Episode 74: Unlocking 10% Growth with Direct Mail

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‍Transcript

Announcer:

Welcome to Nerd Marketing, an original podcast for e -commerce operators and marketers looking to level up. Drew Sanocki and Michael Epstein will bring you actionable strategies from their decades of running eight and nine figure brands, along with interviews and insights from the leaders of some of the most successful brands in the world.

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Drew:

Hey, everybody, Drew Sanocki here with the Nerd Marketing Podcast. Today, we've got a really interesting episode. The question that was put to us was how do you increase revenue 10% only through direct mail? So what we set out to do is talk about a specific program you can implement to increase your revenue 10% in one quarter only using direct mail. So it's based on what we've seen work at Dr. Squatch and Hexclad and a couple other big brands. We walk you right through what to do on retention, retargeting, and then maybe prospecting. But I think high likelihood if you're not doing direct mail, this program will get you another 10% revenue in one quarter. So I hope you enjoy it. It's really action oriented. We give you a great playbook, Nerd Marketing Podcast. Thanks.

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Michael:

I think we jump in, Drew.

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Drew:

Yeah, let's get into it. I mean, the general idea here is everybody's complaining about meta, especially after last week. We think CMOs have learned time and time again not to be overly dependent on one channel. So we're going to show you how to build a direct mail program that throws off an additional 10 percent revenue by the end of Q2. 

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Michael:

That's right.

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Drew:

The goal is to make it quick and easy.

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Michael:

Exactly. And to be clear, we're not saying go all in on direct mail and just ditch Facebook or Meta. But what we know is brands do need to diversify their mix because it helps smooth out that volatility that you see in some of your other channels. It's another go-to channel that you can use to close the gap if you're seeing performance erode other places. And you can also get more scale than you would with just Meta or a couple of core channels because there are acquisition campaigns, many acquisition campaigns you can run that are gonna be higher ROI for your next marginal dollar of marketing spent. So once you hit a certain scale as a brand, your efficiency doesn't scale linearly. That marginal ROAS that you get as you keep scaling up your budget declines typically over time. So you need to unlock other channels that are going to get you a higher return on that next marginal dollar. So where do we start to get these to get to start our path towards driving extra 10% of revenue or getting a bump of 10% of revenue through a new channel? Like the easy wins start with just retention. And you know, it's. It's pretty simple. There's this huge swath of your best audience that is not engaged with your emails and digital channels. They're either unsubscribed, they never subscribed, or they haven't opened an email in months. And so you're not reaching them. And so direct mail can help you reach those customers that are not engaging with your other channels and they can get you an incremental lift from those audiences. So this is a brand that tested. And what we'll do is we'll set up different tests, like win back campaigns. We'll break them into all these different cohorts based on recency, frequency, and monetary value. That's the RFM that you see here. And we'll track how each of those cohorts perform when you send them direct mail campaigns.

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And that will allow you to see, okay, how do my one-time customers perform relative to my repeat customers? How do people who haven't bought in six months compare to people who haven't bought in a year or two years? And then you can start to understand, okay, I can actually still be profitable going this far to this particular audience. And so the example that you see here is a brand that tested going back all the way from 30 days of a lapsed customer to what's that, four years, 1,460 days. And you can see that performance essentially is fairly linear in that as you go back in time to less and less engaged people, your ROAS starts to decline over time. But the key takeaway here is they're very happy with like a 2X ROAS on reactivating a customer that hasn't bought in a year and a half to two years, which you see in that 540 day segment.

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So these are people that have been on the email list the entire time, not engaged, not responded. But they're still getting a three, two, three up to 8X ROAS on those audiences that have not engaged for six months back to two years. And so they get these learnings by sending an initial test and then they automate these campaigns such that we're hitting them at these different intervals. Let's hit them at six months. Let's hit them at a year. Let's hit them at two years.

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And they're running those as automated win back flows, just like an email flow. And they're getting this lift off of those audiences that are not responding to email and other channels. And so an example here would be a $10 million a month brand, $120 million in annual GMV. These are actual examples that we pulled. It has about 60,000 customers per month that go beyond 90 days and not come back and buy. They have a $90 AOV. And so getting a 5% incremental conversion rate from targeting these defected people that otherwise are not coming back to buy gives them about 270K extra dollars per month, which represents about a two, over two and a half percent lift to total monthly revenue. We follow that, Drew?

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Drew:

Yeah, I think the important thing on retention, I guess some people will say like, well, why can't I just do this in email? Why can't I just, you know, email previous buyers going back three, four years with the same offer and get the same results? And I think that the reason is if you look at your data and we've got a number of posts up on this, go into Klaviyo, go into MailChimp, whatever you use in mail, look at the number you're going to look at your total a number of previous buyers and then look at how many are actually opening your emails and you'll find that maybe 10% of your whole group of previous buyers going back the two or three years, maybe 10% are opening your emails now. Most, the other 90% have unsubscribed, never subscribed or are not opening your emails. So that's why you can't, you know, the temptation would be just to do this in email. But if you do it in an email, you're only hitting about 10% of the opportunity. It's going to be different for each brand. But I would encourage you to look in Klaviyo, see how many people are actually opening your emails over the past 90 days, what percent of your previous buyers, and it's a lot lower than you think. Only direct mail allows you to go out with 99% deliverability to all your previous buyers because you don't require the opt-in. So that's sort of the magic. Yes, it's more expensive to send out the campaigns, but if you got, but an ROI is an ROI. So in this case, what Mike has shown you is, you know, pick your ROAS, pick your cutoff, whatever works for your brand. Eventually, you know, you run one campaign like this, you go way back. You're going to figure out where the threshold is, where you no longer have to go beyond that. And then you just automate everything else. And in this case, they got a 5% increase in revenue.

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Michael:

Yeah, that's exactly right, Drew. And to be clear, to emphasize Drew's point, these customers have been on the email list the entire time for years and not responded. And then they get a card and they respond. So in other cases, because of our native Klaviyo integration, we can actually filter out people that are actively opening all your recent emails so that we don't even send them a card at all. But that's the point is that clearly these are people that aren't responding to certain channels and so it's truly incremental when you hit them through direct mail and get them to convert. Top use cases here for these types of retention campaigns or win backs like we showed before, cross-sell. So you bought pants, wait 60 days, sell them the shoes, sell them the shirt. And VIP campaigns. So targeting folks that are previously, big, loyal customers, but haven't come back in a while. But a new feature that we just launched is actually birthday cards too, which is we actually can get the birthdays of about 90 % of your customers, even if you never collected that information. And that's been a killer use case that we've seen more and more brands using. We'll send them a birthday card in the mail with a thanks, happy birthday, maybe a special birthday incentive has been awesome.

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Drew:

It's just to be clear, we can provide the birthdays for you, which is kind of freaky, but you don't need to have the birthdays. I think we've got some data sources that have birthdays in there. So just a way of enriching your own data and triggering it. Just another good excuse to contact a customer.

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Michael:
Yeah, exactly. This is a plan for one particular brand that does about eight million bucks a year. So what's that? A little under seven million in monthly revenue. And this is just turning on a handful of those WinBack automations based on recency and frequency. A couple of key points in the overall customer journey when we've shown them to be highly defected. This is just a handful of like core basic retention campaigns. And that gets them to about just under 60K a month in incremental revenue that they based on some conservative projections around ROI, which represents what's that out 8 % lift in just a handful of core retention campaigns. So you think, ah, it's retention. You know, maybe it doesn't move the needle a whole lot. It actually can with a handful of basic things.

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Moving up the funnel a little bit, Drew. We're going to acquisition, but we're not starting with cold acquisition, with cold prospecting. We're starting with warm acquisition, which is more retargeting. So another interesting thing that we can do, Drew, you mentioned how we find birthdays for about 90 % of customers, even if the brands don't know that information or capture that information. We can actually find postal addresses for about 70 % of your email subscribers who never bought anything from you. So you don't know their address because they never bought anything. They never entered their address. All they did was give you, they signed up for your email list. That's called MailMatch. And then with SiteMatch, we can find postal addresses for about 30% to 40% of your anonymous website traffic. So people that are browsing your website don't opt into your email list or buy anything from you and leave without buying anything.

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And so a couple of, it's warmer acquisition. So again, you're going to people who have shown some level of interest with an engagement with your brand. Clearly they've come to your website because they found out about you somehow and they have some level of interest in what you're offering. So they're not totally cold. And that's where you're going to get a bit higher conversion rate, a bit higher ROAS on these campaigns relative to typical ROAS on cold prospecting campaigns and it's just another easy win where with MailMatch, for example, they go through your email welcome sequence. They sign up for your list. They go through your whole automated sequence. 

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Let's say that in the sequence of seven days you hit them four times with email over seven days. They still haven't bought by the end of seven days. They're getting they're becoming increasingly less and less likely to ever to ever buy anything from you by the end of that sequence.  How do you get them off the fence? Well, you can target them with a card at the end of your welcome flow and say, they still haven't bought, let's send them a card, see if we can get them off the fence. $6 million a month brand, so about $70 million GMV, sending about 600 of these cards a day based on a couple of activities. They've gone through your welcome sequence and never converted, or they've abandoned their shopping cart and never converted. So they've given you their email, they've engaged with you, you've tried to convert them over email multiple times, they haven't bit. And so how do you ultimately get them across the finish line, target them with the card. This brand was converting about 2.4% of those people after they had already tried to convert them over email, represents an additional 100K a month, which is just under 2% in revenue for them. And so with SiteMatch, a bit lower conversion rate because it's a little bit colder than someone who gave you their email. All they were doing was browsing your site. So a bit lower conversion rate, but still positive ROAS, extra $50K a month, spending about $500 a day. You can cap your daily spend for SiteMatch and say, I only want to spend up to $100 a day or $200 a day or $1 ,000 a day based on the amount of traffic your website gets.

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And we can further refine those audiences based on other types of engagement with your site. They only viewed a particular page on your site, like your category page, your product page. They only viewed a checkout page. We can apply all those rules. We can say they have to have spent a certain amount of time on your site. And then we can say, how much do you want to spend a day targeting those people? And that got an extra one and a half-ish percent revenue lift for this particular brand that does about $50 million a year at another point and a half of revenue just on this one campaign.

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Drew:
I love it. Retargeting with postcards. An ROI is an ROI.

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Michael:
That's exactly it. And it's incremental revenue. It's stuff that you're not getting elsewhere. We've already gotten to just about 10 % of revenue just off those couple campaigns targeting these warmer audiences of customers or prospects. We haven't even started talking about cold acquisition. And that's really where you can, you know, sky's the limit here because it's a scalable channel. We build lookalike models. We find people among all the US consumer households, over 250 million of them that look like your best customers. You can test into this and test different, just like meta. You can test different creative. You can test different audience targets. And we can scale the ones that work, just like Meta. So we learn from testing a couple of these variables. Then we can scale, and there's a lot of people. that are going to meet the criteria that says these look like your best customer. So you can start to really scale that.

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So a couple of variations of this cold prospecting that we do are these AI lookalikes. So think Meta, you know, lookalike prospecting where we find people that look like your best customers and then can send them a card or our Cardalog, which is our, a version of a, you know, a mini catalog that we do. It really allows you to show a large assortment of product. It allows you to tell your brand story, show lifestyle imagery. It works really well. And conventional wisdom suggests that showing more assortment to colder audiences helps with conversion rate. But we test that. We can test that against the postcard and say, what's going to deliver the best ROI? That's one of the benefits.

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And so we target these lookalike audiences and we can also target people based on very specific behavior. For example, with a brand like Caden Lane, a baby brand, we can target expectant mothers based on where they are in their pregnancy. Cause we even know the due dates of these expectant moms and can say, we want to target expectant moms in their third trimester. We want to target new moms who just had a baby within the last three months or have multiple kids in the house under three.

So we can do that. We can target people who just moved. We can target people who just got engaged, who just got married, who like all these major life events, as well as a lot of different propensity data. Like we know that they shop in Target. We know that they buy organic products. We know they shop for meat jerky. We know they buy, you know, craft beer.

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And so we can combine the power of our lookalike models with a lot of these other attributes and get some really powerful cold prospecting that is scalable and pretty predictable. Because once you see the results with that audience, you can scale into it and expect generally a pretty consistent level of results as you continue to expand.

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Drew:
Yeah, I think of this as like Facebook plus or Meta plus. Like Meta, we do a lookalike. But the plus comes in with traditional direct mail attributes. They're about a thousand, Mike mentioned several of them, that you can layer on top of the lookalike to get even better.

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Michael:
And again, are we saying this should replace all of your Meta-spend? Nope, not for most brands, but is it another predictable, scalable channel that can drive incremental growth, profitable customer acquisition for many brands.  And it's not a fit for every brand either. If you've got $20 AOV on some generic food item or something like that, it might not be the best fit for you, but we're gonna tell you what we think is, if you're a good fit for this, we'll run some models and tests and say, like, do we feel confident that the model is gonna deliver a pretty good result for you.

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All right, so all these campaigns that we've talked about should essentially be automated. They should be running every month, in the background a lot of the times, like it's automated flow. So retention campaigns, winbacks, should run just like your automated email winback flows, where they're literally running in real time. Like we are not batching a bunch of cards and dropping them in the mail once a month, they're literally being triggered one at a time every time a customer meets that criteria that you set, just like an email flow. And one card gets fired off in essentially real time and goes out that day to that person. So those are these campaigns that are always running as evergreen flows in the background, your retention campaigns, your retargeting campaigns, like SiteMatch, like MailMatch. Every time someone meets that criteria, we're dropping a card right then and there. With lookalikes, that also is something that we can run it that does get batched in, you know, it doesn't run one card at a time, but we're running them for a lot of brands like on a set schedule. So every month or twice a month we're coming up, we're getting a new refreshed audience for that and dropping those on a, you know, on a consistent basis. And then you've got this, the one-off opportunities that you use to supplement those automated campaigns.

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So what are those like? That's like every major holiday, Mother's Day, Valentine's Day, Fourth of July, anything that's relevant to your brand. Those are times where, one, you want to get that offer and that message out to the maximum number of customers and prospects you have. And if you're just going to do it through email or digital ad, you're not doing it. And second, those are typically times where ads get more and more competitive, because everybody's got the same idea, right? There's a million brands that are trying to compete for moms over the Mother's Day period, and that drives up cost. Postage cost doesn't change, so it gets even more attractive to hit these customers and prospects with direct mail around these big peak buying periods, because the price doesn't change just because of who you're targeting or when you're sending it. 

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Drew:
That used to happen to us, especially around Black Friday. All of a sudden, you're bidding against Amazon, Walmart, all the big consumer goods companies kind of roll in hot with big budgets. So you see the the prices go through the roof on Meta.

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Michael:
Exactly. You want to drop a new product launch. Same thing. You want to get that message out to as many people and customers and prospects as you can. New collection launches for your apparel brand, new product launches for your skincare, your cosmetics brand. Get that out to as many people as you can. And then of course, like over peak, other peak periods, Black Friday, Cyber Monday, when things get real competitive and you've got big offers that you want to make sure get to through to everybody. And people are getting bombarded by emails around those periods too. So they're just getting ignored.

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So that's how you get to 10 % plus in total revenue, incremental revenue for your store using really a handful of pretty simple campaigns. And we'll set them all up for you. Like you don't have to really do any of this yourself. We did the creative for everything you've seen. I think everything you've seen in this deck, our team did the creative for.

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We set all the segments up, we set up all the automations, we can do all that stuff for you. So it's not a heavy lift on your team's part either. It's just basically, here's the general offer, here's the thing that we want to promote. You guys put some creative together and propose some target audiences and we'll just give you the thumbs up.

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Drew:

It's all of, I would say, four to five campaigns. Four to five campaigns. All you got to do is reach out to PostPilot. If you go to our site, postpilot.com/meet, you can schedule a demo with someone on our team. We can show you those campaigns. We can look at your data. We can estimate how much we could move the needle for you based on your own data, which is kind of interesting in what your ROIs would be.

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And as Mike said, our big goal is to make it fast and easy. So it's like one, one phone call, two phone calls, and you can have your, your direct mail channel unlocked and hopefully get five to 10 % additional revenue within short order. 

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Michael:

And if you already are a PostPilot customer and you aren't doing some of these things, just reach out to your account manager, reach out to me or Drew, and we'll make sure that we get you set up with the right strategy that we think is gonna be ideal for your brand.

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Announcer:

Thanks for listening to Nerd Marketing. Don't forget to check out all of the other great episodes, some of which include interviews with e-commerce marketing masters working with Mr. Beast and Joe Rogan, plus Drew and Michael's experiences in private equity, advice from VC firms on what they look for in investments, and so much more. Like, share, subscribe, and tune in every week for a new episode.