Common Direct Mail Marketing Mistakes

direct mail marketing mistakes

Direct mail marketing requires expertise; otherwise, you can be making mistakes and not even know it. Too many lenders are oversimplifying the process, which is causing them to make preventable errors. To help you improve your direct mail marketing process, the following paragraphs will show you the mistakes that we have seen lenders make throughout […]

direct mail marketing mistakes

Direct mail marketing requires expertise; otherwise, you can be making mistakes and not even know it. Too many lenders are oversimplifying the process, which is causing them to make preventable errors. To help you improve your direct mail marketing process, the following paragraphs will show you the mistakes that we have seen lenders make throughout the steps of their campaigns.

Determining Offer Goals, Analyzing Product Offers, and Building and Customizing Marketing Lists

The first step of the direct mail process is where you need to match the product offer with a compatible mailing list. It’s during this process that we see the most common mistake get made. The error occurs when you do not know your audience, have a loose idea of who your target demographic is, or when you have an outdated mailing list. This misjudgment can be catastrophic because not knowing your ideal audience means that you are unable to align your products properly, which then makes your products un-relatable to the prospects that you’re mailing to, thus causing a low response rate, poor customer acquisition, and a high cost per acquisition.

If your mailing list contains outdated information like addresses, phone numbers, etc., then you could be mailing offers to prospects who are unqualified or unlikely to respond. Mis-aligning your product and audience can also cause legal issues such as legal-in-compliance and legal-in-risk problems. To avoid these dilemmas, you need to be able to find the balance between the responsiveness and risk of a client, because we often see lenders who have a high response and low origination rates due to this critical component of the campaign.

Developing Mail Pieces

This leads us to a misconception that we see all the time, which is the “one size fits all” ideology. This mistake happens when a company believes that all prospects will respond similarly to the same mail piece and offer.

When developing a mail piece, lenders need to realize that almost every person will respond differently. All prospects will have a different reaction to things like images, examples, testimonials, and phrases. Your prospects will each have their own prejudices and opinions. Some will believe a guarantee and others will believe a testimonial. To avoid this problem, you will want to use all of these tactics, and more, to convince them to call you.

Another common mistake we see is when a lender expects that all potential borrowers will have the same level of education. This misconception can cause your company to have a low response rate because your prospects may not understand the offer due to the language you are using in your letter. You must write for reading comprehension! To prevent the possible confusion of your prospects, we suggest writing at a 7th-grade level. Each copy and campaign type should be customized for the prospect, which means going beyond just putting their name on the letter. Don’t just stop at the basics when you can further improve customization by including things such as a personalized URL and personalized offer.

Personalization will make it so your letters are less focused on sales, allowing you to focus on the prospect and their needs, thus providing you with a better opportunity to convert a potential borrower into a customer.

Getting the message wrong in your letter is another way you may be killing your ROI. Your message needs to make a logical and emotional argument in order to get a prospect to convert. Humans are controlled by their emotions, and although a logical argument seems the most reasonable tactic when trying to sell, lenders need to remember that the letter should not be focused on selling. Instead focus on the potential client, and communicating value.

The key is to come off as relatable. You want the reader to feel comfortable and attracted to the offer. This means that you need to target their emotions by showing them a problem they are facing and offering them a solution. Remember, without a problem, there is no reason to respond to the solution. This “problem-answer” format allows you to make an emotional connection with your clientele while also improving your chances of them responding to your offer.

Not testing your letters before mailing a large campaign can lead to an ineffective campaign. You want to be able to get money out on the street as fast as possible, but this can occasionally lead to a failed campaign. Testing your letters beforehand will lead to higher response rates and a low cost per acquisition. This is because you now know what type of letter works for your target demographic. Not testing your letters before mailing a massive campaign can cause you to fall into the cycle of mailing letters that do not function as they should. Don’t assume that something will work because you can never predict the results of a campaign. You need to constantly test campaigns next to each other, and proper tracking is imperative to this process because if you can’t accurately measure campaign performance, how are you going to manage subsequent campaigns?

Executing and Fulfilling Mail Campaigns

Improper planning is another massive mistake that lenders make when it comes to getting campaigns out the door. You are focused on lending, which means your internal teams may get bogged down with interferences that cause campaigns to go out late or not at all. This problem can represent millions of dollars to the bottom line. You need to ensure that you have a timely process so that important marketing drop dates are not missed.

Execution is a key step because if your execution is off, then it doesn’t matter if you’ve made any of the previously-mentioned mistakes. You are in the business of getting money on the street, so the faster and more efficient you can do that, the better.

Tracking Responders, Analyzing Campaign Results, and Determining ROI

Lenders need to be able to track their campaigns’ results because if your response tracking and reporting is unreliable or slow, you’ll be making important decisions using inaccurate information and likely killing your ROI. This is critical to the success of your campaigns because the success of your subsequent campaigns relies on this information. Being unable to track your campaigns’ progress means that you are funneling money into the unknown, which is never a good business tactic. This can lead to poor re-targeting, unclear campaign results, and a negative ROI. Tracking responders, analyzing campaign results, and determining ROI will allow you to learn what is working, and what is not, so you can optimize all future direct mail marketing campaigns.

Each step of the direct mail marketing process has room for errors, and these small errors can create big problems for lenders. It is possible to optimize each step so you can avoid these common mistakes, and a strong suggestion is to outsource your direct mail marketing to experts who know how to identify and change what is not working. A successful direct mail campaign depends on each step of the process being properly aligned and executed. Now make a list of these mistakes and go over each one of them outlining how your operations are reacting to each one. Are you making the mistake? How are you planning to solve it? Are you not making mistakes? How can you improve?

Author:

Written by Pablo Gonzalez
Marketing Coordinator / Acct. Manager
Lending Science DM

Why Online Lenders Should Consider Direct Mail Marketing

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It is amazing how neglected direct marketing is in the lending space. Many lenders are ignoring a unique opportunity to maximize revenue and operations. The Cost and Advantage of Direct Mail to Online Lenders Direct mail has a long and successful past, beginning with an Egyptian landowner in 1,000 B.C. Many people still wonder, “Why send direct […]

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It is amazing how neglected direct marketing is in the lending space. Many lenders are ignoring a unique opportunity to maximize revenue and operations.

The Cost and Advantage of Direct Mail to Online Lenders

Direct mail has a long and successful past, beginning with an Egyptian landowner in 1,000 B.C. Many people still wonder, “Why send direct mail when we have the advantage of the internet with online advertising, social media, and such?”

While this is an applicable marketing strategy for many industries, it is not true in the lending space. The advantages of a lending company adding a direct mail component to their advertising campaign are beyond what most can imagine, and it can truly take a company’s operations to the next level.

Although adding a direct mail component to your business can take it to the next level, it is a huge upfront investment for many lenders. The cost to implement direct mail marketing can fluctuate based on your company’s mailing quantity and the services you are receiving, but the results you’ll generate will be far superior to your online marketing results.

Recent monthly response data results show direct marketing deliver response rates of up to 1.16% in the lending industry. While this number might not seem sensational, it is a powerful number for lenders. When targeting and mailing up to 120,000 people, 1.16% means 1,392 have responded. Then consider that 75% applied and 50% converted. Do the calculations and consider; how much revenue would 522 funded loans mean to a business? What about mailing to 1,000,000 people? A positive ROI is an immediate reality. More on this later…

Direct Marketing and Traditional Direct Mail Differences

After making the significant investment to implement direct marketing, a company will naturally desire immediate results, but with direct mail marketing you need to have patience. It could (in some cases) take more time to see results than it does with online marketing. Direct marketing involves a lot of trial and error, which involves a lot of testing, and time. To reap the benefits, you need to be ready to make a long-term commitment to the process.

However, businesses must consider the significant differences between traditional direct mail and direct marketing. Vast improvements have been made since the times of the Egyptians roughly 3,000 years ago. Traditional direct mail is simple. Use a specific database with addresses and send your prospects letters with your advertisement. It is a basic procedure and basic results follow. Direct “marketing” applies much more to strategical thinking, and its results directly correlate with the complexity of the program.

Starting with the advertisement portion of the equation; generic advertising attempts to sell but fails to communicate value according to the reader’s needs. How are a reader’s needs determined? THE DATABASE! Having a clean, well segmented, well-targeted database will do wonders. Creating a database of this caliber takes time, plenty of deliberate testing, and detailed analysis, but done correctly, qualified response rates will increase indicatively.

A well-tested advertisement in the form of a letter is one of the last pieces of a successful direct marketing campaign. However, if the message is off-target, it’s almost guaranteed to decrease the response rate and ROI. Creating the ideal message can be more complicated than one might think. The message must make an intellectual and emotional connection with your prospects, but it is the emotional connection that drives response. Human beings are ruled by their emotions. No logical argument will ever sway a client from their feelings. No emotional connection, no deal. You must tap into the reader’s emotions by using every method possible. How We Decide by Jonah Lehrer makes the case that rationality depends on emotion. Motivation is driven by feeling, not intellect. Lehrer points out, “Emotion and motivation share the same Latin root, movere, which means to move. The world is full of things and it is our feelings that help us choose among them.”

The Logistics of Direct Marketing Campaigns

The logistics of the whole direct marketing campaign process play an important role, as well. Mail at the wrong time, choose the wrong address, work with the wrong mail house, or lack the ability to take each separate campaign through its segmentation and analysis process on time and the investment could be a waste. That being said, it is imperative to have an excellent team of analysts to address these needs, and effective writers and marketers, as well. In direct marketing. every facet counts. Get all the pieces to align and you’ll enjoy unlimited growth.

Logistics are a critical component of the direct marketing campaign process. With direct marketing, you have a lot more rules and regulations to deal with than you would with online marketing, thus affecting the logistics process. The increased amount of legislation makes the logistics process more complicated than what you would have with online marketing, but it can be done. The complication of logistics occurs when everything needs to be in compliance and has received any and all legal approvals.

Lenders also need to be ready operationally. Once a lender implements direct marketing, they need to ensure that they can support the demand that direct mail brings in. One of the operational change lenders must be ready for is scaling up the company’s call center to be able to answer the increased amount of calls. Updating your business’s infrastructure to meet new demands depends on the quantity of mail your company wants to send out, and your current infrastructure. Although these improvements can be an additional cost, it is necessary to have the proper framework in place to obtain the full benefit of direct marketing.

While those are two of the largest pieces, there are a few more things to recognize. Tracking and reporting, for example. Less than 1 percent of lenders perform accurate analysis on their own, which can significantly impact direct marketing performance. This is a powerful tool, so a business can determine what’s working and what isn’t and improve upon the parts that are not.

Lenders are busy lending, so a strong suggestion is to outsource to experts in the direct marketing field. Preferably to those who have a long, successful track records and have shown they know how to identify and effectively change what is and isn’t working.

So, if maximized revenue, larger pipelines, and improved operations aren’t enough for a company to add direct marketing to their advertising campaigns, then there is the one final consideration of “scale.” There’s no other channel that comes even close to the scalability that an effective direct marketing campaign provides. The universe of options to choose from when targeting potentials becomes almost infinite. Improved targeting equals more relevant audiences and higher response rates. The more targeted and precise a database is, the more profitable direct mail marketing can become.

It’s important, however, to consider that results from direct marketing vary among different types of lenders. The charts on display at Lending Science show direct marketing results in business lending, consumer lending, and mortgage lending for the previous month. These results show accurate averages of each overall group’s results. Something necessary to note is that even if direct marketing proves to maximize a business’s lending game, the results on cost-per-funded loans depend on your team’s ability to execute on the highly qualified prospects that direct marketing delivers.

Author:

Pablo Gonzalez is marketing coordinator and account manager at Lending Science DM.