TO MAIL OR NOT TO MAIL, THAT IS THE QUESTION!
Before starting any business one would have to create a business plan and within the business plan would be one of the most important parts – the financials, ie. budgeting, cost estimations, projections of potential earnings, etc.
The financials are important because say if you’re going to the bank for a business loan or are seeking an investor, they are going to want to see your financials in order to assess your business’ potential earnings and to determine if it’s worth lending or investing in you.
Business after all is a numbers game and the saying “numbers don’t lie” is so true because in the end your business lives or dies by the numbers.
A direct marketing campaign is no different. Before starting any DM campaign one has to understand the numbers before diving in. If JR Direct were to take on a direct mail campaign for example, we would first discuss with our client the type of mailing they would like to pursue and what their budget is. Then we go to work putting together a simulation of the mailing and projecting what the results may look like.
In general, the numbers we usually gather are all the actual and estimated costs that affect the mailing, ie. artwork, stock, lettershop, lists, etc. Next we estimate projected response rates, this is something that comes from experience and knowing the market. We also determine the average order value which is the amount of money made on the sale of one item. With all these numbers we project our sales revenue, costs and expected profits (or loss). If this is an ongoing program, we can also project cash flow and sales growth.
Projections for any DM campaign are important for any business. Every business should be doing this so they know that at the end of the day whether they can expect to come out of the mailing with more than what they went in with.
There are of course many other numbers in relation to a direct marketing campaign that are good to know, like customer lifetime value, customer acquisition costs, etc. For more on this, please read the following article: http://www.entrepreneur.com/article/227616
