EX #1 A SWIMMING POOL COMPANY Let’s say you are an established swimming pool design and installation company looking to drive off-season sales. You want to provide a special offer to prospective customers with a pool starting at $50,000. The objective is to send out to target 15,000 households chosen based on residences with children, high home values and high household incomes. Projected Response Rate: 0.5% Typical close rate: 10% Typical Profit Margin: 20% Estimated Direct Mail Piece cost: $0.55 Revenue = 15,000 x 0.5% x 10% x $50,000 = $375,000 Profit = 20% x $375,000 = $75,000 Cost of Acquisition = $0.55 x 15,000 = $8,250 ROI = 75,000/8,250 = $9.10 profit per $1.00 spent A more effective campaign would be a personalized mail piece sent to smaller sample of recipients, for 3 consecutive months. In this case you could expect a big increase in response rate, perhaps to 2.5%. In this case you will send a total 15,000 pieces to 5000 targets. Projected Response Rate: 2.5% Typical close rate: 10% Typical Profit Margin: 20% Estimated Direct Mail Piece cost: $0.75 Revenue = 5,000 x 2.5% x 10% x $50,000 = $625,000 Profit = 20% x $375,000 = $125,000 Cost of Acquisition = $0.75 x 15,000 = $11,250 ROI = 125,000/11,250 = $11.10 profit per $1.00 spent Although the second scenario is better, both are worth the cost. Even at a 0.5-1% response rate, is it worth the investment.

EX #2 A Dental Practice A new dental practice is eager to build its patient base. A typical new patient will generate $1000 in revenue the first year, but $10,000 average revenue over their lifetime. The practice has committed to a yearlong direct mail campaign to build its patient base. Seeking to target the most receptive audience to establish a long term relationship, they have chosen to target 20,000 potential customers based on home ownership, length of residence and age of the recipient. They will mail to 5,000 customers per month, targeting each customer at least 4 times. In addition, they have decided to target new movers to the area each month, approximately 150 per month. Projected Response Rate: 4.0% Typical Acquisition Rate: 50% Typical Profit Margin: varies, assume average of 35% Estimated Direct Mail Piece cost: $0.40 Revenue = 21,800 x 4% x 50% x $1,000 = $436,000 Profit = 35% x $436,000 = $152,600 Cost of Acquisition = $0.40 x 5,150 x 12 = $24,720 First Year ROI = 152,000/11,250 = $6.17 profit per $1.00 spent Lifetime ROI = 10 x $6.17 = $61.17 profit per $1.00 spent Where else could you possibly make over 60x your initial investment? Direct mail marketing works.