Using direct mail to sell high-tech products--Direct Marketing, Mail Order, E-commerce News

Direct Marketing, Mail Order, and E-commerce News from the National Mail Order Association

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TAKING THE MYSTERY OUT OF HIGH-TECH DIRECT MAIL
by Robert W. Bly

DIRECT MAIL MAY BE A NATURAL FOR HIGH TECH, BUT TO MANY MARKETERS
ITS UNCHARTED - AND UNFATHOMABLE- TERRITORY.

Direct mail is booming among high-tech marketers.

But despite direct mail's appeal to the high-tech industry - it allows marketers to target their
select audiences without spending big advertising dollars, and is a natural for products that
face stiff competition for dealer attention - direct mail remains a mystery to many high-tech
marketers. They view it as an advertising medium filled with more unknowns than knowns,
and are reluctant to commit to large-scale programs.

What works, they ask, in high-tech direct mail? What doesn't? Is high-tech fundamentally
different from regular direct mail? Or do the basics of good direct mail apply equally to all
product categories? Can sophisticated products and systems be sold directly through the
mail? Or is direct mail appropriate for lead-generating only?

HIGH-TECH MARKETING bounced these and other questions off nearly a dozen high-tech
marketers experienced in direct mail. Although their answers were as varied as their products,
they did provide some general guiding principles.

Boiled down, their advice was simple: Never underestimate the importance of testing and
tracking, of stressing benefits and offering guarantees, and of sticking to your "best-shot"
mailing lists.

A sampling of the formulas these direct marketers use follows:

The Price is right. According to Ken Sullivan, marketing manager of SoftLogic Solutions, Inc.
Of Manchester, NH, price is a key element in selling software through the mail. For the past two
years, Sullivan's company has used direct mail to sell microcomputer software packages priced
at approximately $50 per program.

"In microcomputer software, any product priced at $100 or under is basically an impulse buy,"
explains Sullivan. "Over $100, it becomes a major decision that the customer has to think about.
At $50 to $100, it's less of a decision."

Sullivan's basic message: Get the reader to respond today. The longer he takes to think it over,
the less likely he is to respond at all.

SoftLogic mails 250,000 to 300,000 pieces a month, and Sullivan considers each mailing a "test."
That is, he expects to gain specific knowledge that will help him improve his response rate every
time he mails a new package.

SoftLogic has tested many variations and offers, including mailings that offer one, two, three and
four products. Sullivan says that mailings offering two related products, with a discount on the
second product if a customer buys the first, seems to work best for him. He considers a mailing
successful if it pulls 1.2-1.3 percent response.

SoftLogic uses a "standard" direct-mail package consisting of a sales letter, brochure and reply
card. Sullivan is very particular about the way his mailings are written and designed.

"To begin with, don't use a teaser on the outer envelope," he says. "This makes it look like junk
mail. People will throw it away."

"Use a short letter, with short paragraphs. The longer the letter, the less appeal. People don't want
to read. They will breeze through your package very quickly."

"On the front of the brochure, put a simple explanation of what the product does. Put a lot of
information on the back page, including technical specifications and features."

Repetition is as important in direct mail as it is in space advertising, Sullivan says. SoftLogic mails
repeatedly to the same list of software buyers, continually testing new letters and new offers.

Direct mail has been so successful for SoftLogic that every promotion the firm does is designed to
generate a direct sale by mail. Even ads, once used to build image, now carry a toll-free number
and copy that asks for the order up front. "For a $50 to $100 software package, it's better to get
mail orders than leads," Sullivan says. "For us, mail order is very profitable, while leads are a waste
of time."

Testing, testing. Eugene M. Schwartz, president of Bi-Intelligence, Inc. Of New York, has also had
great success selling inexpensive microcomputer software directly through the mail. But unlike Sullivan,
who has strong notions about how to structure a mailing, Schwartz says there are no sure things in
direct mail. The only way to learn what will work for your product, your offer and your market, Schwartz
says, is to test many different approaches.

"You have to test everything - price, offer, headline, copy, format, theme," he says. "There are no
answers in direct mail except test answers. You don't know whether something will work until you test
it. And you cannot predict test results based on past experience."

Schwartz is something of a mail-order maven. In addition to running Bi-Intelligence and Instant
Improvement, Inc., a company that sells health books by mail, Schwartz serves as a freelance
consultant to Rodale Press, Boardroom Reports and other direct marketing clients. He has 35
years' experience in mail order and is the author of a book on the subject.

Schwartz's latest effort is a package selling an $89.50 product called Easyfier, which enhances the
performance of several software applications. The mailing consists of a #10 envelope with lengthy tester
copy on both sides, an eight page sales letter, an order form and a reply envelope. The headline on the
envelope teaser reads: "FOR $89.50 YOU CAN MAKE YOUR IBM AS EASY TO USE AS A MACINTOSH."

"The essential rules of direct mail are the same no matter what you are selling - including high-tech," "
Schwartz says. "A product is just a bundle of benefits; your direct-mail copy lets the consumer 'sample'
the product's benefits before he buys it."

"Most marketers are very much in love with their product - and they shouldn't be. The customers don't
care about you and your product. All they care about is what the product can do for them."

Although Schwartz is known in the industry for his long-copy ads and letters, he says that content, not
length for length's sake, is what makes for successful direct mail. "If a person wants to know what you're
saying, he'll read a 20 page letter, blurred, in 2-point type," he says, half joking. "Copy should be as long
as is needed to make it complete and interesting."

An important feature of a successful direct mail package, says Schwartz, is that it allows the customer
to try the product without risk. He explains: "Always give a money-back guarantee. Without it, most people
won't pay any attention to you. If they haven't heard of your company, why should they trust you?"

Schwartz also contends that percentage of response - the yardstick by which most companies measure
direct mail results - is a meaningless statistic. He says the real test of whether a mailing works is the
profit it makes. Schwartz considers a mailing successful if it generates revenue 150 percent above
"break even" - the point where the income from sales equals the cost of doing the mailing.

The technical target. Vivian Sudhalter, director of marketing for Macmillan Software Company of
New York, faces a slightly different challenge than Sullivan and Schwartz: selling expensive ($495 to
2,000 per product) scientific software to scientists, engineers, and researchers. According to Sudhalter,
the two markets - technical vs. consumer - are quite different.

"Despite what tradition tells you, the engineering and scientific market does not respond to promise or
benefit-oriented copy," says Sudhalter. "They respond to features. Your copy must tell them exactly what
they are getting and what your product can do. Scientists and engineers are put off by copy that sounds
like advertising jargon."

Sudhalter's lead-generating self-mailer for Macmillan's Asyst and Asystant software follows this model.
The copy has a scientist-to-scientist tone and talks about such arcane matters as Hermitian matrices,
spectral slicing and QR factorization. Yet it is successful, having generated a 4 percent response with
Macmillan's in-house prospect list.

Sudhalter's technical audience seems to respond well to visual treatments of complex concepts.
"Scientists are excited when you show them something rather than tell them," she says.

What types of visuals are used to illustrate a mailing piece promoting software? "Show screens of your
program if they are unusual or interesting," Sudhalter advises. "A diagram with call-outs is much more
effective than volumes of prose. Scientists like tables and graphs. They will ignore coy but pour over a
table of specifications and features. And they resent it if you talk down to them. When writing copy,
don't try to be clever; just give information about the product."

Sudhalter says that finding good lists is a problem when using direct mail to sell high-tech. Because of
poor results with outside lists, she mails primarily to Macmillan's in-house list - people who have
previously inquired about Macmillan software through advertising or publicity. But she will use outside
lists to announce a new product or product enhancement.

Sudhalter has experimented with a variety of formats in her career, but chose a self-mailer for the Asyst
package because self-mailers are less costly than the standard direct-mail package (consisting of outer
envelope, letter, brochure and reply form). She says that skyrocketing paper prices and production

expenses have made it increasingly difficult to do cost-effective mailings.

"Today I find that there are two kinds of direct mail that work," she says. "For a cold mailing, you've got
to go for glitz. You can't send out a two-color mailing and expect to generate much excitement. You need
four-color, slick design, high-quality paper, slick copy and a larger typeface than the old-fashioned tiny
type used in traditional direct mail packages."

"However," Sudhalter says, "a cheapo mailing can work well with your in-house customer and prospect
list." To prove the point, she recently mailed a one-page form letter to prospects who had telephoned in
responses to ads and PR (no bingo-card inquiries were on the list). The response rate was more than
12 percent. Why so successful with such a simple package? "People who are already interested in your
product just want the facts,:" she says.

High impact. Rochester, NY-based Xerox also is following Sudhalter's "go-for-the-glitz" formula. The
company is investing heavily in "high impact" direct mail - expensive three-dimensional pieces
designed to stand out among the clutter of direct marketing that deluges today's professional.

To launch its new Conference Copier - an electronic "blackboard" with a copier attachment that can
make reproductions of anything written or drawn on the board - Xerox targeted several major business
centers, starting with San Francisco.

In each city, Xerox compiled a list of approximately 500 key corporate decision-makers. The company
sent each prospect on the list a series of four high-impact, three-dimensional mailers based on a theme
showing how the communications process for meetings has evolved. The first mailing contained a
miniature rosetta stone; the second, a quill pen and parchment; the third, a slate and chalk. The fourth
mailing introduced the new Conference Copier, which sells for $3,295.

Although Xerox would not release response figures, test results are "encouraging," according to Dick
Martin, manager of Advertising and Sales Promotion for Direct Marketing.

The high-impact mailing was just part of the Conference Copier direct-mail campaign. Another mailing,
an invitation to a product demonstration, was sent to 15,000 prospects in each target city. In San
Francisco, approximately 150 of the people invited actually attended the demonstration.

Kam Shenai, product manager for the Conference Copier, points out that For mailings inviting people to
a public seminar or demonstration, the mailing list must be carefully segmented by zip code. The reason:
The farther the prospect's office from the hotel where the demo is being held, the less likely he or she is
to attend.

A third mailing piece in the program was a self-mailer sent bulk rate to approximately 200,000 prospects
in each target city.

"The self-mailer is the most economical format," Martin says. "We tested the self-mailer vs. a standard
package, and the self-mailer generated a better response."

In an unusual offer for a product as costly as the Conference Copier, the self-mailer asks for the order
directly. By giving a credit card number or sending a check for 10 percent of the purchase price, prospects
can try the copier free for 15 days.

So far, the self-mailer has generated many sales. Says Martin: "We have learned that it is possible to sell
high-priced equipment directly by mail and phone. And we do."

The critical list. "Regardless of whether you're about to do your first mailing or your one thousandth, no
factor is more critical to your success than choosing the right mailing list," says Steve Roberts, a senior
account supervisor with Edith Roman Associates, a firm that specializes in high-tech mailing lists. "The
best list can pull 10 times the response as the worst list for the identical mailing piece."

Roberts explains how his clients use both response and compiled lists.

"Response lists are generally better," says Roberts. "People who have previously responded to direct
mail are twice as likely to respond to your offer as people who aren't proven direct mail buyers. With
compiled lists, you risk mailing to the one-third of Americans who don't read direct mail."

But Roberts does recommend compiled lists for total penetration of a particular market. "Let's say you
want to reach every manufacturer in Kalamazoo, MI," he says. "Only a compiled list can do that. A
response list won't have all the names, because not every manufacturer in Kalamazoo has responded to
direct mail."

The best high-tech lists around, says Roberts, are publishers' subscription lists for controlled-circulation
publications. "You have a greater degree of selectivity with a controlled vs. paid circulation list, because
people must give a lot of information about themselves to qualify for the free subscription," he says.

An example of a "hot" high-tech mailing list, says Roberts, is the subscription lists to NASA Tech Briefs,
an official publication of the National Aeronautics and Space Administration. This list allows direct
marketers to target recipients by job function, type of industry, number of engineers at the location and
- importantly - type of products and components purchased.

"With NASA Tech Briefs, you can mail to engineers who buy test equipment, or purchasing agents who
authorize the purchase of electronic components," Roberts says. "You can't get that level of selectability
with a paid-circulation subscription list." He advises list users to make sure that the controlled-circulation
lists they rent are from a BPA-audited publication.

Roberts acknowledges that there is a great deal of duplication among many of the subscription lists, but
he notes that larger companies in the list business have sophisticated "merge/purge" computer systems
that eliminate duplication. For this reason, he urges high-tech marketers to rent all their lists from a single
broker, compiler or list management firm, rather than go to the publications directly.

"There is no extra cost in going through a broker, since the broker gets his commission from the list owner,"
Roberts points out. "Also, the broker gets to know your products and can use his expertise to recommend
the best lists for your offer."

Opting to co-op. Because of rising direct-mail costs, more high-tech marketers are opting to co-op with
their dealers. Says Mark Toner, who runs the direct mail program for Amano, a manufacturer of
computerized time recorder and data collection equipment: "If a dealer wants to do a mailing, we split the
cost. Then we let them decide whether they want to use our mailer or do their own. The manufacturer
should be happy to let dealers do whatever they want."

Amano also does its own mailings, independent of dealers. A good response for a lead-generating
self-mailer, says toner, is 2-3 percent.

Toner believes that unlike consumer marketing, where a host of look-alike products may compete for the
same customers, half the battle in high-tech is simply reaching the right prospects to tell them about your
product. "You have to educate the market," he says. "With an unusual product like ours, most people don't
even know of its existence."

Segmenting mailing lists provide the key to a good response, Toner says. "Using SIC codes, we select
only those portions of the list that reach our best prospects. For example, our best markets are hotels and
restaurants. We also segment geographically."

Toner says that his response from outside mailing lists ranges from less than 1 percent to 3 percent.
When mailing the same piece to his in-house list, he can get as much as 5 percent.

Finally, Toner has discovered that his fellow direct marketers are rather open about discussing their
successes and failures. "Ask your competitors and associates about which lists have worked best for
them," he advises. "In most cases, they'll tell you."

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Editors Note: Want to learn more on how to write great advertising and direct mail from the master Bob Bly?
Check out the NMOA bookstore for training, classes and books: http://www.nmoa.org/catalog/index.htm#copywriting
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