Email Versus Direct Mail: A Head-to-Head Test

The last time I wrote a case study comparing return on investment (ROI) for direct and email marketing campaigns, a reader chastised me for drawing the conclusion email campaigns are always more cost-effective to run (yes, I really do read those messages you send me!).

Now seems a good time to point out a case study is just that — a study of one particular case. I didn’t (and still don’t) claim what works for one company will work for all. That said, here’s another example of how email marketing can save big bucks over a more traditional campaign.

Consider a large company that provides high-end document management software products. The company, which I’ll dub Company ABC, offers software priced at $75,000. It is sold to industries such as insurance, finance, and government.

Last summer, Company ABC wanted to focus on driving leads into the sales process. It had a great deal of experience with direct mail and wanted to test the effectiveness of email marketing. The goal was to compare total cost, initial response, conversion rate, and cost per lead of email to direct mail.

To run a clean test, Company ABC designed identical offers and selected similar target audiences. It used traditional channels on the direct mail piece and worked with Blue Ink Solutions to implement the email component of the test.

Before sending email to the entire database, Blue Ink Solutions conducted a number of tests. An extremely important one tested two subject lines: “Download $1000 Worth of Electronic Forms Design Software” and “Demo the Only Complete eForms Toolkit.”

Before I go on, take a guess at which performed better. Ready with your answer? OK.

The subject line that mentioned $1,000 worth of software had higher open and click-through rates. Not surprising. It’s a sexier come-on. But Company ABC decided to go with the other subject line. Why? Because “eForms Toolkit” generated more qualified leads. Although more individuals clicked through the first message, the ones who clicked through the second message were more interested in actually purchasing the product.

The companies also experimented, among other things, with HTML versus text formats (the HTML mailing had a CTR about 2.5 times higher than the text version). A variety of opt-in lists and vertical markets were also tested.

Now we’re ready for the real test: the actual mailing. Company ABC sent about 90,000 direct mail pieces and about 93,000 email messages. Blue Ink Solutions’s Clint Kaiser notes, “There probably was overlap since we used email addresses from publications that also had direct mail lists associated with them. But we did not specifically look for a list that had both email and direct mail address so we could assure a crossover.”

On every metric, email outperformed direct mail:

• The total cost of the direct mail program, including production, postage and lists, was $153,000. The total cost of the email program, including production, lists and delivery, was $35,837 — a quarter of direct mail’s cost.
• The initial response rate for direct mail was 1.25 percent. The initial CTR for email was 3.72 percent. This translates into a cost per initial response of $80 for direct mail versus $10.31 for email.
• The direct mail piece received 1913 total responses. Two percent converted to leads. In other words, Company ABC received 38 total leads from direct mail. The email campaign had 3,476 click-throughs, with 23 percent converting to leads. Email delivered 800 leads.
• The most important result: cost-per-lead for direct mail was $4,026.00 versus $44.80 for email. An 890 percent difference!

Clint attributes success to several factors, all of which I agree with. The email offer was highly targeted and was tested quickly, inexpensively, and effectively. Because the audience is in the IT arena, it is highly receptive to email offers. Email permits response within the same medium. With direct mail, recipients need a new medium (e.g., the telephone or even a different mail piece) to respond to an offer.

Granted, your company may not have the same experience as Company ABC. As always, you need to consider your audience and offer when deciding which medium works best for you. Often, as illustrated here, email is a clear winner over direct mail.