Probability of positive ROI on direct mail spend?

Question

Hello guys,After lurking around the forum for a while, I finally signed up. This is my first post!So many knowledgeable and helpful people post here. I've learned a lot just by reading (and reading, and reading...)I wanted to post because this question has really been bugging me:What is the probability of achieving a positive ROI on one's direct mail spend?In some of the forum discussions I've read and podcasts I've listened to, the likelihood of achieving a positive ROI isn't mentioned at all. The mechanical aspects of targeting prospects and running a campaign are discussed, tips and tricks, etc. But it's as if a positive ROI is simply a given.Then, on the other hand, I read posts by other members who aren't getting anywhere with direct mail. In one post I read recently, the member was sending 4,000 pieces of mail a month and struggling to find one deal. 4,000 pieces a month!Can you help me reconcile what seem like wildly different results between the former group and the latter? Just how likely is it that a well-targeted, persistent direct mail campaign will pay off with a worthwhile number of good deals?Thanks!

Mark Gallagher · Answer

@Jon V.If you mail good mail, to a good list, you're going to get good results. Most people are BAD at direct mail. I can't tell you how many times I've gotten a letter (a bad letter) looking to purchase a flip I purchased within the last 30 days. That's just flat out a bad list because the odds someone who just bought a property and wants to sell it already is very slim. Likely those people just pull a list of non-owner occupied homes and sent a list. Selecting your list and trimming it nicely, is 50% of the battle. I suggest connecting with @Ryan Dossey.

Jay Hinrichs · Answer

@Mark Gallagher Ryan is in France enjoying the fruits of his labor :) @Ryan DosseyI think a HUGE part of this as well is area.. Some areas or locations have an abundance of available distressed houses .. other areas no way. so like in our particular area of the world Portlandia.. there is very little distressed housing and even the dogs go for 100 to 200k.. best case.. so the direct mail pieces here have to be either extremely targeted or you have to send out 10k a month..

Matthew Olszak · Answer

@Jon V.@Sean CarrollYou'd be amazed at what some people send out. I managed a project for a client that was a fire damaged property. The mailbox was full of these "cash buyer" letters each week. Some handwritten letters were just scribbles on crumpled notepad paper. Others with crooked and faded printed from their $50 inkjet printer. Others with massive typos. Others clearly had no clue as to how a real estate transaction works. Maybe 1 or 2 appeared to be from an actual professional.Volume is essential - unless you are following up via email, text, and calls, a small list will get you nowhere. @Mike Flora makes an excellent point - its all about catching someone in your list at the right time. Just one deal can pay for all of this, but you have to be prepared financially to pay for it until the deal comes around. I think the average response rate to direct mail is somewhere around 0.5% - 1%. From there, you've got just a small % that will actually convert to a sale.@Mark Gallagher Also makes a great point about list quality. I recommend developing your own lists by merging and narrowing down larger databases vs. purchasing "likely to sell" lists that 100s of others have bought and are mailing.And lastly - ANSWER THE PHONE! People calling on these letters aren't going to beg you to buy their property. If you don't answer, they'll simply move on to the next letter. With super small response and conversion rates, you can't afford to not talk to each prospect.

David Dachtera · Answer

@Jon V.,If you've never done it before, understand that direct mail is not for the average "How much will it cost?" consumer.Response rates are measured in the single digits and, of that, the responses which result in profitable deals is still a small percentage.You need to be prepared to make a substantial investment in such a campaign with little or no expected return. If you get a return, that's great - reinvest it into the business, but don't count on it.You need multiple active lead sources. Direct mail is only one.

Pratik P. · Answer

The probability of getting a positive ROI on direct mail will depend directly on factors such as quality of leads, frequency, consistency, mail piece, your phone skills, lead management, negotiation skills.......You see where I'm going with it. Your chance of success depends on how good you are at marketing and converting leads into deals. You could get 10 motivated seller leads but still not close a single deal because you're horrible at negotiating. Or maybe you're amazing and can close 9/10.

Pete Perez · Answer

@Christopher BlancoYup! The 3 M's. So far my only experience with marketing has been a few books I've read. But they all say that the message must be tailor made to your market. So I am working on that right now. They also said that you have to test, and tweak the message. I think I am going to have to start tweaking it. Thanks for the help! Best of luck to you!

Christopher Blanco · Answer

@Pete Perez I am creating my own. I do marketing for a living, so that helps. Here is my tip: know your audience. Your marketing piece for probate is going to be different than your marketing to an absentee owner or landlord. Marketing is a 3 legged stool of Market, Message, Medium. You need to start by defining and understanding your market, craft a message to attract that market, and then pick the correct medium. For example: $$$$$$WE BUY HOUSES FOR CASH$$$$$$$$$$$$$ on a postcard is not the right message or medium for the probate market. In addition to that don't be afraid to tweak your message, I listen to people when they call me and almost every time they give me a hint as to what part of my letter caused them to call, either to inquire about a deal or to tell me that they don't want further communication. Finally, follow up! I deal with probate...its a LONG lead time and requires diligence. I am still getting calls from my December mailings, so don't be afraid to send out 5-7 mailings once a month.

Mike Flora · Answer

We are not in the real estate business, we are in the marketing business!!! These guys are right in many ways when they talk about how important your data is in who your targeting in your list, your social skills with the seller when they call you, how to overcome objections with a motivated seller, but getting back to direct mail......it is very effective in my Southern California market. I send 3000 postcards a week with a total of 5 lists I rotate and you have to keep sending your lists on schedule. A lot of it is timing with these people. First month might not be the right time for them to dump there property but month 5 is. Direct mail is my best results for deals. My good friend sends 90,000 targeted postcards a week! I use property radar to create my lists. Great site!!

Mark Gallagher · Answer

@Sean CarrollYes, but I prefer blue ink to red. It's going to be hard to mass mail by hand, you can find companies that have fonts to make it look like handwriting.

Mark Gallagher · Answer

@Sean CarrollWhite postcards with black text that say stuff like "I've been trying to reach you!" = bad mail. Attractive envelopes with hand-written addresses and hand-written letters inside, that look professionally made = good mail