Email Marketing and Direct Mail: Numbers and Efficacy

Posted by Scott Cohen On March 10, 2011 in story time I 0 Comments

A week or two ago, I read an article (and don’t ask me to remember where) that said that direct mail was more effective than email marketing. Now, after drying off my computer and monitor from the spit-take that statement induced from me, I thought to myself, “I’ve worked with both email and direct mail. I know this statement is a bunch of baloney.”

In my experience, a good direct mail campaign gives you a 1% conversion rate. A great campaign? Two percent. An out-of-this-world campaign? Three percent.

In email marketing, odds are a 3% conversion rate isn’t considered very good (obviously, it depends on what you’re selling).

But rather than give you specific examples, let’s talk numbers. Here’s a hypothetical situation:

  • Your mailing list has 60,000 subscribers on it.
  • You are selling your product for $100.

Let’s do the “break-even” math here.

The Break-Even Point of Direct Mail

Based on my calculations from my “Four Reasons Why You Should Use Email Newsletters” post, each piece of direct mail you send will cost about 72 cents to produce and mail.

So, 60,000 x $0.72 = $43,200.

To break even, you would have to sell your product to 432 of your mailing list subscribers. That comes out 0.72% conversion rate. Not bad, right? (I never said direct mail was bad, just not as effective.)

The Break-Even Point of Email Marketing

In that same scenario, we can safely estimate that it costs about 20 cents per individual to send an email (we’re counting creative, design, etc.).

So, 60,000 x $0.20 = $12,000.

To break even, you have to sell your product to 120 of your mailing list subscribers. Conversion rate? 0.2%.

The Profit Differential of Email Marketing Against Direct Mail

Okay, let’s take that same hypothetical and go one step further. Let’s say your campaign is wildly successful and your conversion rate hits two percent. That means you sold 1,200 units at $100 a piece, for a clean $120,000 in revenue.

Now, let’s do the math with the hypothetical that each channel produced the same revenue:

  • Direct Mail: $120,000 – $43,200 = $76,800 in profit
  • Email: $120,000 – $12,000 = $108,000 in profit

Profit Differential: $31,200

So, given this scenario, to produce the same amount of profit from 1,200 sales from a direct mail campaign, you need to produce 888 sales from an email campaign. That means 312 fewer sales required, and a full half a percent less in conversion. How awesome is that? (Not saying you should strive to do less, but you need to do less to accomplish the same profits.)

Plus, here’s what you get with email that you don’t with direct mail:

  1. Faster delivery (Immediate, practically)
  2. Tracking data (engagement data, delivery data, etc.)
  3. Easier testing (in terms of cost)

At the end of the day, all things being equal, email marketing provides better bang for your buck. Direct mail has its place, but it shouldn’t replace email, but rather augment it.

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