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Profitable Direct Marketing

A Strategic Guide to Starting, Improving, and Expanding Any Direct Marketing Operation

By Jim Kobs

Many new entrepreneurs want to learn about Direct Marketing. Often, they pick up books telling them it is trivial to build and grow a profitable, mail-order company earning millions of dollars in a very short time. Many established small businesses spend tens of thousands of dollars on direct-mail ad campaigns which prove a disappointment.

Whenever either group asks for a solid, authoritative information about direct mail, the first book which comes to my mind is Profitable Direct Marketing: A Strategic Guide to Starting, Improving, and Expanding Any Direct Marketing Operation by Jim Kobs.

Kobs gives us the definitions of the basic terms in direct marketing:

"Direct mail is simply an advertising medium, like magazines or television, except that it uses the mail to deliver its message. That message can have a wide variety of objectives, from making a sale to changing opinions or providing information." (Profitable Direct Marketing, Kobs)

"Mail order is a way of doing business. It is a distribution channel in which the customer's order is received by mail or phone [or, today, possibly, the Internet] and delivered through the mail or a similar direct-to-the-buyer shipment method. Of course, the order can be solicited by any advertising medium." (Profitable Direct Marketing, Kobs)

"Direct Response is an advertising technique. This is a specialized type of advertising that solicits an immediate action or response. The action requested might be an order, an inquiry, or even a store visit." (Profitable Direct Marketing, Kobs)

"Direct marketing is a term that embraces all of the above-direct mail, mail order, and direct response. Direct marketing uses the media to deliver the message; it calls for action on the part of the message recipient; and it often provides its own distribution channel. Direct marketing, however, is also a method of promotion that can be employed with traditional distribution channels, such as providing leads for a sales force. ... Direct marketing gets your ad message direct to the customer or prospect to produce some type of immediate action. It usually involves creating a database of respondents.... The two key words are direct and action..." (Profitable Direct Marketing, Kobs)

Kobs goes on to explain that the actions of the respondents must be measurable. Inquiries or orders received are measurable. Kobs notes that while billions of dollars are spent on advertising, the companies spending this money aren't completely aware of just how effective the advertising is in generating sales and company awareness.

In the Chapter, Launching a New Direct Mail Program, Kobs teaches us basic direct marketing math. We learn how to calculate media cost, CPM (or, cost per thousand), OPM (orders per thousand), and cost per response (CPO). While such calculations are basic, they form the foundation of successful direct marketing. This is how direct marketing gurus measure in direct mail.

In a later Chapter, Direct marketing's Testing Laboratory, Kobs introduces us to some of the more advanced aspects of direct mail, such as segmentation analysis, regression techniques, and confidence levels. However, Profitable Direct Marketing doesn't show the use of these more advanced techniques in detail. This is probably because many readers of Profitable Direct Marketing probably don't have the statistical background or inclination to learn the most advanced direct-mail techniques. Further, these advanced techniques aren't necessary for many smaller businesses which want to use direct marketing.

Kobs covers much direct-mail testing in depth. In particular, Kob does an excellent job of discussing list testing and list segmentation. Kobs gives us useful rules for making successful tests. Among Kobs' Eight Testing Ground Rules are trying to "beat the champ." This means using your currently most successful direct-mail package as a "control" to which all of your other direct marketing packages are compared. Another of Kobs' ground rules is being sure that "your tests are statistically valid." Profitable Direct Marketing also devotes an appendix to The Mathematics of Planning Profitable Mailings.

Direct marketing isn't all about testing and math, however. Part III of Profitable Direct Marketing is aptly titled Targeted Creativity. Or, we might think, "Measurable Creativity."

Kobs discusses how to write successful direct-mail copy. He asks us to contemplate our market, our offer, and our objective. We learn about letter writing formulas which have proven to be successful in the past.

Kobs tells us "These seven steps [of direct-mail copywriting] have stood the test of time:

  1. Promise a benefit in your headline or first paragraph-your most important benefit.

  2. Immediately enlarge on your most important benefit.

  3. Tell the reader specifically what he or she is going to get.

  4. Back up your statements with proof and endorsements.

  5. Tell the reader what he or she might lose by not taking action.

  6. Rephrase your prominent benefits in your closing offer.

  7. Incite action."

Although you can deviate from the proven formulas, people who are trying to create their own direct-marketing packages really should consider following similar templates, at least as a test.

Profitable Direct Marketing also gives examples, exhibits, and case studies to demonstrate the concepts throughout. Fundraising for nonprofits, direct marketing of financial services, as well as business-to-business direct marketing are each given separate sections. Unlike many direct-mail books which show us some pretty crappy products as examples, Kobs' examples range from American Association of Retired Persons (AARP)/Scudder Investment programs to the University of Minnesota's Mayo Clinic Health Letter.

Incidentally, while this review has focused upon the use of direct-mail marketing (sending out some "package" via the postal service), Kobs also discusses telemarketing, print media, such as newspapers and magazines, and broadcast media, such as TV infomercials. And, a section is devoted to measuring the performance of each item in each space of catalogs, for those companies interested in creating a catalog mailing.

Kobs writes that the five inherent advantages to direct marketing are:

  1. It allows your company to "establish a separate and substantial profit center."

  2. Your company controls the distribution channel.

  3. Mail order "can maximize market penetration. ...reaching unrepresented markets."

  4. Your company controls the risk (direct-marketing costs are measurable, projectable, and controllable).

  5. Direct Marketing programs are "completely accountable."

In the Marketing Strategies Chapter, Kobs discusses the importance of knowing the value of a customer to your particular company. Kobs writes: "How Heavily Should You Invest In New Customer Acquisition?...This is a deceptively simple question, but I'm constantly surprised at how often supposedly sophisticated marketers fail to grasp what a new customer is worth. If you don't know what a new customer is worth, you don't know how much you can profitably invest to get one. You may be spending too much which will eventually hurt your bottom line. Or, by spending too little-you may be losing sales to more aggressive competitors... To determine how much you can afford to spend on new customers, you need to know two things: What your repeat business potential is and what payback period you want from new customers." This is a fundamental question any company contemplating using direct marketing must answer.

Direct marketing is an interesting blend of measurement, psychology, and creativity, used to generate responses to your marketing programs. Profitable Direct Marketing: A Strategic Guide to Starting, Improving, and Expanding Any Direct Marketing Operation by Jim Kobs is one of the best introductions to the subject. At $49.95, it's a pricey book, but it's worth every penny.

Profitable Direct Marketing: A Strategic Guide to Starting, Improving, and Expanding Any Direct Marketing Operation
Profitable Direct Marketing

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