Prospecting Cost Effectively using Alternate Media

by Stephen Lett

Historically, catalogers have relied almost exclusively on outside prospect lists to generate new buyers. However, it is becoming more difficult to find “good” lists and “fresh” prospect names. What’s more, list universes are flat or declining. Today, catalogers need to consider alternative or non-traditional methods of generating new buyers expanding their prospecting universe. It is important to look for the “diamonds-in-the-rough” and dig deeper to find those prospective mail order buyers. The use of alternate media can provide an effective means of generating incremental catalog buyers cost effectively. Can alternate media replace the use of outside rental lists? Of course not. But, it is wise to test other ways of generating new buyers in order to keep growing your business. This month, we will discuss what alternate media is, the best strategy for testing and what results you can expect.

What is alternate media? Alternate media is defined as all forms of printed advertising media including package inserts, statement stuffers, freestanding inserts (FSI’s), etc. The cost per thousand impressions is relatively low and so are the expected results. However, alternate media can be cost effective providing your expectations are realistic. While our focus this month will be on package inserts and on FSI’s, alternate media includes:

  • Package Inserts – Your insert accompanies actual mail order purchased merchandise.
  • Free Standing Inserts (FSI) and Space Co-op – Space advertisement with FSI coupon Co-op that inserts into newspapers nationwide.
  • Statement Stuffers – Inserts are enclosed with invoices or subscription renewals.
  • Catalog Blow-in and Bind-in Programs – Inserts are either “blow-in” or bound into the catalog.
  • Ride Alone Programs – Insert is included into a promotional mailing to a company’s house file.
  • Mass and Lifestyle Co-op Programs – Coupon/special offers mass mailing sent to households (not to a specific individual). Lifestyle Co-op Programs offer themed mailing. Recipients meet target lifestyle theme from a compiled database.
  • Handout Programs – Special offer themed handout bag. Hand delivered, i.e., new moms, college students, etc., special offers plus brand samples.

PACKAGE INSERTS

A package insert is a printed promotional piece, which is inserted, in another company’s actual outgoing merchandise packages. They reach proven mail order buyers. What’s more, they reach recent or “hot-line” buyers. Package inserts carry the strength of an implied endorsement of the offer.  Most firms who offer package insert programs will commonly allow 4 to 8 non-competitive inserts in their packages. The actual piece can vary by size, format and weight, but most programs accept a maximum dimension of       5-½” X 8-½” and a maximum weight of .25 ounces. They might be a single or tri-fold or a simple 2-sided piece. The nice thing about a package insert is the piece can vary in size and most are going to proven mail order buyers. A competitor or semi-competitor might rent you their list but they may not necessarily approve your package insert. This is because the insert rides along in their outgoing orders/packages. As mentioned previously, the company who agrees to insert your package insert in their packages is almost like an endorsement from that firm. At least indirectly.  Program owners will not give preliminary approval until the artwork is submitted. Final approval will not come without seeing the final piece.

What should the offer be? You might elect to offer selected merchandise on the package insert. Or, you might use package inserts to generate catalog requests. The difficultly of selling merchandise is selecting the products to be offered. That’s because it is difficult to select items, which are most representative of your entire product line. It is generally more cost effective to place the catalog in the hands of a qualified prospect. A few design considerations are as follows:

  • Offer a free catalog.
  • Encourage response with a discount when the prospect actually makes a purchase such as $5.00 off your purchase of $20.00 or more.
  • Include multiple ways to response such as a toll-free 800 number, Website or E-mail address and/or a postage-paid response card (designed as part of the piece).

What results can you realistically expect? Typically response rates range from .2% to .4%.  Test costs average approximately $45 to $50 per thousand for inserting plus printing and shipping costs. The minimum test quantity allowed is typically 25,000 per program. Because you are reaching “hot line” buyers through a package insert program, the L-T-V (Life-Time-Value) of the acquired new buyer can be favorable.

FREE STANDING INSERTS

Freestanding inserts appear in your local newspaper. They are printed not by you but rather by the company sponsoring the insert. The amount of space you contract for can vary; common sizes are one-half to a full page. The FSI Co-op mailing is a mass vehicle.  Within this mass vehicle, you can target based on demographics within a market coverage area.  You will distribute into the entire market coverage area, so you will select markets that index the highest against a national average.  The costs are low; $6.50 or less per thousand. A full page, full color FSI ad can therefore cost approximately $6,500 to reach 1.0 million households including the printing.

FSI’s are generally used to sell a product. If you select an item to feature in the FSI Co-op, the price point should be $20 (or less) to maximize response. The higher the price, the lower the response rate. A word of caution: The life-time-value (L-T-V) of a buyer who comes on the file as the results of purchasing from an FSI needs to be measured (as with any media or list used). In a recent test we did, only 17% of all buyers who purchased from the FSI bought again within the next 12 months. This compares with new buyers acquired as a result of mailing to outside rented lists. Here, approximately 40% repeat within the next 12 months generating a much greater L-T-V. Buyers who purchase from the FSI are purchasing the item being advertised and they may not have any interest in other items featured in the catalog.

While FSI’s can be targeted to certain geographical areas based on income demographics, keep in mind this is a mass media. It is important to select an item to advertise that has wide appeal. The item you feature needs to retail for under $20 in order to maximize your response. Keep in mind the higher the price point, the lower the response rate. The goal should be to generate as many orders as possible to add to your file that has life-time-value potential. While the cost is low, so is the response rate. In recent testing we have done, response rates typically range from .01% to .04%.

The chart shown below provides a good comparison of the different alternate media programs. Note the type of program, i.e., package inserts, free standing inserts statement stuffers, etc., and vehicle description. The chart also gives you the average maximum sizes and weighs allowed, minimum test quantities, average cost per thousand, typical response rates and suggested retail price points you should consider.

INSERTMEDIA.xls
LETT Direct, Inc.
Date: 07-09-04
INSERT MEDIA COMPARISON CHART
INSERT MEDIA VEHICLE VEHICLE DESCRIPTION AVERAGE MAXIMUM SIZE MAXIMUM WEIGHT without "Overweight Charges" MINIMUM TEST QUANTITY AVG. TEST COST PER M EST. RESPONSE RATES SUGGESTED PRICE POINTS COMMENTS / BENEFITS
Package Inserts Insert accompanies actual mail order purchased merchandise majority are 5 1/2" x 8 1/2" .25 oz. 25,000 $45 .2% to .4% $20.00* Can be used effectively to generate catalog requests, web driver, new customers, immediate sales through product offering.
Recipients are hot line, proven  direct mail buyers.
Free Standing Inserts (FSI) Space Co-op Space Advertisement with FSI Coupon Co-op which inserts into newspapers nationwide.
Newstand + Subscription
7 1/2" X 10 3/4" Full Page
7 3/8" x 10" is live art area
7 3/8" x 4 15/16" is live art area for 1/2 page
Typically printed on 35# stock 1,000,000 $6.50 .01% to .04% $20.00* Select an item with mass appeal.  No separate printing and shipping costs…artwork required only.  Must buy entire form (cluster of newspapers).  Please note higher price points do work and continue in the FSI Co-op - example Bose, Orek, Sharper Image.  Ta
Blow In into FSI Co-op   7 3/8" x 10" "Bulkiness is more of an issue" 200,000 $15/m Higher Response than FSI Co-op.  $20.00* Can purchase by each individual newspaper
Statement Stuffers Inserts are enclosed with invoices or renewals 3 1/2" x 6" .03 oz - .15 oz 100,000 - 250,000 $16 - $45/m 0.10% $20.00* Large Volume. Quick Distribution.
Catalog Blow In Insert is "Blow Into" a catalog mailing 3 1/2" x 5" or   6" x 6" .2oz. - .25 oz. 100,000 $20 - $25 .1% to .2% $20.00* Large Volume. Quick Distribution
Ride Along Programs Insert is included  into a promotional mailing to a company's house file. 5 1/2" x 8 1/2" .25 oz. 100,000 $20 - $25 .1% to .2% $20.00* Large Volume. Quick Distribution
Mass Co-op Programs Coupon / Special Offers Mass mailing. Sent mass to household (no name).  Combination of local and national participants 3 1/2" x 7" or 5 1/2" x 8 1/2" .25 oz., but lighter will help with pricing. 500,000 - 1,000,000 depending on program $10 - $12 0.05% $20.00* Large Volume. Quick Distribution. Targeting Available
Lifestyle Co-op Programs "Special Offers" Themed mailing.  Recipients meet target lifestyle theme from a compilied database 5 1/2" x 8 1/2" .25 oz., but lighter will help with pricing. 100,000 $20 - $40 .1% - .2% $20.00* Large Volume. Quick Distribution. Targeted by Theme
Hand Out Programs Special Offer Themed Hand Out Bag.  Hand Delivered (new moms, college, etc).
Special Offers + Brand Samples
8 1/2" x 11" .25 oz 100,000 $25 - $40   $20.00* Large Volume. Targeted by Theme.Longer Distribution Trend
Insert Media Offers category exclusivity
Please note response rates vary based on product and promotional appeal, price points and the exact program/file in which you are participating.

Alternate media is a low cost way of generating new catalog buyers when used effectively. The various alternate media programs help to expand the prospecting universe by reaching potential buyers who may not appear on a rented list. Some of the prospects will obviously be proven mail order buyers. Many will not have purchased by mail previously. Response rates are low. Costs are low too.  As always, testing will be the key to knowing what works best for you. In summary, insert media is an effective, valued media channel to many mailers with and without traditional catalogs and should be included in your overall media plans.