How to Plan Your Direct Mail Budget

“Money, money, money—must be funny, in the marketer’s world.” Like a captivating ABBA song, direct mail is beloved for its high response rates, impressive return on investment, and most importantly, its budget flexibility.

However, one question lingers for those who are new to the channel: how much does direct mail cost? In this article, we’ll explore ways to plan your direct mail budget and maximize its potential.

How Much Does a Direct Mail Campaign Cost?

While direct mail can be costly due to data, paper, print, and postage costs, it’s also highly effective for customer acquisition and generating a positive ROI. With the right approach, this channel can deliver quick results and exponential growth, far outweighing the costs.

For a test direct mail campaign, the cost can average between $75,000 and $300,000, depending on your campaign goals, package complexity, and size.

Direct mail costs are often calculated using cost per thousand (CPM). It’s a straightforward method of determining the price of a campaign. You simply divide the total direct mail campaign cost by 1,000. Direct mail CPM can also be used to compare costs with other marketing channels.

The average Franklin Madison Direct client has a direct mail budget of $1.14 million a year. Our industry research shows 41% of DTC brands have an average direct mail CPA of $150.

What Affects the Cost of Direct Mail?

Postage Costs

The price of postage can significantly impact campaign costs and is not a fixed amount. This rate changes frequently and is determined by the size and weight of the mail piece and volume. To view prices for first-class mail, priority mail, and international mailings, along with extra services and fees, visit usps.com.

Standard class, or marketing mail, is a discounted pricing tier exclusively available to direct mail service providers and commercial printers. It is a great choice when sending more than 500 pieces and looking for significant discounts. On the other hand, first-class mail is more expensive—but it provides rapid delivery, priority processing, and precise mail tracking.

Printing Costs

Many small details can alter your printing costs to a considerable extent. Factors that affect these costs are page count, paper size, paper stock, ink, number of sides, number of elements per side or page, colors, color density, coating, finishing, and binding. The actual cost of printing can also differ from printer to printer.

Extra costs are involved when using variable printing data (VPD). VPD allows you to swap the design and copy elements of your mail piece from one contact to the next to deliver a unique and personalized experience for each person on your mailing list.

Mailing List Costs

When acquiring mailing lists, the costs differ based on your direct mail marketing objectives. There are also several data sources available. If you want to save on costs when targeting your existing customer base, you might choose to employ first-party data (leads, cancellations, cross-selling), personas, or demographic data.

To expand your database and get new leads, partnering with a data broker to rent mailing lists is in your best interest. Lookalike and persona data have superior targeting capabilities, allowing for more intricate audience segmentation. Rates depend on the quality, the number of records, and the number of times you want to use a particular list.

Creative Costs

Pay structures for creative services vary significantly and depend on factors like project scope and timing. Many agencies charge an hourly rate, which includes creative strategy, copywriting, and design. If you hire freelance designers/writers without an agency, it could be even less depending on what the freelancer charges based on their experience and whether it is or isn’t a rush job.

At FM Direct, we charge per project type rather than hourly. In general, creative is roughly 10% of an overall campaign budget. Remember that there are variations in rates, and you should engage with vendors early on to ask clear questions about what the agency or individual considers when determining rates. That way, you can plan your budget and project requirements accordingly.

Agency Costs

Working with a direct mail partner will incur additional costs that you wouldn’t have if you were to carry out the campaign in-house. However, such partners will help you make the most of your budget. They take care of every aspect of the campaign, from planning and targeting to execution and analysis.

Keep in mind that different agencies have different payment structures. Some require upfront payment, charge hourly fees, or operate on retainers to ensure they are paid, even if you are not mailing. Others maintain low fees and have a cost-per-piece model tied to the program’s success. Some even allow your campaign to generate sales before your final balance is due to help with your cash flow.

If you’re in the market for a new direct response partner, download our free checklist to find the right agency for your brand and growth goals.

Digital Integration Costs

91% of marketers believe integrating direct mail with digital marketing positively impacts campaign performance. The cost of doing so is subject to the scale of the campaign, target audience size, and level of customization required. For example, a complete omnichannel campaign with TV, digital, and print deliverables, three creative concepts, and a tight deadline will cost much more than a project with a single mail format and coordinating digital ad.

Methodologies like Surround involve both initial setup costs and ongoing fees. The initial setup costs can encompass software implementation, data integration, and creative strategy/personalization. The ongoing operational costs can include data management and program monitoring expenses. These recurring costs are essential for optimizing the campaign over time, and despite the investment, FM Direct clients leveraging integration report reductions in CPA by 30% or more.

Ways to Maximize Your Direct Mail Budget

Now that you understand the factors that can affect your direct mail budget, here are tips for maximizing it to get the most out of your campaign.

• Use Targeted Mailing Lists: By utilizing defined audience segments and lookalike modeling, you can ensure that your mailers reach consumers who are most likely to convert.
• Test Regularly: Testing elements of your campaign helps determine what resonates best with your target audience, allowing you to avoid wasting money on what doesn’t work.
• Integrate Direct Mail with Digital Marketing: Digital integration tools, such as Surround, help you maximize your impact and reach.
• Start with Shared Mail: To optimize CPA, consider starting with a shared mail campaign for cost-effective testing. Then, transition to a solo mail strategy to enhance scalability and gain greater control.
• Performance Monitoring: Direct mail campaign analytics allow you to make educated decisions about future campaign strategy.
• Try Bulk Mailing: Since the volume of mailings significantly determines direct mail pricing, bulk mailing can help you run a cost-effective campaign.
• Partner with a Direct Mail Agency: Look for experienced partners with the expertise and resources to plan and execute a successful campaign within your budget.

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When planning your direct mail budget, remember that there’s a careful balance between risk and reward. Before launching into the channel, conduct thorough research to determine whether direct mail is the right fit for your brand and ensure that you have the budget to achieve the desired results.

At FM Direct, we prioritize transparency and openly communicate pricing with our clients. Contact a FM Direct Strategist today to start the conversation.