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The most complete library of direct mail, Target Marketing Group's Who's Mailing What! Archive, continually monitors the use of premiums. Comparing the first quarter of the last four years reveals that despite the budget crunches many direct mail programs have faced during the overall economic slowdown, the use of premiums has not shrunk. And compared to 2007, when the economy was chugging along, the tactic has actually increased by 15 percent.
In the first quarter of 2010, 20 percent of all direct mail had a premium offer—the exact same figure of 2008. Of course, 2008 also was the year when the economy started going south, so 2009 registered slightly less at 19 percent. But the tactic's resurgence demonstrates that, in the face of economic obstacles, premiums are playing a vital role in direct mail response.
As Lee Marc Stein, copywriter, former columnist for Inside Direct Mail and author of "Street Smart Marketing," once said, "The right premium not only helps you achieve your response objectives, but probably makes sense economically, particularly in lifetime value calculations."
From one of Stein's articles, here are three ways to use the premium that still move the needle on response.
1. Premiums as a reward for fast response
Normally, faster response means more response. You get people who would put your mail aside (and later reject it) to act on impulse. There are two ways to couch the offer: either with a deadline or with a limited quantity of available premiums.
You can give the premium to everyone responding by a specific date (and even to those whose responses arrive within two weeks of that date). Or you can give the premium to the first X number of people responding. This ploy is known as the "Fast 50"; but if you mail large quantities, seriously consider expanding the quantity beyond 50. For a nationally known product or service, people think, "First 50? I have no chance." It's like sending a time-limited offer and giving prospects just a week to respond.
Look at the math: Without any premium, you get a 2 percent response. With in-mail costs at $500/M (on a quantity of 500,000), your gross order cost is $25. Let's say you choose to send the premium to everyone who responds by a deadline, and the premium costs you $3 per response. To lower your cost per order by 10 percent and justify the premium, you'd need a 2.56 percent response or 28 percent increase.
That kind of increase is possible. For a magazine, however, it may not be necessary. If the premium increases response by just 10 percent on 500,000 mailed, you get an additional 1,000 subscribers to renew and add to your rate base.
If you do a sweepstakes mailing with a giveaway costing you $50 and offer your Fast 100 on a mailing of 500,000, that increases your costs by $5,000 or $10/M. Here, to decrease gross order cost by 10 percent, you'd only have to increase response to 2.26 percent from the original 2 percent. The larger the quantity, the more a Fast 100 premium offer works in your favor. Aside from magazines, the "Fast X" offer should be tested for consumer catalogs and some lower-ticket business software and equipment mailings.
2. Premiums used to boost average order
Of course, this is most prevalent in the catalog sector—and is used by both consumer and business marketers. Some catalogers give away premiums based on number of items ordered, but most base it on exceeding a specific dollar amount per order.
Investment advisory and health newsletter publishers have added a premium (or in some cases, many premiums) for subscribers taking a longer term of two years versus one, and … magazine publishers [now] do the same thing.
Say you now get a 2 percent response and $40 average order. If you can boost that average by 10 percent or $4, that means an increase in revenue of $80/M mailed. For orders more than $40, you can afford at least a $3 premium cost because the number of people qualifying will be a fraction of your 2 percent response rate.
3. Premiums generate demand
If you're selling high-ticket equipment or services, economics are really not a consideration in your choice of premiums. Getting prospects to take time to attend a demonstration or listen to a formal presentation could be worth $25, $50 or even $100. Sometimes, the question becomes ethical rather than economic—is this a thank-you or a bribe?
The Hartford/AARP has been using premiums for its auto insurance lead generation program for decades. It can't seem to make mail work without it. But the cost of its premiums—usually simple calculators—is miniscule.
In the first quarter of 2010, 20 percent of all direct mail had a premium offer—the exact same figure of 2008. Of course, 2008 also was the year when the economy started going south, so 2009 registered slightly less at 19 percent. But the tactic's resurgence demonstrates that, in the face of economic obstacles, premiums are playing a vital role in direct mail response.
As Lee Marc Stein, copywriter, former columnist for Inside Direct Mail and author of "Street Smart Marketing," once said, "The right premium not only helps you achieve your response objectives, but probably makes sense economically, particularly in lifetime value calculations."
From one of Stein's articles, here are three ways to use the premium that still move the needle on response.
1. Premiums as a reward for fast response
Normally, faster response means more response. You get people who would put your mail aside (and later reject it) to act on impulse. There are two ways to couch the offer: either with a deadline or with a limited quantity of available premiums.
You can give the premium to everyone responding by a specific date (and even to those whose responses arrive within two weeks of that date). Or you can give the premium to the first X number of people responding. This ploy is known as the "Fast 50"; but if you mail large quantities, seriously consider expanding the quantity beyond 50. For a nationally known product or service, people think, "First 50? I have no chance." It's like sending a time-limited offer and giving prospects just a week to respond.
Look at the math: Without any premium, you get a 2 percent response. With in-mail costs at $500/M (on a quantity of 500,000), your gross order cost is $25. Let's say you choose to send the premium to everyone who responds by a deadline, and the premium costs you $3 per response. To lower your cost per order by 10 percent and justify the premium, you'd need a 2.56 percent response or 28 percent increase.
That kind of increase is possible. For a magazine, however, it may not be necessary. If the premium increases response by just 10 percent on 500,000 mailed, you get an additional 1,000 subscribers to renew and add to your rate base.
If you do a sweepstakes mailing with a giveaway costing you $50 and offer your Fast 100 on a mailing of 500,000, that increases your costs by $5,000 or $10/M. Here, to decrease gross order cost by 10 percent, you'd only have to increase response to 2.26 percent from the original 2 percent. The larger the quantity, the more a Fast 100 premium offer works in your favor. Aside from magazines, the "Fast X" offer should be tested for consumer catalogs and some lower-ticket business software and equipment mailings.
2. Premiums used to boost average order
Of course, this is most prevalent in the catalog sector—and is used by both consumer and business marketers. Some catalogers give away premiums based on number of items ordered, but most base it on exceeding a specific dollar amount per order.
Investment advisory and health newsletter publishers have added a premium (or in some cases, many premiums) for subscribers taking a longer term of two years versus one, and … magazine publishers [now] do the same thing.
Say you now get a 2 percent response and $40 average order. If you can boost that average by 10 percent or $4, that means an increase in revenue of $80/M mailed. For orders more than $40, you can afford at least a $3 premium cost because the number of people qualifying will be a fraction of your 2 percent response rate.
3. Premiums generate demand
If you're selling high-ticket equipment or services, economics are really not a consideration in your choice of premiums. Getting prospects to take time to attend a demonstration or listen to a formal presentation could be worth $25, $50 or even $100. Sometimes, the question becomes ethical rather than economic—is this a thank-you or a bribe?
The Hartford/AARP has been using premiums for its auto insurance lead generation program for decades. It can't seem to make mail work without it. But the cost of its premiums—usually simple calculators—is miniscule.
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