As new generations make their way into the financial marketplace, the demand for a digital-first customer experience is exploding, after bubbling under the surface for years. Financial institutions that miss this digital boat will soon tire of treading water and slip out of sight. But how far toward digital should the pendulum swing?
Direct mail might just be the marketing channel that most represents “the old way” of reaching and converting customers — it’s analog, printed, harder to track, costs postage to send, and takes days to get to the customer instead of nanoseconds. But is it time to throw it out altogether in exchange for its digital cousin?
The data reveals that direct marketing not only has a place at the table but is a vital ingredient for marketing in the digital age. The direct connection that customers have with physical mail is proven to boost brand recall, response rates, and attention. It boasts some of the best ROI in the business. And the data on millennials and direct mail is often shockingly good.
However, while direct mail may be a key ingredient in modern marketing, maximizing returns requires some smart choices. Letting data drive strategy (we have some of the best data scientists you’ll find anywhere) is a no-brainer. Combining direct and digital communications in an omni-channel approach is also mandatory, because it connects the dots for consumers, letting them pick their own path to conversion—like a choose your own adventure book that always ends in sales.
Playing the Numbers: Data on Direct Mail Engagement
The most dangerous direct mail myth propagated over the past decade is that direct mail is an ineffective medium for communicating with customers. Critics of direct mail in the finance industry often suggest that customers are unresponsive and direct marketing isn’t as cost-effective as digital marketing. The data reveals a drastically different story.
According to the 2018 DMA Response Rate Report, direct mail response outperforms all digital channels combined by five to nine percent. Direct mail has an average response rate of 3.7% compared to 0.62% for a combination of mobile, email, social media, paid search, and display advertising. The value of that level of engagement is undeniable, and yet companies are walking away from it, lured by the promise of greener digital pastures and the tease of digital’s reputation for being cheap and easy.
So, does direct mail really cost more? The short answer is yes. The 2017 DMA Response Rate Report showed that direct mail is the most expensive medium in cost per response at $26.40 (household level). In comparison, email maintains a cost per response of $10.32, paid search $16.22, online display $24.75, and social media $20.32. But what does that price get you?
Smart marketers care far more about return on investment than overall cost. And while direct mail is costlier to produce than digital marketing, the increased response rate drives ROI. In other words, direct mail may cost more, but the increased response rate provides huge value, as the same DMA report describes an extremely competitive average of $19 cost-per-acquisition for direct mail, compared to mobile and social at $16-18, paid search at $21-30, and internet display at a whopping $41-50. Only email outperformed direct mail, coming in at $11-15 cost-per-acquisition. The data is clear: Direct mail shouldn’t just be part of your marketing spend—instead it should probably be a foundational element.
Even better news for those maintaining a direct mail focus: across the financial services industry, there has been a substantial decline in spending on direct mail, driven by this high cost, and likely, misconceptions about its effectiveness. Mintel has discovered that major credit card issuers are sending less mail, even insurance direct mail is in decline. That means as more brands preemptively depart the direct mail sector, opportunity will only skyrocket as consumers attention becomes less divided. And for those brands who master omni-channel marketing, the upside gets even higher.
Contact Franklin Madison today to learn more.