Bulk mailing (junk mail) as a business




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I do not often talk about specific business concepts on this blog, but since I am at a trade show, I thought I would give you a specific business tip today.  That tip is very simple—be skeptical and cautious when people try to sell you business services.  Many business people are slimy, dishonest crooks who are trying to steal your money.

At the show today, I listened to a group of five individuals today in an “educational” presentation entitled “Insider’s Secrets to Profitably Selling Supplements By Mail.”  I will not say who these people are, but if you happen to be visiting Expo West in Los Angeles, do not stop at booth 900.  That area is inhabited by at least five self-proclaimed experts in the business of mass mailing people in the hope of getting them to buy something.  In my opinion, they are actually experts in selling hype.

It is a close call as too whether I was more disgusted by the endless lies from those presenters or just discouraged by the way the naïve crowd actually bought into their silliness.  Businesses are really hurting and they are desperate for hope.  These guys gave out plenty of false hope.

I could give examples for a long time but don’t want to bore you.  Suffice it to say that these guys were trying to sell outrageously expensive services to businesses that have basically no chance of success in mass mailing.  I have never heard so many untrue, deceptive, and stupid statements inside of just one hour.  Expo West should be ashamed of itself for giving these clowns a pedestal.

Let me give you a math problem.  If you mail 10,000 people and you pay $6500 for the mailing, what is the customer acquisition cost?  According to one Einstein on the panel, the answer is $0.65 ($6,500 / 10,000).  He conveniently forgot to consider the response rate, which is the percentage of people getting the mail who will act on it.  When I pressed him, he claimed that the response rate is around 1% (which is probably too high).  At 1%, the customer acquisition cost is $65 ($6,500 / 10,000 / 1%).  Can you make money when paying $65 for a customer?  That is something you have to consider, but if you are selling health supplements as everyone there was, probably not.

Just in case you ever want to do a mass mailing, here are some facts.  First, you have to have a project with huge gross margins (at least 80% but preferably 90%).  Secondly, even with huge gross margins, you are more likely than not to lose money.  Thirdly, pick your partners wisely because that industry is unbelievably slimy. 

But the best advice would be find another way to make money.  As postage rates have gone up and response rates have gone down, bulk mail is quickly becoming obsolete.  There is a new game in town; it is called the Internet.



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Peter Dimond





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