Direct Mail Marketing Tips – Part Three of Three. As seen in National Mortgage Broker Magazine
Defining ‘Correct Estimation of Effort’
What is the correct estimation of effort for your marketing? Do you know the answer to that question? Figuring out what it is for your business is relatively simple once you’ve done some test mailings. For most business owners, mortgage brokers included, marketing is about as clear and certain as being blindfolded in the middle of a six lane freeway. Because of this they make assumptions that are way off base in the areas of how much to spend and how much to mail out. There is a mathematical formula that I have discovered that works through and through. When you use it, you will never be in the dark again.
I remember a time in my business where we were sending out 2500 postcards per week to our prospective clients. We did quite well – until we hit a plateau. A plateau that was totally frustrating. We wanted to grow and were beating our heads against the wall trying to figure out why, no matter how hard we pushed, we were not able to push up to the next level. Then, one day in a fit of thinking-outside-the-box passion, my execs and I decided to double the number to 5000 per week! That simple action burst us through that seemingly impenetrable barrier and my company has never quit expanding since.
What I learned in that instance was something very valuable. I could determine the correct estimation of effort of my marketing to control how fast my company expanded. I learned how to project the amount of income I could make by testing and tracking my postcard marketing. Then I figured out what I needed to do to get more leads and more closes based on my tracking results. So, by tracking the number of leads, how many of those leads closed and for what dollar amount they closed for, I was able to ascertain the future number of leads, the future closes and the return on investment (dollar amount) for each increased postcard mailing. It became a science and that science has paid off. (By the way: My company now mails out 76,000 postcards per week.)
How It Can Pay Off For You Too
It is a fairly simple mathematical formula:
Ø Start by figuring out what your monthly gross income is or has been for the last several months. Let’s use $100,000 as an example.
Ø Then target out what amount you’d like it to be at. Be realistic. For starters, in this example, we’ll go for $150,000.
Ø Then determine the difference between your targeted and actual gross income. This is the amount you need to bring into your company with your direct mail campaign. For instance, in this example that we have been using, we need to create an additional 50G’s a month with our marketing campaign.
After you see how much income you need to create with your marketing campaign, you now need to start your direct mail testing methods. I recommend doing a test mailing of 5,000 postcards and then track your results.
How many calls came in? How many mortgages did you close? What was your gross income from these sales? And what was the average commission amount? $1,000? $2,000?
It’s a fact of life in the marketing world, that test mailings are important – very important. You have to be willing to spend some of your dough to see what will work and what won’t.
Novice marketers give up the minute their mailing did not go as they expected – and quite frankly, what they expected was not realistic. You cannot count on total abundance in response where you are just starting out. You may rocket there, but you have to be able to maintain it. Marketing is a game of gradual increase, if you do it right, by testing and tracking all along. That way you don’t go into overwhelm and are able to organize your business structure as you expand from the constant new, but gradual business.
Okay, Time to Track Results
All right, you’ve started testing. Now you need to track. Let’s take for example a situation in which you decide to start a Postcard Marketing Campaign for your business. The first week you sent out 5000 postcards. When they started hitting homes you received 50 calls. Did all of these leads come from the postcards? Probably not. Because the week before you got 8 calls and hadn’t sent out any postcards yet. So how can you tell who actually got a postcard?
The Answer: All you have to do is ask them. "So how did you hear about our company?" The hard part is making sure that any employee in your company who answers the phone and may talk to a new prospect remembers to ask the question every time. The fewer prospects who answer this question, the less accurate your information will be when making future marketing decisions.
Now let’s assume that you have been sending out postcards weekly for a while and you have a good number of calls coming in day after day. If you ask the question "So how did you hear about our company?" they may respond, "I got your postcard in the mail." But, by now you have mailed postcards to 4 different lists, 3 times each. How do you tell which list and which mailing this customer was from?
The Answer: Put a marketing code on the postcards that will tell you which specific postcard they received and when it was mailed. Example: LISTA102005
In the example we used above, ‘List A’ worked the date into the marketing code. Then the only other thing your representatives have to ask is "Would you mind reading me the marketing code above your address?" This code should give you all the info that you need to know and help you keep your Marketing Results Tracking as accurate as possible.
How Do Others Track Their Mailings?
You can get as sophisticated at this as you want. Or you can keep it really simple.
One of my clients tracks their mailings by simply having the receptionist ask the ‘how did you find us’ questions before routing the call to a sales representative. The receptionist keeps a neatly hand-written log in a notebook.
We do it in a spreadsheet format simply because we’re mailing several designs to several different mailing lists.
Either way you do it, you have to find out 2 things:
Now, Determine How Many Postcards Need to Go Out in Order to Make Your Gross Income Target
This is the fun part. It is where you figure out what you need to be mailing to hit the income target you have set for yourself.
First determine:
Ø How many sales you will need to make to make your target. Example: At an average $2,000 commission per sale, you’ll need 25 more sales per month to make an extra 50 grand.
Ø Then: How many postcards does it take to make one sale? Take 5000 divided by the number of sales you closed when you mailed out 5000 postcards. Perhaps out of 50 calls only 25 were really good leads and maybe only 5 closed. So, if 5000 cards yielded 5 closes and 5 closes yielded 10G’s…well, you figure it out!
Ø Now multiply the number of sales you need by the number of postcards you need to make those sales.
This is where most people start to recognize that they have had no budget for marketing. They have no set asides or reserves to pull from in this area. Most times when they think of promoting it is because they aren’t making enough money. What a Catch 22! I can tell you from hard-won experience, the wrong thing to do is not promote. Find the money to promote and then figure out how cut back on your expenses – not the reverse order. A renowned philosopher, L. Ron Hubbard, taught me that. He was a genius when it came to business-sense. In one of his principles he states that if you want to reverse declining statistics or unchanging statistics, the first big broad action you take is promote!
What Percentage of Your Income Needs to Go Toward Marketing?
So now that you have figured out how many postcards you need to mail out to achieve the income that you have envisioned for yourself, you need to put that expense into your budget.
Ø Find out the cost to mail the number of postcards you concluded above. Usually it averages about .30 per card, including the postage, depending on the quantity mailed.
Ø Take the number of postcards you need to mail and multiply by .30, then add this to your current marketing budget.
Ø Then take your new marketing budget and divide by your current monthly gross income. This is the percentage of your monthly gross income that you need to spend on marketing each month!
A Little Business Advice
I have built my company using this mathematical formula from the moment I discovered it. Please don’t get overwhelmed by all of this. If you heed my advice and implement what you’ve learned here you will grow your business. Unfortunately, at times we make things more complicated than they have to be. The only ‘complication’ in all of this is not in the formula, but in the ability to carry out the actions needed to achieve success once one sees what needs to be done.
Now, some of you may not even have that amount budgeted – especially if you’ve never mapped out a marketing budget. In that case, you are going to have to get there by a gradual approach. Pick an amount to spend on marketing that you can do – push it a bit, but make it workable. Then raise it each month until you have reached the goal that you originally set for yourself. Persevere and ignore any trepidation.
Remember: Promote first, economize later. In fact, just so you have the full story, there are 4 remaining steps that Hubbard said to take which I have used each time I have hit a new plateau or had either a slightly declining or unchanging situation:
2. Change your operating basis.
3. Economize.
4. Then prepare to deliver.
5. Stiffen discipline.
If you look at #2, (after you have started the #1 step of promote), take a look at what you need to change. If you haven’t been promoting, promote. If you don’t have a budget, get one. Whatever change you need to make, first you need to identify it so you can recognize the reason you started just coasting or falling instead of expanding. And then you’d better prepare to deliver to all the new influx because once you do those first three steps the business will start rolling in. After you do all this, there is one last step: Stiffen discipline. If you don’t do that you will wind back up where you started – declining or unchanging.
To Recap:
You need to do,
These things work like magic. But you have to find out for yourself. I can only tell you what I found out, what worked for me and every company that I have helped grow. I didn’t make it where I am now by doing something else.
I leave you with a challenge: determine what your ‘Correct Estimation of Effort’ is for your company, grow your company and move out from being pedestrian into being what you were meant to be – prosperous. And if you want more information on the above business principle, email me and I will see that you get a booklet explaining it in detail.
P.S. You can go to my web site and get the ‘Estimation of Effort’ Worksheet to easily start calculating your marketing budget.
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