The financial costs will include everything that has been used to make the mail shot possible. This will be the costs for producing the advert/letter/form such as printing costs. Additionally, there will be the cost of the envelopes and postage (stamps, pre-paid return envelopes).
If you do require people to send something back to you, make sure that you use pre-paid envelopes. Never ask the customer to pay for postage themselves.
On top of that, you may want to add the costs of direct labour including anything that is used to follow up on the responses (personal visits, telephone calls, etc). It is a good idea to record your costs for future reference (detailed in the next section).
It can be costly if you decide to leave your mailing to the experts at a professional agency. This will include extra designing and printing costs due to higher quality. However, it can be more cost-effective if you are mailing to a high number of customers (10,000+).
Rented lists to provide you with addresses to target customers can be found both online and off-line. These lists (depending on size) can start from around £500+.
You have to be sure that your targeting of people is done as accurately as possible. If not done properly, then it may damage your company image. People who find your mail irrelevant will refer to your mail as 'Junk-mail'. This can become annoying to those people but will also be an unnecessary financial cost for yourself.
Recording Your Progress
You may find it useful to make a record to determine the costs of that particular mail shot. Below is a typical example of how you may do this, although you might want to include extra costs where you think appropriate:
List: 1,500 potential customers
Quantity: 1,200 mailings sent
Date sent: 20th June 2001
Cost: £500 (for example)
Replies: 200 (16.7%)
Cost per Reply: £2.50
Orders: 100
Conversion: 50%
Cost per Order: £5
Total sales value: £1350 (for example)
Average value: £13.50
Cost per £ sales: £0.37
After recording the information of future mail shots, it can further be used to plan the next one to incur less costs with maximum responses
E-mail
Using email as a delivery system is still in it's early stages and has a degree of contention about it's use. SPAM (unwanted emails) are the curse of many PC users and they are seen as more invasive than regular junk mail through your letter box: probably something to do with the easy identification of junk mail envelopes and content. Using legitimate email lists is the only option you should use, and even this is open to being classified as SPAM due to many recipients being unaware of 'opting in' to the list you are using. Email mail shots are very cost effective and quick to send out: do take care who you send them out to as you may end up with thousands of emails from people who are not pleased with you.
Effects of a Price Change in Postal Services
If you are thinking of sending mail shots, you should always be aware of proposed price increases as an increase of just 1p for postage stamps can have a significant affect on the cost of mail shots. For example, if you propose to send 10,000 mail shots:
With stamps at a price of 27p: 10,000 x 27p = £2,700
Price Increased by 1p i.e. 28p: 10,000 x 28p = £2,800
Should future issues in the postal service make prices jump dramatically, we could see price increases soar as high as 33p (an increase in 5p) and so,
With stamps at a price of 33p: 10,000 x 33p = £3,300
If postage prices do increase significantly in the future, it may well trigger a response that sees e-mail as the most favourable source for mail shots.
Summary
Using a mail shot can be your best marketing tool if done in the right way. It is important that you target the right people to get the best response and to minimize costs. This all goes down to how well you plan your mail shot and that you use it at the most appropriate time (in relation to your objectives).
Be sure that you have the resources to deal with the expected amount of response and that you can cover the initial extra costs.
By recording your progress, in every mail shot you send, in time you will be able to optimize your performance. This in turn will lower costs and also reduce the amount of profit you will lose on sales.
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