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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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Secrets of Direct Marketing Testing
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