But, direct mail gurus know response is usually not their main interest.
They often want to maximize profits on the particular mailing. A mailing
that draws only a 0.8% response might be far more profitable than a response
of 1.5%.
The key factor that makes the mailing getting only a 0.8% response more
profitable than the mailing generating a 1.5% response is the price of
the product. In addition to testing the copy, the offer, and the graphics
of the mailing package, a most significant goal in direct mail testing
is to test the price you charge for the product. Maybe, $50 for the product's
price will maximize profitability on the mailing. But, maybe $100 will
make even more, despite a drop in response rate.
Direct mail marketers test price. You send out 5,000 pieces pricing the
product at $50, or probably $49.99 or some such thing. You send out 5,000
pieces pricing the product at $99.95 or whatever. And, you test a midrange
price by sending out 5,000 pieces, price testing at $75.
It is the response to your price testing that will be used to set the
price assigned to the product when you do the roll-out mailing to the
entire mailing list. Changes in the price often will determine whether
a particular offer is profitable or not for the direct-mail company. But,
what would happen if you sent two different offers to the same customer?
One offering the product for $50 and the other for $100? The customer
would probably order the product for $50! What if the customer had already
ordered for $100 when he gets your piece offering the same exact product
for $50? The customer is not a happy camper anymore. He feels you charged
him more and took advantage of him.
The lesson is that direct-mail price testing works because the market
being sent the promotional pieces is not price efficient. No one knows
what the offer made to the other guy or gal is. You can discretely test
$50 versus $100 and then use the information of your testing to set the
final price which will be used with your roll-out to the entire list.
And, the price chosen will be a significant factor in determining the
financial success of the promotional mailing. Notice how price inefficiency,
or customer unawareness of your competitor's pricing (and even your own
pricing sometimes!), is a key factor in both catalog marketing and direct
mail. [cont..]
Click here to go to part 4, the final one. Wow!
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