services, the awning company could make $1,000 per conversion and the cable TV company $3,000 per conversion, even though the cable TV bill isn't paid all at once.
Postcard campaign investment
Your postcard campaign investment plays a large role in your ultimate return, which is why it's important to invest in premium-quality, discount postcard printing and opt for bulk postcard mailing, which significantly reduces your postage fees. Let's say you can rent a targeted mailing list for $200 and you want to mail 5,000 4-inch by 6-inch postcards to targeted potential customers, printed full color on both sides on 14-point gloss stock. In this example, your printing investment would be around $340 (though you could print 5,000 postcards for as little as $170 if you keep an eye out for postcard printing discounts) and your investment for address labeling and postage combined would come to around $1,400. You also have design and copy, which could add an additional $500 to your campaign.
Thus, your total postcard campaign investment would come to around $2,500.
Example postcard campaigns
So, how much can you make from postcard marketing? Assuming you've done everything right and you're sending 5,000 postcards to a targeted mailing list, it still depends on how much you make per sale or the lifetime value of each customer. Here are a few examples for your consideration.
Scenario: Your postcard campaign aims to directly sell Product A at a 25 percent discount, which yields a $100 profit per sale.
Results:
- 1 percent conversion rate of 5,000 recipients = 50 sales
- 50 sales X $100 per sale = $5,000 gross
- $5,000 gross – $2,500 investment = $2,500 net
Scenario: Your postcard campaign aims to generate leads for Product B, which yields a $1,000 profit per sale.
Results:
- 2 percent response rate of 5,000 recipients = 100 leads
- 10 percent response rate of 100 leads = 10 sales
- 10 sales X $1,000 per sale = $10,000 gross
- $10,000 gross – $2,5000 investment = $7,500 net
Scenario: Your postcard campaign aims to directly sell Service A, for which each customer has a lifetime value of $3,000.
Results:
- 1 percent conversion rate of 5,000 recipients = 50 sales
- 50 sales X $3,000 lifetime value = $150,000 gross
- $150,000 gross – $2,500 investment = $147,500 net
Admittedly, these figures make a lot of assumptions and there's no guarantee your own postcard campaigns will yield the same level of success as the listed examples. At the same time, you could yield even better results. These figures can serve as guidelines for helping you plan your direct-mail postcard marketing campaigns, but your business plan should not be dependent on them. In order to find out exactly what you can make from direct-mail postcard marketing, the best method is to test the market for yourself. You don't have to launch a 5,000 postcard campaign right off the bat. Try a 1,000, 500, or even 100 postcard campaign and measure your response rates.
Grow slow and steady, test, track and tweak, and after some trial and error you'll be able to accurately predict how well your postcard campaigns perform within your market. Then, you can confidently launch large scale campaigns that generate enormous profits for your company.
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