Why Direct Mail ISN'T the Answer for Handmade Businesses

The other day I was posting questions in a business related soap forum asking how others promoted their soap making classes. One of the responses truly surprised me. Having working in associations and using this tactic for nearly 10 years when I wasn't footing the bill, it made perfect sense. Plus, the programs I were selling were worth the acquisition cost. What did the person suggest? Direct Mail.

Here is the breakdown on why this isn't recommended as a marketing tool for the average handmade business without a prospect list.

1 - You have to buy addresses for your list.

To mail via USPS's direct mail feature you can select just the folks in your zip code within certain perimeters.  Just for my one zip code, the cost of just postage, is $898.16. Needless to say, by being in the DC area, I'll have a few more zip codes that I will need to add and this cost will go up exponentially.

2 - The cost of the piece to produce

Between the graphic designer, printing, and getting the piece to the post office - it all adds up. I work with a few designers and I would be looking at about $500 to just design the piece. To print the postcards (I would go with a 6"x11" so it stands out more) would add another $547.75 before shipping costs.

Running total so far: $1945.91

3 -The response rate

Mailing cold to a list you've never used before will get low 1% response rate according to the Direct Mail Association. We've mailed to 4,908 houses (see pt 1) so that means 49 people will go to the URL on the direct mail. We can then assume that about 5% of the 49 may purchase something from you or 2.45 people. Using the example of my soap classes, that means 2.45 people may have purchased the $75 class earning me a revenue of $150.

But what did it cost to make that revenue?

Let's go back to our numbers. Between the cost of the addresses and the production costs we are at $1945.91.  (We'll be nice and say our .45 of a person is actually a 3rd person so we really made a revenue of $225). We divide 1945.91/3 and that means it cost us $648.64 PER PERSON to make $225.

That's right. It cost $648.64 per person. Now, if I was selling recurring memberships to a gym or birthday services or rides to the moon, this cost-per-acquisition isn't unreasonable. For a small business selling handmade items, this money would be better spent elsewhere.

Stay tuned for situations for when direct mail IS a smart use of your businesses revenue.