How to Sell by Mail Order
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Copyright 1990, William E. Cohen. All rights reserve. No part may be reproduced, transmitted or transcribed without permission of the author. SBA retains and irrevocable, worldwide, nonexclusive royalty-free, unlimited license to use this copyrighted material.
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TABLE OF CONTENTS
MAIL ORDER SUCCESSES
WHAT QUALITIES ARE REQUIRED?
SELECTING A PRODUCT
TESTING -- MAIL ORDER’S SECRET WEAPON
MAINTAIN GOOD RECORDS
REPEAT BUSINESS -- KEY TO MAXIMUM PROFITS
APPENDIX: INFORMATION RESOURCES
This publication provides basic information on how to run a successful mail order business. It includes information on selecting, pricing, testing and writing effective advertisements for your products.
MAIL ORDER SUCCESSES
Almost a hundred years ago, Richard Sears and Julius Rosenwald founded Sears, Roebuck and Company, which eventually became a $10 billion corporation. At the same time Aaron Montgomery Ward started his company, which also became a multimillion dollar operation. These three entrepreneurs were the world’s first mail order millionaires.
Since then, countless part-time and full-time entrepreneurs have been attracted to the mail order business. Although many have failed, a surprising number have succeeded in both good times and bad. Today you can buy everything from clothes to insurance to live lobsters through the mail.
WHAT QUALITIES ARE REQUIRED?
For marketing wizards, a mail order business can be highly profitable. Melvin Powers, a mail order publisher, started with a single book. Today he has more than 400 books in print and has sold millions of copies. Another marketing genius, Richard Thalheimer, built a multimillion dollar company, The Sharper Image, starting with a chronograph watch and an advertisement in Runner’s World. He now sells not only by mail but also through retail outlets across the country. Although everyone cannot expect to achieve the same level of success as these exceptional entrepreneurs, your chances of building a profitable mail order business increase if you possess the following essential qualities: imagination, persistence, honesty and knowledge.
Imagination is needed to visualize the special appeal that will compel a potential customer to buy your product. In How I Made $1 Million in Mail Order, Joe Cossman described how someone once offered him the rights to sell earrings with little bells attached, a previously unsuccessful mail order product. Cossman turned this product into a mail order winner simply by renaming the product mother-in-law earrings and selling the earrings to newlyweds.
Persistence is required because success is rarely instantaneous. There are always obstacles and setbacks. Cossman struggled over a year before his first success. While holding down a full-time job, he worked at his kitchen table, tackling false leads, problems and failures. He did nothing but lose money. Less persistent entrepreneurs would have given up much sooner. But when he finally was successful, his first product made him $30,000 in less than a month.
Absolute honesty is necessary because a successful mail order business is built on trust, satisfied customers and repeat sales. Cheat your customers even a little and you’ve lost them forever.
In addition, federal, state, and local government agencies, as well as Better Business Bureaus and consumer groups constantly monitor advertising and are quick to act against unsubstantiated claims or infractions of laws.
One of the most well-known laws applicable to the mail order business is the Federal Trade Commission’s (FTC) Thirty-Day Delay Delivery Rule. Basically, if you don’t mention a specific delivery period in your advertisement, you have 30 days after receipt of an order to ship it. If you can’t make shipment within 30 days or by your stated date, you must notify the buyer of the new shipment date before the original date passes. You also must enclose a self-addressed stamped envelope and give your buyer a chance to cancel the deal.
This rule is nothing to fool around with. A well-known, very reputable mail order firm in Chicago was forced to pay a fine of several hundred thousand dollars when a snowstorm caused mailing delays and the firm didn’t notify customers of their cancellation rights using the required method. The fine wasn’t meant to reflect on the firm’s integrity, but it showed that no company is exempt from the rules.
Without proper knowledge your chances for success are minimal. Success stories like Ward’s, Sears’ and Cossman’s are built around those individuals’ constant search for the answer to one important question: What works?
You must continually increase your knowledge if you are to succeed. You can do this through both reading and experience. Experience is a valuable but expensive way to learn. Because you can save time and money learning through the experiences of others, extensive reading is highly recommended.
You can also learn from successful competitors. Thoroughly study advertisements in magazines and newspapers, over a period of time. Note those that run consistently month after month or several times a year. Answer advertisements that are particularly interesting. Carefully study the catalogs, sales letters, brochures and other literature you receive. Particularly study all follow-up mailings. Know what your competitors are doing.
SELECTING A PRODUCT
It may appear that you can sell almost any product through the mail, but this isn’t true. To develop ideas for products, study trade publications, attend product shows, contact manufacturers and answer advertisements. To increase your chances of picking a winner, look for a product that
To maintain a high enough profit margin to offset the cost of advertising, you should select a product that will sell for three or four times what you pay for it. (Retail merchants can usually sell at about twice their cost.) Although you can’t get this kind of markup with all products, you can charge even more for many products. If customers won’t pay the price you need to make a profit, sell a different product.
However, many mail order advertisers are willing to lose money on initial sales to obtain a customer’s name. They hope to make up for the loss by selling other products to that customer in the future. Without the high cost of advertising, direct mail repeat sales can be made at much higher profit margins. Again, this is one of the reasons honesty and efficiency in mail order operations are so important.
Evaluating Your Products
If you have many products to promote, decide which are your best. Do this with a two-step process: first, rank all factors that apply to a certain type of product in order of importance, then grade your particular product for each of those factors on a scale of zero to four (zero meaning poor and four meaning excellent). The result of your calculations, a value rating, will help you determine which products to sell.
For example, let’s say you decide four factors are important and you determine their relative importance as follows:
Now take two candidate products. One is a beautiful vase imported from Japan and the second is a gold plated lucky coin manufactured in your city.
We’ll look at the vase first. Let’s assume that the vase appeals to a reasonably broad segment of the population interested in art. So you assign the vase three points for that factor. However, due to the cost of the product, import duties and shopping, the product has only a fair profit margin -- this merits only one point. The vase is moderately light, so you give it two points for light weight. Finally, there is breakability. No matter how carefully you package the vases, you’re going to have some breakage. So give the product zero points on that factor.
Use the same method to evaluate the lucky coin. Let’s assume that you decide to assign one, one, three, and four, respectively, for the same factors.
Now you can build a comparison matrix like this:
Since 2.0 is greater than 1.6, this tells you that the coin is a better product at this time. If any of the factors change, you will need to do another analysis.
Of course, in real life there are many other factors you may want to include in your analysis, such as the total market potential, the need for the product, the availability of the product in stores, the potential of the product to create repeat business, the investment required, etc.
How you structure your sales offer is also important. You may have the right product and the right price but still lose customers simply by your presentation.
For example, you want to sell a widget at two for $1.00. You could advertise your offer just like that, or you could advertise one widget for $1.00 and a second widget free. Or you could sell one widget for $.99 and offer a second for $.01.
All of these offers are exactly the same; however, they are perceived differently by your customers. Tests have shown that there can be a vast difference in response depending on the way you present an offer. Unfortunately, because every situation is different, no one can tell you which is the best offer without knowing the product and project intimately -- and without doing extensive testing.
Always be cautious when forecasting sales. Your break-even point (the number of units to be sold in order for a product to stop losing money and begin making money) should be set very low, at least while you are testing your probable level of response. For example, if your break-even point is 5 percent of the names on a mailing list, up to 5 percent of the people can respond to your offer and you still do not make a profit. Keep your expectations reasonable. For many businesses, one quarter of 1 percent is an excellent response.
The same idea is true in forecasting orders from magazine advertisements. One famous advertiser is happy if he gets 1.25 times the cost of his advertisement in sales. This means that if the advertisement cost $100, he is delighted if the resulting sales amount to $125. For one publication, this means .10 of 1 percent of the readership responded. However, many advertisements don’t even bring in .01 of 1 percent of their readership.
TESTING -- MAIL ORDER’S SECRET WEAPON
Successful mail order operators test almost everything. They measure the response to an advertisement or mailing by testing all advertising variables, such as
Testing is a scientific approach to mail order selling. It permits a mail order entrepreneur to fail with four out of five products and still walk away with big profits on the fifth product.
How is it done? Spend a small amount of money for a test advertisement or mailing list. A complete failure tells you to drop the whole project. Marginal results tell you to experiment and rework some aspect of the project. A major success gives you the green light for a larger investment.
In this way, you can afford to lose money on several dismal failures. But when your testing indicates a clear success, you can move immediately to capitalize on what you know to be a winner. The idea is not to risk a lot of money until you are fairly certain of success.
Nothing determines the success of a mail order enterprise so much as its advertising, whether it be via magazines, newspapers, radio, TV, direct mail or some other form of promotion. Writing advertising copy, preparing art, selecting media, determining price and other aspects of creating ads usually require expert skills. If you decide to work with an advertising agency, select one primarily on the basis of its successful experience in producing profitable mail order advertising.
Whether you decide to use an agency or go it alone, there are some important points to remember.
Where to Advertise
It is important to recognize that everyone is not a good prospect for your business. Concentrate your efforts on the media reaching those segments of the market that are more likely to buy your product or service. A good strategy is to advertise in the same place where similar items are advertised. This is true whether the media you are considering is a magazine or a list of names for a direct mail campaign.
When to Advertise
The month in which you advertise a product or service can greatly affect the results. Follow these general guidelines:
What to Put in Your Advertisements
The words (or copy) in your advertisements are critical. They should not be just a casual consideration. In his book Tested Advertising Methods, John Caples described two ads that were the same size, used the same illustrations and were in identical publications. Only the copy differed. One ad sold 19 times as many goods as the other. This is not just the difference between failure and success; it can be the difference between failure and a small fortune.
There are many different formulas for developing copy. Initially, you should write your advertisement according to a definite copy structure. Once you know that you can write good mail order copy, you can experiment with less structured forms of communicating. The copywriting checklist included in this publication lists several important considerations. A basic structure to begin with is described below.
The most important element of your ad and copy is the headline. This is how you gain attention. Yet many copywriters spend hours writing the body of the ad and just a few minutes on the headline. The weekly magazine, "Advertising Age," once related that Maxwell Sackheim sold 500,000 copies of a book by changing the title, from "Five Acres" to "Five Acres and Independence."
All good headlines have certain things in common. First, they appeal to the reader’s self-interest and stress the most important benefit of the product or service. A powerful headline arouses the curiosity of the reader, presents startling news or suggests a quick and easy way to obtain benefits.
Second, good headlines use key words that are psychologically powerful in attracting potential readers. In "Confessions of an Advertising Man," David Ogilvy says that the most important of these key words are free and new, but there are many other powerful words. Here is a list of some words psychologists have discovered to be powerful in stopping readers and getting their attention: 1
1 For a comprehensive list, refer to William A. Cohen, "Building a Mail Order Business," 2nd Edition, (New York: John Wiley & Sons, Inc., 1985).
Once you have gained the reader’s attention, demonstrate the benefits of buying. The benefits must override the cost of the product and the trouble involved in finding a stamp and envelope, writing a check and mailing the order. Don’t sell product descriptions. Sell benefits. A customer at a restaurant buys the taste, smell and sizzle of meat not a piece of meat. It is your job to describe your product in terms of taste, smell and sizzle.
Credibility is very important in making your copy effective. Regardless of what you say about the benefits or advantages of a product, if your potential customers do not believe what you say, they will not place an order.
Testimonials can be helpful, particularly if you have permission to use the name of an individual whose testimonial is on file. An alternative is to omit the name or use only initials.
You can also achieve credibility by identifying a bank, accountant or attorney as a reference. Even showing a picture of the building that houses your business can add credibility, especially if it is an imposing structure.
A basic law of sales is that a face-to-face salesperson must ask for an order. As a salesperson selling through an advertisement, you should also call your customers to immediate action. You don’t want your customers to cut out the coupon and put it away for another day. You want your customers to order immediately. Research has demonstrated that regardless of initial intent, in most instances, if your prospects don’t order immediately, they won’t order at all. Include incentives, such as a statement on limited quantities or a time-limited offer.
What Does Advertising Cost?
Top quality advertising costs more, but it usually brings the best results. However, don’t overspend on advertising, direct mail and other promotions. Don’t invest in full color printing when one or two colors will do the job. There is no need to use the most expensive paper, elaborate art or other extravagances to sell profitably.
Use of Post Office Box Numbers
Some states require that you include a business (or home) address in your advertisement, even if you want orders to come to a post office box number. If you have the choice using a post office box number or your home address, consider these trade-offs:
Whether or not you use a post office box will not mean the difference between success and failure. It is more a personal preference decision.
Credit Card Sales
Credit card sales will increase your returns. This is because prospects who aren’t familiar with your company do know the names VISA and MASTERCARD. Use of credit cards also means that your customers can order higher priced items easily on credit, with the advantage that the bank grants the credit, not you. Since some mail order companies find that they are able to collect only about 60 percent of their credit sales, this may be no small consideration. However, the bank will charge you several percentage points on each order charged against its credit cards. If you are new to business, you may also have a problem convincing a bank to let you use its credit card service.
You should also know that some individuals who have become mail order millionaires did so dealing on a strictly cash basis with no credit cards.
If you sell expensive items, or inexpensive items likely to total a fair amount for each order, credit card sales may be worth investigating. If you are going to enable your customers to order through a toll-free number (see below), credit cards definitely make sense.
Toll-free numbers allow your customers to order more easily, which will increase your sales. The question is, will it increase your profits? Toll free means that the caller doesn’t pay; but you do. Some mail order operators have found that, for their product, use of a toll-free number is not profitable. Others have found that a toll-free service is what makes their business profitable.
As with other important business decisions, one way to find out whether you should use a toll-free number is to test one. Installation and toll costs vary; you can find out more about toll-free numbers through your telephone company.
Are all the following elements of the offer present in the copy?
MAINTAIN GOOD RECORDS
A word of caution: to succeed in mail order, keep accurate records of all figures that are important to the success of your business, such as
However, do this in the simplest, easiest and least time-consuming way possible.
Use a Computer
Although you can start a mail order business without a computer, it is hard to imagine anyone operating very long without one. More than any other single tool, a computer will help you keep accurate records, increase your productivity and stay competitive. Before you buy a computer, wait until your business is established and you have a profitable product. Once you have established good credit, a computer should be one of your first important investments.
A computer can help you to perform most of the key functions of running a mail order business. Below is an outline of how different software systems can help you.
The computer has revolutionized the mail order business, and it can help you to become successful. When you are ready to get a computer, go to your local business software store. They can show you many of the programs available. If your town doesn’t have a software store, get a copy of one of the many computer magazines that are published. You will see many programs advertised and described and you can obtain catalogs listing hundreds of programs that can help you run and build your business.
REPEAT BUSINESS -- KEY TO MAXIMUM PROFITS
Continuous profits come from continuous sales. As already suggested, rarely is a profitable mail order business established on a one-time sale. Paul Muchnick, president of Paul Muchnick Company in Los Angeles, suggests the following methods for stimulating repeat orders at minimal cost.
Mail order can be a profitable and interesting full- or part-time business. But remember, you will probably lose money before you start making it. So don’t make major investments until you have gained experience and until you have found the right product, the right price and the best means of communicating to the most receptive market.
Brumbaugh, J.F., Mail Order Made Easy, North Hollywood, CA, The Wilshire Book Company, 1979.
Burnett, Ed, The Complete Mail List Handbook, Englewood Cliffs, NJ, Prentice-Hall, Inc., 1989.
Caples, John, Tested Advertising Methods (fourth edition), Englewood Cliffs, NJ, Prentice-Hall, Inc., 1989.
Cohen, William A., Building a Mail Order Business (second edition), New York, John Wiley and Sons, Inc., 1985.
Cohen, William A., Direct Response Marketing, An Entrepreneurial Approach," New York, John Wiley and Sons, Inc., 1984.
Gosden, F. Jr., Direct Marketing Success, New York, John Wiley and Sons, Inc., 1986.
Hoge, Cecil C. Sr., Mail Order Know-How, Berkeley, Ten Speed Press, 1982.
Hoge, Cecil C. Sr., Mail Order Moonlighting, Berkeley, Ten Speed Press, 1976.
Holtz, Herman. Mail Order Magic, New York, McGraw-Hill Book Company.
Joffe, G., How You Can Make At Least $1 Million (But Probably Much More) in the Mail Order Business, New York, Harper and Row Publishers, Inc., 1978.
Jutkins, Ray, Direct Marketing: How You Can Really Do It Right, Costa Mesa, CA, HOL Publishers, 1989.
Katzenstein, H. and W. Sachs, Direct Marketing, Columbus, OH, Charles E. Merrill Publishing Company, 1986.
Kobs, Jim, Profitable Direct Marketing, Chicago, NTC Business Books, 1979.
Lewis, H.G., More Than You Ever Wanted to Know About Mail Order Advertising, Englewood Cliffs, NJ, Prentice-Hall, Inc., 1983.
Nash, Edward, The Direct Marketing Handbook, New York, McGraw-Hill Book Company, 1984.
Nash, Edward, Direct Marketing: Strategy/Planning/Execution (second edition), New York, McGraw-Hill Book Company, 1986.
Ogilvy, David, Confessions of an Advertising Man, New York, Macmillan Publishing Company, Inc., 1988.
Powers, Melvin, How to Get Rich In Mail Order, North Hollywood, CA, The Wilshire Book Company, 1976.
Rapp, Stan and Tom Collins, Maximarketing, New York, McGraw-Hill Book Company, 1987.
Roberts, Mary Lou and Paul D. Berger, Direct Marketing Implement, Englewood Cliffs, NJ, Prentice-Hall, Inc. 1989.
Schwartz, Eugene M., Mail Order, New York, Boardroom Reports, 1982.
Simon, J, How to Start And Operate a Mail Order Business (fourth edition), New York, McGraw-Hill Book Company, 1987.
Stone, Bob, Successful Direct Marketing Methods (fourth edition), Chicago, NTC Business Books, 1988.
Tepper, Ron, Secrets of a Successful Mail Order Guru: Chase Revel," New York, John Wiley and Sons, Inc., 1988.
Mail Order Business Directory, Coral Springs, FL, B. Klein Publications, Inc.
Guide to American Directories (tenth edition), Coral Springs, FL, B. Klein Publications, Inc.
O’Callaghan, Dorothy, Mail Order USA, Washington, DC, Mail Order USA.
Direct Mail List Rates & Data, Skokie, IL, Standard Rate & Data Service, Inc.
Consumer Magazine & Farm Publications, Skokie, IL, Standard Rate & Data Service, Inc.
APPENDIX: INFORMATION RESOURCES
U.S. Small Business Administration (SBA)
The SBA offers an extensive selection of information on most business management topics, from how to start a business to exporting your products.
SBA has offices throughout the country. Consult the U.S. Government section in your telephone directory for the office nearest you. SBA offers a number of programs and services, including training and educational programs, counseling services, financial programs and contract assistance. Ask about
For more information about SBA business development programs and services call the SBA Small Business Answer Desk at 1-800-U-ASK-SBA (827-5722) or visit our website, www.sba.gov.
Other U.S. Government Resources
Many publications on business management and other related topics are available from the Government Printing Office (GPO). GPO bookstores are located in 24 major cities and are listed in the Yellow Pages under the bookstore heading. Find a “Catalog of Government Publications at http://catalog.gpo.gov/F
Many federal agencies offer Websites and publications of interest to small businesses. There is a nominal fee for some, but most are free. Below is a selected list of government agencies that provide publications and other services targeted to small businesses. To get their publications, contact the regional offices listed in the telephone directory or write to the addresses below:
Federal Citizen Information Center (FCIC)
Consumer Product Safety Commission (CPSC)
U.S. Department of Agriculture (USDA)
U.S. Department of Commerce (DOC)
U.S. Department of Health and Human Services (HHS)
U.S. Department of Labor (DOL)
U.S. Department of Treasury
U.S. Environmental Protection Agency (EPA)
U.S. Food and Drug Administration (FDA)
For More Information
A librarian can help you locate the specific information you need in reference books. Most libraries have a variety of directories, indexes and encyclopedias that cover many business topics. They also have other resources, such as
In addition to books and magazines, many libraries offer free workshops, free access to computers and the Internet, lend skill-building tapes and have catalogues and brochures describing continuing education opportunities.
Published - July 2011
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