Does Postcard Marketing Work?

The question of how to grow a business is one that nearly all of our clients ask themselves on a regular basis.

Very few businesses can survive for long if they aren’t growing because costs never stop rising and there is virtually always attrition in sales no matter what you are selling.

So some amount of growth is necessary just to stand still. And most small business owners are looking to do more than stand still.

It’s also a question I ask myself frequently, since I too am interested in growing CapForge well beyond its current size. The basic response to the question is usually in the form of your choices for growth:

• Sell more of the same to existing customers
• Sell new things to existing customers
• Add more customers

For us, I think we are doing the first two pretty well, although of course there is room for improvement. But I want to focus on the third option for right now, and so then the question becomes: what is the best way to add more customers?

How to Get More Customers

For our business, there are really only a few viable ways to get new customers:

• Referrals from existing clients
• Referrals from related service providers
• Online searches
• Direct mail

We do pretty well with the first and the third ones listed. We’ve tried paid search, but there just aren’t very many searches for our service online and we didn’t have much success using that channel in terms of ROI. Too few searches and lots of competition equals high cost per click and high per client acquisition cost.

By the way, knowing these numbers is critical to be able to evaluate your marketing and knowing which is working, which isn’t and what to do more of and what to stop immediately. But you already know the importance of quality bookkeeping, right? 🙂

We could be doing a better job at acquiring more referral partners for related service providers and I aim to spend some time there as well. The drawback to this channel is it takes a lot of time to develop these relationships and you never know how they are going to pay off until way down the road.

So that leaves the subject of today’s post, direct mail- specifically postcards.

Wait, what about other marketing, like cold calling and door to door soliciting and sky writing and all the other things?

Well, tried cold calling- didn’t work. I haven’t tried soliciting, but ADP makes it work and they are a billion dollar publicly traded company. I have it on the list. Other forms of marketing don’t seem too likely for what we do so I haven’t tried them yet. But I’m open to ideas.

Going With Postcard Marketing

OK, back to mail. I like postcards because you can include a very simple message, no letter opening required, and the offer is right there. I am not going to sell anyone directly, with any kind of correspondence, so why write a long letter to get them to call if I can get the same result with a postcard?

Actually, I’m not sure I can- I really need to test letters vs. postcards, but for now the economics say start with postcards.

The next step is getting the list. I sorted through all my current and past clients and started with those types of businesses. To that, I added similar profile businesses who would make good clients.

Then I got a list of those business types in my area from infousa.com that have opened in the last 3-6 months. Long enough to know they need to do bookkeeping but early enough they probably haven’t stared yet or found someone to work with.

Again, I know this because I know my clients. If you don’t know your clients it i hard to figure out how to market your service or product without a lot more trial and error.

Next I got an actual postcard design from Fiverr.com. I did an initial “this is about what I want” design myself then sent it to an actual designer to get it in print ready shape. Then I ordered postcards from gotprint.com.

I am going to be mailing 2,500 at a time, and I’ve committed myself to do it every month for a year. Each business will get 3 postcards, one month apart, so at the end of the year I will have mailed 30,000 postcards and hit 10,000 individual businesses.

But will it work? First, like I mentioned above, you have to define “work”.

Economics of Postcard Marketing

The cost per month for me to mail is about $1225 or almost exactly $.50 a card once all costs are added in. These are for larger 6×9 inch cards, by the way. I want them to pop and the extra cost for printing and mailing is minimal compared to the cost for mailing much smaller regular size postcards (but I should really test this, too).

The average new client first year value is $1,700. That means that if I get one new client from a single mailing, I have covered the cost of the mailing although I will have lost money overall for the first year (because of the cost of providing the service to that new client is more than the $475 that would be left after paying for the mailing). With two clients, the effort was break even  and anything above two I am making money.

That would be a response rate of .04%. The very general ballpark figure for postcards mailed to a non house list (meaning not previous clients or leads you already gathered) is 1.0% or 25 new clients from the list of 2,500 names.

Therefore, this is a pretty low risk trial since in order to recoup the investment I need only a very tiny response rate because the value per client is fairly sizable. Anything above a tiny response is then profitable and the most likely outcome. Sounds like it works.

In a previous single mailing I did, I ended up with 6 new clients from a mailing of 2,500 names, or a .25% response rate. That mailing was less successful than it could have been, however, for a couple of key reasons:

• The list was unverified, so I think a good chunk of the addresses were probably undeliverable or no longer valid
• The business types were not as carefully selected for the ones to be most likely to respond

My hope is that with a better list, and three times the exposure per potential new client, my aggregate response rate will actually be close to 1%. Over the course of a year, that would give me 100 new clients (1% of 10,000 businesses). I only need 24 new clients to cover the entire year’s effort at full break even (and really it is less since most clients remain past a year even a smaller response rate could still ultimately be profitable).

And as an optimistic entrepreneur I am of course hopeful I can reach even higher- a 2% response rate would be 200 new clients in a year and not at all an unachievable result.

The other factor to keep in mind is each new client is also a potential source of referrals to other businesses as well as other business owners. So the actual first year client value is really higher than the amount of billing they provide.

And in the bigger picture, putting your name out in front of 10,000 business owners three times each is probably going to boost general name recognition and referrals among people who didn’t get a mailer when they speak with people who did.

I’ll come back to this and update once there is some real data to report but as of right now I am definitely looking forward to boosting our growth some with postcard marketing and I’ll be able to recommend it to some of my clients as well who would seem to be a good fit for the same model.