As we discussed in Part 1 of Modernizing the Property Valuation Process, the housing market has experienced dramatic changes that have presented many challenges for appraisers. Although the market has...
In the age of digital-first banking, direct mail has made a surprising resurgence. This marketing strategy involves sending a physical piece of collateral—a letter, brochure, package, postcard, etc.—directly to your prospect’s home address. Direct mail campaigns can result in higher conversion rates, larger sales pipelines, and a deeper personal connection with consumers, but they can also be expensive and tricky to execute. In this blog post, we’ll discuss the pros and cons of direct mail for lenders and other financial institutions.
Pro: Larger Sales Pipelines and Higher Conversions
The Direct Marketing Association recently found direct mail’s response rate is 4.4%, compared to 0.12% for email. This response rate is somewhat lower for financial institutions, but increased responses lead to higher conversion rates, which results in more qualified leads landing in your sales pipeline.
In fact, recent data shows that direct marketing efforts have response rates of up to 1.16% in the lending industry. While this number might not seem extraordinary, it is powerful for lenders. For example, when targeting and mailing up to 120,000 people, 1.16% means you have 1,392 respondents who are highly interested in your products or services. Then consider the fact that 75% of those respondents applied and 50% converted. Do the calculations—how much additional revenue would 522 funded loans mean to your institution?
Pro: Direct Mail Matches Consumer Preferences
Recent research indicates Americans prefer direct mail to email marketing. According to the HubSpot data cited above, 76% of people trust ads they receive in the mail.
Direct mail helps cut through the endless email clutter consumers are constantly bombarded with. The average person receives 121 emails per day. With so much competition and noise online, rising to the top of someone’s spam folder can be a tall order.
On the other hand, four in 10 people report that they actually enjoy checking their physical mailbox. There is a deeper emotional connection to checking the mail—it has an element of surprise and can grab consumers’ attention far easier than a marketing email.
Con: Direct Mail Can Be Expensive
Despite the higher response rates of direct mail campaigns, email marketing still offers better ROI than direct mail. Sending emails is relatively cheap, and you can send them out to thousands of people at once. In fact, the average ROI for email is $28.50, compared to $7 for direct mail.
Cons: Direct Marketing Doesn’t Always Yield Immediate Results
When it comes to direct mail marketing, a degree of patience is required. In some cases, direct mail could have a longer turnaround time for results than online marketing. Sending mail directly to consumers involves a lot of trial and error. Your process could take time and testing to yield desired results. To reap the full benefits of direct mail, your institution should be prepared to make a long-term commitment to marketing efforts.
Cons: The Logistics of Direct Mail Can Be Tricky to Get Right
The logistics of pulling off a successful direct marketing campaign can be tricky, but it’s a critical component of the direct mail process. With direct marketing, you have different compliance concerns than you would with online marketing. The increased amount of rules and regulations regarding who you can send mailers to and what messaging you can use often makes the logistics of direct mail more complicated than it would be with online marketing—but it’s not an insurmountable hurdle.
Tracking and reporting can also be more difficult with direct mail campaigns. Given the fact that less than 1% of lenders perform accurate marketing data analytics on their own, many financial institutions don’t have a clear idea of what’s working when it comes to direct mail campaigns.
Messaging is Key for All Marketing Channels
Regardless of the marketing channel, your message needs to resonate. If your message is off-target, it’s almost guaranteed to decrease the response rate and ROI or your direct marketing efforts. You don’t want your marketing messaging to miss the opportunity to truly connect with consumers by coming off as too “salsey” or tone-deaf.
The key to resonant advertising is empathy. You want your message to be well-articulated, but it is the emotional connection to your words that drives response. When it comes down to it, most of our decisions are determined by emotion. If your messaging doesn’t spark an emotional or personal connection for your prospect, any marketing strategy around that messaging is going to fall flat.
Conclusion: The Multi-Channel Marketing Approach
We live in a multi-channel marketing world. Consistency and redundancy across multiple channels is an important part of a broad communication strategy, as some consumers will prefer one method, while others may require multiple contact methods to gain top-of-mind awareness. Having regular communication touchpoints using multiple channels can help turn your financial institution’s prospects into customers.
A graduate of the Plan II Honors program at UT Austin, Amanda Harr is the Content Manager for SWBC. A clever wordsmith who appreciates artful persuasion and authenticity in writing, Amanda uses a structured creative process to craft marketing strategies, develop communications solutions, and deliver top-notch content.