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INTRODUCTION
While many aspects of mail order are commonly
understood by those
who have alreday learned the hard wya--by costly experience,
years of trail and error--there are several facets of mail
marketing that remain cloaked in mystery, clouded by half-truths,
misinterpretation and misinformation among those who0 have not
yet had the advantages of such experience.
This report will attempt to clear away
some of the fog and reveal
mail order the way it is in the real world, not as some crafty
promotor would have you believe it is.
We will cover a wide territory in just
a few concise pages, and
present both pros and cons of various mail marketing ideas,
methods and pratices within the large sco-e of selling by mail.
Many books on the subject, some consisting of hundreds of pages
do not include the informatioon you will find here.
CAPITAL INVESTMENT
You've probably seen the ads:
"Start your own mail order
business with just
$10 and make thousands of dollars at home in
your spare time"
You don't really believe ads like that,
do you? of course not.
You're much too intelligent to fall for such misleading promises,
but there are many people who are not as smart as you, and it's
to this audience these ads are directed.
Some shrewd promoters of mail order plans,
schemes and other
questionable programs prey upon the gullibility of the public.
They appeal to humanity's inherent greed...the dream of making a
fortune without investment, risk or effort.
Just for the record, there still is no
free lunch. The amount
necessary to begin will depend on what you hope to accomplish. If
you plan to buy or rent a small building, stock it with
merchandise, hire a few employess, we're talking upwards of
$50,000. To begin at home in spare time, using a spare room and
operate as a sole proprietorship or with the help of family
members, you can trim that figure by many thousands of dollars.
Before we get too specific about dollar
amounts, let's pose a few
questions:
* How much do you know about mail order?
Do you have knowledge
and experience in advertising, graphic arts, printing,
accounting, record keeping, taxes?
* Have you selected your product line,
and have you determined
who your prospective customers will be? Do you know which
publications to advertise in, what size ad to use, which mailing
lists to rent?
* Do you have a reliable supply source
for what you will be
selling, or will you be your own supplier as manufacturer or
publisher?
* If you must rely on an outside supplier,
will you purchase
products wholesale to stock and ship your customers, or will you
operate on the dropship method, having orders shipped directly to
your customers from supplier's stock?
Your answers to these questions will help
in figuring your
initial cost. For instance, if your knowledge of mail order and
the other related subjects consist of what you might have read in
a book about 10 years ago, you're not ready to begin. Plan to
invest at least $100 in a few mail order books, reports,
subscriptions to a couple of mail order journals, maybe even
subscribe to a newsletter. Learn as much as you can about mail
order selling, now and on a continuing basis, because there are
always new ideas, changes and innovations that you must keep up
with. Never think you know all there is to know.
Obviously, it will require more capital
to produce whatever type
of item you sell than if you purchase ready-made products, and it
will cost more to buy and stock what you sell rather than doing
business on a dropship basis.
We haven't established the selling price
of the products in
question, either wholesale or retail, but it will require more
capital to maintain an inventory of $50 items than if they are to
sell for only $5 so this must be taken into consideration.
When purchasing inventory from an outside
supplier, you can
probably buy in dozen quantities, but the picture changes if you
produce your own product line. It would not be practical to
produce only a dozen of anything because the production costs
would be prohibitive. To enjoy the lowest possible production
costs, you would be required to turn out a minimum of a thousand
at a time.
On a dropship basis, inventory costs would
be zero. If purchasing
items to stock yourself, you should maintain an inventory of
about $500. If you plan to manufacture, publish or otherwise
produce your own products, you should figure a minimum of $3,000.
The biggest chunk of your initial capital--and
this is important,
because most newcomers don't realize this until it's too
late--should be reserved for advertising and promotion. So, if
you invest $500 in products, plan to keep about $1500 for
promotion. This will include space ads, classified ads, mailing
lists (if you opt to take the direct mail route), circulars,
brochures, sales letters and envelopes.
If you are operating on the dropship method,
you should still
plan to invest a minimum of $500 in advertising to get your
business off the ground.
As you can see, there is no exact answer
to the capital question,
but now you should have a working estimate as to how much capital
will be required, based on the direction your are investment for
your particular objectives.
ADVERTISING--THE GOOD, THE BAD AND THE
UGLY
To the mail order newcomer, all advertising
looks pretty much
alike. Each ad represents a person or company who is trying to
sell you something or get you interested in what they have to
offer. You normally don't try to judge the sales copy, layout or
graphics. Either you buy, inquire or pass it by.
As you become an active advertiser, yourself,
all ads begin to
take on a new perspective. You see ads interesting or boring; one
will zoom out at you with sparkle and zest, while another leaves
you cold. All this analysis will be based on your own experience
in creating and placing advertising for whatever you are selling.
In the final analysis, however, personal
opinion or judgement
means nothing to the success or failure of advertising. It's the
results of each ad which determines its power and effectiveness.
WHAT MAKES ADVERTISING SUCCESSFUL?
MANY INDIVIDUAL ELEMENTS COME INTO PLAY MAKING A SUCCESSFUL AD:
1. PERSUASIVE SELLING COPY. The wording is the single most
important element in determining a successful ad. What counts
most is what you say and how you say it.
2. PLACEMENT IN APPROPRIATE PUBLICATION.
This might seem obvious,
but it is often neglected. If the right people don't see your ad,
they can't respond.
3. SPACE/PRICE IN PROPORTION. You simply can't sell high priced
merchandise from a small classified or one inch ad space. These
should be considered as a low cost means of building a mailing
list by asking readers to write for more information. If you
expect to sell directly from an ad, the size of the ad will have
to increase in proportion to the selling price. Two or three
inches of space for items selling for 42 to $5... half or full
page for items selling for more than $5 up to $20. When the price
goes above $20 it is usually best to run inquiry ads and follow
up with a printed sales presentation. There are exceptions, but
this is a fairly safe rule to follow.
4. TESTING ALL THE ELEMENTS. Unlike institutional advertising
(toothpaste, cars, soap, etc.) which must rely on extensive
market research, analysis, surveys and a lot of psychology to
achieve success, mail order selling has a built-in "watchdog"
to
guard against waste and loss, and to help assure that every
dollar spent will produce a profit...or at least tell you why it
didn't, so you won't make the same mistake twice. This method
(unique to mail order) is called KEYING. By inserting a number or
letter (or combination) into every ad you run, you can tell which
ad works in which publication and in which issues it works best.
More sophisticated forms of this testing technique can be carried
thru by trying a new headline, a different testimonials,
guarantees, etc. The testing technique know no limits, but there
is also danger in becoming test-happy. To use the testing
principle effectively, be certain that the results will justify
the time and expense of making the test. If it merely means
adding to your paperwork without adding profit or reducing cost,
it isn't worth it.
DROP SHIPPING
Theoretically, you can offer a million
dollars worth of
merchandise by mail without ever buying or stocking a single
item. The trick to this is by using the drop ship method of
selling. Simply stated, this means that you merely do the
advertising, receive orders at your address, then forward the
orders to your suppliers with your wholesale price and they send
the item to your customer. It's an easy way to sell, it's
effective and it works for many mail order firms, large and
small. But, like so many other things in this business, there are
two sides to the story. If you have already heard about drop
shipping, you have probably only heard one side...the side that
merchandise promoters want you to know. As Paul Harvey might say,
"Now you will hear the REST of the story."
Yes, drop shipping can be used profitably,
but it is unlikely
that you or anyone else can become wealthy in mail order this
way. The reason is economic. Most manufacturers, wholesalers or
suppliers offer drop ship discounts of 30%-40% and up to 50% to
dealers. This is not enough to allow any great profit on which to
build a business. The selling costs will usually outweigh the
profit allowed on merchandise, so the more you sell, the more you
lose. How then can you make money by using the drop shipping
principle? By using it to get REPEAT business.
Here's how it would work:
Select what you think would be a good "leader"
item and ask your
supplier for his lowest price in quantities. The low price will
give you greater flexibility in promoting it. The important rule
here is to make sure this item represents the entire line of
merchandise that you want to sell. Whether you sell it directly
from an ad, run inquiry ads and use the two-step followup method
of selling, or rent a mailing list...you will probably lose money
on this first sale. Don't worry about it. If it's a good item at
the right price, you will be building a customer base... people
who will be happy with their purchase and will be willing to do
business with you again.
Now is the time to use the drop ship method.
From your original
supplier or from others, get all the sales literature available
on other good products that will appeal to your customers. Use
this literature as individual sales pieces, or compile them into
your own catalog. When filing your first order, enclose this
catalog or sales literature with the order, along with an order
from and your return address envelope. A percentage of customers
will begin sending you additional orders for these new items.
Here's an important point: To get the first order you had to
spend a lot of money for merchandise, first order you to spend a
lot of money for the merchandise, the advertising and shipping.
This time you don't have these expenses. All subsequent orders
are virtually FREE, except for the cost of the sales literature
(possibly 2 cents to 10 cents each.)
At least 3 or 4 times a year, mail to your
accumulating customer
list with additional offers. All of these can now be drop shipped
at a profit. Keep a close watch on items that are hot...those
that sell exceptionally well. You might want to take advantage of
the lower prices by stocking some of these to fill your own
orders and enjoy the maximum profits from each sale.
This is how drop shipping can and should
be employed. Of course,
if you already manufacture or publish a product of your own,
you're way ahead of the game. Use drop shipping to supplement
your sales by offering other items to your customers on a regular
basis. This is where the profits are in drop shipping.
THE ILLUSION OF PRINT/MAIL SERVICES
If ever there was a lazy way to easy profits
in mail order it has
to be the concept of letting someone else do all the work for
you.
In theory, it works like this:
You send a camera-ready circular or ad to someone who advertises
a print/mail service and they will print and mail it (along with
many others) to 1,000 to 25,000 names on their own list. You
simply pay a one-time charge while they do all the work. Now,
multiply this by 5, 10 or more such services and you could (still
theoretically speaking, of course) have several thousand of your
offers in the hands of prospective buyers within a few weeks.
The problem, is that it doesn't work that
easily, at least not to
the point of making it profitable for the dealer who expects to
become delunged with orders. Even the very best mailers in the
business can produce only a small percentage of return for their
clients, so you would have to have a very high markup on your
offer and reach millions of people if you hope to make it
profitable. If you already have a test-proven offer that produces
about 3% return when you mail the offer by itself, you will be
lucky to get one-half of 1% when mailed by a mailer along with
hundreds of others.
Yes, some offers can produce a profit,
even with such a small
percentage of return, but they are extremely few and far between.
First of all, you would most likely have to be the high markup
that is required. If the offer calls for $10 and you can produce
it for 41 really is: That's 5 orders per thousand...50 orders per
10,000. Some offers might be able to survive on this, others
cannot. You will have to do some figuring to determine whether
it's worth trying.
On the down side of this practice, there
has been quite a bit of
speculation about such print/mail services as to their honesty
and quality of their services. Many of them offer less than good
printing, often smudgy or in various shades of gray instead of
crisp black and white; some of the lists they use are so
overworked, they have become virtually worthless. Even the best
mailers use primarily "Opportunity" lists, so merchandise
offers
would hardly be appropriate. Another flaw in this idea that some
crooked mailers are out there who simply don't mail the quantity
they claim. It seems they print and mail only hundred or so, but
claim to mail in the thousands. This is very difficult for anyone
to prove or disapprove, so the entire idea of using a print/mail
service is precarious at best.
CHAIN LETTERS
It should hardly be necessary to include
this mail order scam,
but such letters continue flooding the mail every day. Chain
letters are a total waste of time and money, appealing to the
gullible and greedy, looking for fast, easy money. The easiest
way to spot a chain letter is when you see a group of 4 or 5
names and you are asked to delete one and add your own, then send
a specific amount of money. Chain letters are a sore spot on the
business of selling by mail, and they are illegal. If it even
looks like a chain letter, it probably is. Save your money and
stay out of trouble. When you receive chain letters in your mail,
trow it away...fast. Better yet, turn them over to your local
Postmaster.
ESTABLISHING AN IN-HOUSE AD AGENCY
There have been several ads promoting books
and reports on this
subject, or included as part of the contents in several mail
order books stating:
"SAVE UP TO 17% ON ALL YOUR
ADVERTISING"
It's legitimate, practical and effective,
but like so many other
promises, there are pros and cons involved. The pros are fairly
obvious. By setting up your own advertising agency and placing
your advertising under your agency name, most magazines will
allow you the standard 15% agency commission plus and extra 2%
cash discount. If your annual ad budget is $5,000 this amounts to
a saving of $850 a year, which is a considerable piece of change.
The negative side to this operation involves
the initial cost of
establishing your new agency, which isn't very difficult, but it
might be considered time-consuming. To initiate an agency you
will have to have a name for it other than your regular business
name. Example: If your company name is Nationwide Electronics and
your name is John Smith, you could call your agency John Smith
Advertising or The J.S. Advertising Agency, The agency address
will have to be different than your company's, but this can be
resolved by renting a post office box one of them and using your
home or office address for the other. Next you will have to open
a separate checking account under the agency name because all
advertising payments will be issued thru your agency, and you
will probably be required to register your agency with your
County Clerk as a new business.
Once these details have been taken care
of, you're ready to begin
placing ads. You'll have to have insertion order forms printed
with your agency name and address, and a separate form must be
prepared for each ad in each publication. When your advertising
schedule involves only a few publications, this will not be a
problem, but if you expand into 50 to 100 different magazines, it
can really cut into your time. Of course, if business gets large
enough, you can always hire a secretary to take care of that
chore.
THE LURE OF CLASSIFIED ADVERTISING
The easiest, least costly and potentially
most profitable entry
into mail order advertising is thru the classifieds...yet there
is probably more money LOST in classified advertising than in any
other way, with the possible exception of direct mail. Why? Let's
take a closer look.
Display advertising, the classy, artsy
ads in magazines and
newspapers, are difficult to create and expensive to place. The
novice lacks the necessary talent, ability, expertise and
(usually) the capital needed to venture into this area of
selling. It requires a basic knowledge of advertising in general
and mail marketing in particular, plus some background in
artistic composition, layout and ad writing. The cost of running
even the smallest display ad often runs $200 to $500 or more per
insertion. The biggies, those full pagers, usually run $2,000 to
$10,000 or more. Needless to say, the average newcomer isn't
about to jump into such an investment on pure speculation.
So, the classified ad becomes very attractive,
both in its ease
of creation and the cost of running it. Such an ad can be
scribbed on a piece of paper and sent to publication with payment
in a matter of minutes, if necessary (although such a hasty move
should be avoided) without any creative design or artwork.
The problem with using classified ads that
they are often
expected to do more than they were designed to do in the first
place, and that's to build a prospect mailing list. Instead,
probably 95% of all first-time classified users will try to sell
their wares directly from the ad, and this is where they go
wrong. With very few exceptions, every classified ad should, in
one way or another, say "SEND FOR MORE INFORMATION." It
should
NOT say " Send $10 for this thingamabob"...yet many of
them do.
Many authorities will tell you that you
can ask for money in a
classified up to $5 for certain offers, but this is misleading.
Asking for money in any amount will automatically cut response by
up to 50% or more. When you're paying by the word, every word
must work hard for the money spent, and that means brevity is
essential. But is also means you can only tell, not sell in the
ad. By merely whetting a reader's appetite for more information,
then sending the complete story in a well-prepared sales package,
a classified ad can be used profitably to build a business.
If you don't ask a classified ad to do
more than it was intended
to do, you'll never be disappointed.
WEALTH FROM REPEAT BUSINESS
Most newcomers to mail order think in terms
of finding a single,
new "hot" product to sell...one which will capture the
public's
fancy and catapult them to fame and fortune. This fancy is soon
shattered after a few attempts at advertising the new pet
product, only to discover that sales are few and profits are even
fewer, if any exist at all.
The secret in this case is that costs a
considerable amount of
money to secure each new customer. Sometimes a modest profit can
be realized from the first sale, but more often a break even
situation or small loss is the true outcome. This is the crucial
point...the stage where most beginners in mail marketing become
confused, disillusioned with the entire idea of mail order. It's
at this point the faint of heart throw up their hands in disgust,
claiming that mail order is just another scam. The more
stouthearted (stubborn) dealer will try again with another idea,
another ad, maybe a new selling proposition, only to experience
the same disappointment as the first time. The smart person will
begin to realize that it's vital to begin with at least TWO
related items, preferably five or more products, all appealing to
the same type of buyer.
TO ILLUSTRATE THE POINT:
Suppose you place an ad for a $5 item at a cost of $100. To
recoup the ad cost you'll need 20 orders. Depending on
fulfillment costs you'll also need an additional 5 or 10 orders
to show profit. But suppose you receive only 10 orders? This
means $50 LOSS each time you run the ad. But wait: it also gives
you 10 new customers. When filling the original order enclose
additional offers of a related nature. Assuming customers are
happy with the first purchase, about 10 to 20 % of them will
order something else from you. It have cost you &100 for the
original ad, but the additional order will cost only a few cents.
This is where the profits come from.
Naturally, you hope you DON'T lose money
on the initial ad. You
would much prefer to show a profit right up front, but this
example was used to present the worst picture and how it can be
turned around. Keep in mind that, as long as your ad is running,
you will be building your customer list. At least two or three
times a year, send these customers a new offer. Satisfied
customers will stay with you year after year, and this is where
the wealth is in mail order.
It's not in the advertising; it's in the
customers.
PROFITS IN THE PRINTED WORD
A good line of information books and reports
can be the most
profitable items in mail order. The field is enormous and the
possible subjects are wide and diverse, as are the individual
markets for each subject: financial, home business ideas, health,
home & auto repair, investments, spare time money making
ventures, do-it-yourselfers, mechanics, electronics, collectors,
etc.
One of the big secrets here, of course,
is to decide exactly
which market you want to serve, then offer information only to
these people. Don't try cross-selling by offering a handy auto
repair manual to someone who has expressed interest in better
health or attaining greater income. Equally as important is to
offer useful information; new ideas or uncommon information that
isn't readily available elsewhere.
Next in important is the price/profit margin.
Stay away from
publishers who offer the standard 40% discounts. You need a
minimum of 50% if you plan to operate on a drop ship basis, and
70% discount if you want to stock merchandise and fill your own
orders. This may not seem important to you now, but you will soon
realize that you need the high discounts to help offset the
selling costs of whatever you are selling. Your selling costs
involve the original advertising placed in publications, printed
sales literature and postage needed to answer inquiries.
The next step toward success in the mail
order information field
is to use advertising and sales material that are geared to the
information you are offering. Nothing sells itself by mail, it's
in the words, ideas and graphics in the advertising that will
draw inquiries and sales.
How will you sell your information--
Through classified or display ads? By direct
mail? with a
combination of all methods? Will you try to sell directly from a
magazine ad, or ask for inquiries and use printed follow up
material to make the sale? These are questions that deserve
careful consideration before you go too far. If you are
inexperienced in advertising or new to mail order, you should
enlist thee services of a competent mail order specialist to get
the answers to your questions.
When all the facts are in, are there really
big secrets to
selling by mail? Not really!! There are only established
principles of operation, proven ideas, methods and techniques
that work...others that have been proven unworkable and
unprofitable. There are no hard rules, just helpful guidelines.
The true secret is to learn and follow the methods that have
proven to be successful, use whatever knowledge and skills that
you can bring to your new business, and get professional help in
areas where you lack the ability to do it on your own.
The mail order graveyard is scattered with
the bones of those who
didn't!
