To attract new customers, much of the time, you must make an investment. But every brand wants to minimize this cost while also receiving the kind of returns expected. You can determine what you’re spending to gain new customers with the metric customer acquisition cost (CAC).
What is Customer Acquisition Cost?
CAC has become a buzzword in the world of marketing. The desire is for CAC to decrease over time based on analysis and strategy. Calculating CAC is fairly simple:
(Total Cost of Campaign) ÷ (Number of New Customers Acquired by the Campaign)
Thus, if your campaign cost was $5,000, and you converted 200 new customers, your CAC is $25.
While you may think the cost is too high to pursue direct mail at this CAC, there are many ways to reduce overall costs and increase responses.
Successful direct mail campaigns have these key components and can help you reduce CAC:
About 40% of the success of a direct mail campaign rests on identifying and reaching your target market. Getting the right message in front of the right people is critical. So, it makes sense to target those that need and have expressed interest in your product or service. Intent-based postal retargeting can be a great prospecting tool with lower CAC.
- Personalization and relevancy
Leverage variable data technology to enhance personalization. Variable Data Printing (VDP) is a method of printing that uses software to personalize each printed piece with unique information from a spreadsheet or database. Use it used to customize graphics, text, or the entire marketing message, so it’s more relevant and meaningful.
Including a person’s name on a direct mail piece can increase the response rate by up to 135%. When additional personalized information is included, response rates can increase by as much as 500%.
- Include a compelling offer
What you offer and what you ask the recipient to do (call to action) also accounts for about 40% of the direct mail campaign’s success. Make your offer exciting and meaningful. It might be anything from a discount coupon to an invitation to your grand opening. A better offer can mean more sales and increased ROI. Also, make sure you have a clear call to action. The action step needs to take no effort on the consumer’s part. As always in marketing… less is more.
- Creative Design
Design — such as interesting imagery, color printing, and typography on the mailing piece — account for about 20% of its success. Whatever you do, keep it simple. You have only eight seconds to capture someone’s attention. Using a combination of captivating images along with copy to tell your story is critical to creating a connection. Be efficient with your mailed format. Postcards, which have a higher read rate than other mail, can be a smart choice. But, be sure to have a partner who understands designing for this format.
- Integrate with Digital and Email Activity
We all know multi-channel marketing works best meeting prospects wherever they are. Don’t forget to include your direct mail in those plans. When mail and digital are combined correctly, brands often achieve increased conversions. A 2019 USPS study confirmed this with 60% of marketing respondents saying combining digital and direct mail increased ROI.
- Test, Test, Test
The final tip is always to set up measurable tests with any program you develop. Ideally, you’ll want to set up a test and control hold-out group. You can also set up split-run test, wherein one group gets one variable while the other gets another. This could be an offer, creative, target type, etc. All this testing will help you set up benchmarks to compare one program or offer over another, delivering insights to help you enhance future campaigns.
At LS Direct we have implemented thousands of direct mail campaigns and amassed a significant amount of data on what works well. Check out a small sampling of our offerings or contact us at 845.357.1238 to strategize on reducing your customer acquisition costs.