While we are big fans of digital and email marketing, traditional advertising in banking still has its place. Being quantitatively inclined, one of the easiest traditional advertising methods to track is direct mail. Next to email marketing, direct mail also has one of the best returns – better than digital, social media, print, radio and TV. Today, we present our data on our direct mail efforts with the goal of helping all community banks improve their marketing effectiveness.
For starters the average response rate for community bank direct mail pieces is between 0.3% and 6%, with an average of 3.4%. When banks mail to existing customers, the average response rate is approximately 4.4%, while mailings to prospects are closer to 1.2%. If you include the cost of time, design, mailing list management, postage and execution, the cost per lead for banks works out to between $19 and $55 per lead, or about $169 per sale. Depending on how and what you are marketing, return on investment varies from negative to 900%. Commercial loan marketing usually dominates the higher end of the return spectrum. Not only does marketing to C&I and real estate customers have a higher lifetime value, but their response rates are usually two to three times better than retail.
Ways to improve return
We have looked back over more than 200 campaigns and highlight what has worked the best and some tips that we have learned:
Forget about buying a mailing list – We have done this a handful of times and it rarely works out. The best lists are those from your own staff.
Get Lumpy – Put a promotional item (pen, money clip, customized Post-It notes) in the envelop and response rates increase. In addition, if nothing else brand awareness will increase with the promotion. One of the best ones done was a “To Do” list on a 3x5 Post-It note with the bank’s name and number on it. While the promotion it was used for was a bust, customers commented on the fact that they loved the idea and often asked for more. If your item is not “lumpy” then at least mention it on the outside of the envelope.
Have a clear promotion and put the proposition up front – waiving fees, offering something free, or promoting a bundled service at a discounted price increases response rates versus just informing customers about a product. The value proposition should be right up front, with a clear call to action in a couple different places throughout the mailer.
Give Information – Include some form of valuable content and response rates will increase. Tax strategies, business valuation statistics, calculation matrixes, white papers, learning guides, home price changes and other ideas have all been successful. The more value your bank creates, the more the consumer or business will give your product consideration.
Get creative – Witty copy, bold designs and timely information all help with getting a positive return on investment. Think like Don Draper in Mad Men and watch your response rates increase. One of our favorite direct mail pieces was done by Carolina Premier Bank ($249mm, NC). They created a paper wallet with a $10 gift card inside asking recipients to return the wallet to their nearest branch as if was a lost wallet. Amazingly, 60% of the potential customers came in to learn more about the bank.
Use a real stamp instead of bulk postage – In short, the more effort it looks like you put into the mailing, the better the response rate. We once handwrote a sample campaign and got a great response in our test, but it was not time efficient. We have also tried services such as MailLift that hand writes notes for you. However, at $9 per letter, it is only justified for the most valuable promotions to the highest quality lists.
Customize whenever possible – the more you use the target’s name and background the more effective the response will be. Show that you know their name, their business/household and something about them (size of business, for example) and response rates will increase.
Partner – Since the quality of list matters, doing a joint promotion with another company is a good way to cheaply increase effectiveness. For example, team up with a marketing or technology firm that will give away or discount a selected service in exchange for opening an account is an example how both parties can benefit.
Letter or Postcard - While letters tend to have a better response rate, postcards are cheaper and can be more eye catching. For events, products such as health savings accounts or other easy promotions, postcards garner the best return. For more complicated loan sales, use an odd sized envelope to jump return rates.
Test, Test and Test – You can never improve unless you know what works and what doesn’t. While it takes extra time to track and monitor a campaign, it is well worth the effort. Do a series of small batch mailings each with something different and then see which ones have the best response rate. Sometimes it’s a different offer; sometimes it is different colors, but usually mailing response vary. Throw away what doesn’t work and refine the approach that works best.
If you are not prepared to do some of the above, are advice is to skip the direct mailing because you are unlikely to get a positive return on your marketing investment. Direct mail success breaks down to 40% being about what list you send it to, 40% what offer you send and 20% in timing/packaging. By using the above techniques that we have tested, the odds of success for your bank can be greatly improved.
Are you doing a direct mail campaign? Contact us and we will share our experience in exchange for learning from yours.
Submitted by Chris Nichols on March 10, 2014