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Thursday, March 30, 2017

Choosing A Postage Method: EDDM vs. Bulk Rates

Probably the most expensive part of a direct mail campaign is the postage – so your first instinct may be to keep this cost as low as possible, and why not, it’s your money - but, is the lowest price the best value for your marketing?

When it comes to postage there are two ways to go: EDDM and bulk rates. EDDM is the cheapest per unit, and in a lot of ways, the simplest. Bulk prices are more expensive (about 50% more expensive), the price per postcard can vary making it more complicated, but bulk postage is more flexible in terms of targeting and distribution. So, which is right for you?

Every Door Direct Mail (EDDM)

EDDM keeps things simple. It frees you of a dependence upon an address list, mail merge technology, and postage stamps. With EDDM, all postage stamps/insignia are incorporated in the mailer’s design. Similarly, addresses and mail merge technology are a complication of the past because a generic postal address is printed as part of the postcard.

If you have no ‘sphere of influence’ to speak of, and you are not using advanced targeting algorithms, then EDDM is probably your best bet. It allows you to select individual mail routes to target multiple nearby subdivisions or apartment complexes. These routes tend to have between 550 and 850 addresses. With EDDM prices around 17.7¢ per postcard, the cost to purchase a route is usually between $100 and $150. Unfortunately, the postal routes are defined by the post office so you can’t shape the route; two subdivisions may be right next to one another, but that doesn’t mean that they are part of the same postal route.

Bulk Rates

Using bulk rates allows for a broader geographic range for address distribution (essential for targeting one's sphere of influence) and a higher degree of accuracy when using targeting algorithms. Even the simplest targeting algorithm could make bulk rates the cheaper postage method when measured in terms of conversion cost/lead generation. What's more, the uniqueness of each postcard makes both a direct connection to a target easier and allows for you to track the results.

Conversion Cost and Lead Generation

The purpose of a direct mail campaign - postcards - is to generate leads. Actionable contact. With EDDM, the lead generation rate is equal to the area's turn-over rate reduced by the renter ratio and adjusted by agent loyalty - around 3-4%. Turn-over rate is the number of annual sales in an area divided by the total number of residences in that area. Renter ratio is the percentage of properties that are vacant or occupied by renters in an area. Agent loyalty is a bit trickier, it is based upon frequency that buyers call upon their buying agent to help them sell their home. The term 'loyalty' is perhaps misleading as factors such as retired or relocated agents impact this variable.

Example One - EDDM: An area has 10,000 residential properties, annual sales of 500 properties - a 5% turn-over rate, with 30% of all properties vacant or rented, and an agent loyalty of 25%. That means that for every 100 postcards you send out to this region you are likely to generate 2.6 leads. With EDDM your lead generation cost would be around $6.74 each.

Example Two - Bulk Rates & Targeting Algorithms: Bulk rates coupled with a basic targeting algorithm eliminates some of this. Targeting algorithms start by removing the vacant/renter properties leaving only 'owner occupied' properties. This alone will adjust the starting turn-over rate to 7.14% (annual sales divided by 10,000 properties less the 30% renter ratio (i.e. 500/[10,000 - 3,000]). After factoring the loss due to agent loyalty the lead generation is 5.4% - cost per lead is $4.63 (based on a $0.25 postage rate). 

More advanced algorithms can take into consideration more variables. Agent loyalty could be all but eliminated by targeting properties whose buying agents have since retired. You can eliminate properties that have been owned outside of a specific range of years (more than 5 years, less than 20 years), or price range, etc. Nearly any varibale can be aplied to an algorithm to improve conversion rates/reduce lead cost: square footage, lot size, school zone... Even more elaborate targeting software can identify property owners' social media profiles and scan their public activity for keywords and phrases that indicate an interest in real estate or that the homeowner may be approaching change in real estate life-phase (i.e. parents whose youngest child is going away to college may be interested in purchasing a smaller home).

Tailoring A Postcard to the Recipient

If you don't connect with your target then your lead generation is effectively zero. You can connect with something more general like a universally appealing image or catchy phrase or you can relly connect be speaking to your target by name. The more the owners feel like you are talking to them, and not just the 'current resident', the better your chances of generating a lead. Being unable to target the owner, such as when you use EDDM, can put a cap on the effectivenss of your marketing's effectiveness.

Tracking Postcard Impressions

By putting unique URLs or QR codes on each of your postcards you can track how a recipient uses the information you send them. Unfortunately, this system requires an elaborate setup process. The simplest method requires Google Analytics, a basic understanding of javascript, a dedicated webpage on an independent site (a profile page, such as a social media page or brokerage sponsored agent profile wont work), and a constructive purpose for the collected information. 


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