The Cost Per Impression Era Is Over featuring Prof. Jonathan Zhang

Speaker A: Welcome to Nerd Marketing, an original podcast for e commerce operators and marketers looking to level up. Uh, Drew Sinaki and Michael Epstein will bring you actionable strategies from their decades of running eight and nine figure brands, along with interviews and insights from the leaders of some of the most successful brands in the world.

Speaker B: Hey, everybody. Today on the Nerd Marketing Podcast, Mike and I talked to Professor John Jonathan Zhang, who is a business and marketing professor at Colorado State University. He is one of, if not the only experts in academia on direct mail. And he publishes in the MIT Journal, in the Harvard Business Review, all about how big brands are using direct mail. We go over a lot of data that shows how direct mail as a channel can have lower cacs, lower than digital channels, and drives higher lifetime value customers, how CMOs can best leverage the channel. You're not gonna wanna miss it because I think this really is the next five years in marketing. And without further ado, enjoy our podcast with Jonathan Zhang.

Speaker C: Maybe to kick things off, John, what was your perception of direct mail when you started this research?

Speaker A: I've been observing and I've been thinking about this phenomenon, uh, probably since 2018, you know, and, uh, let me tell you why. Because, see, I've always been a very tactile, kind of a sensory person, you know, like, um, you know, I like going to physical stores, I like to, uh, read paper books. I enjoy receiving, like, catalogs over the years, ever since I was a teenager. So the culture of marketers, you know, starting around 2008, 2009 and 2010, the beginning of digital marketing, when it was heavily subsidized, know, was that, hey, you know, uh, the days of direct mails are over. Right. That's like an old dinosaur system. And digital marketing, just like, nobody gonna read paper books, no one's gonna go to stores. Right. Everybody's gonna be virtual, everybody's gonna online. And so you could see, you know, it's a cultural shift.

Speaker B: Right.

Speaker A: So a lot of that shifted towards digital, as you guys know.

Speaker B: Right.

Speaker A: You know, I always found this kind of extreme pendulum shift to be questionable. Sure. You know, E commerce, that's the period when E commerce was growing a lot. You know, even though offline retail was still kind of a vast majority of the retail activity, but commerce was growing at a faster pace. It's a human tendency for media, also for business decision makers, to focus on the next shiny technological object.

Speaker B: Right, sure.

Speaker A: Being the same thing with AI, you know, that's why a lot of companies are all of a sudden become AI driven. They have this Kind of AI, uh, name in their brand. I saw the trend going on through much of the 2010s. And one thing that start to uh, get me thinking is that around 2000, if you recall, around 2017, maybe 18 that season, Amazon started sending out catalogs for its toy category, right? And this got me thinking, right? Because those guys, they have the most amount of data, right. Of all retail operators. So they must see something that most operators didn't see at that point, right? At the same time, I think several other companies, you know, digital native companies, right, like Bonobos and Warby Parker, they started to have some sort of a direct mail presence. And then the reason why it's a paradox is that those companies started saying, oh, you know what, you know, we are truly digital, right? We, you know, we don't have any kind of a physical presence. Not only this, they started to have, um, direct mail. They also started to have physical stores. You can remember Amazon has store, right, starting in 2014 and then all these other kind of mobile part stores. So made me think about my original thesis that hey, you know, even though technology has made these digital advertising and digital marketing possible and you know, for, for many years, more effective, more measurable and cheaper than traditional quote unquote direct mail or even junk mail, because junk mail wasn't targeted. But you know, our human psychology, how we make decisions hasn't really fundamentally changed because that's the reason why all these tactile sensory experiences still they're making a comeback, right? So that led me to my first kind of investigation, uh, and I ran my first field study in 2019 and uh, very simple field experiment, right, With a online luxury, uh, watch retailer. And the premise is that, hey, you know, if you don't want to have a store, right? And if all you're doing is email marketing, can you make your marketing little bit more, uh, sensory rich by introducing catalogs, right? I'm not asking you to sign a lease, I'm not asking you to, you know, hire staff, right? You know, why not make it a little more sensory rich than just having a, ah, having an email. You know, we did that, um, the ROI was 600%. You know, they had increased inquiry, increased revenue, right? The company made additional $12 million in incremental profit, not just incremental revenue over the span of one campaign that wasn't even like that customized. It was just like, you know what, let's add a catalog, right? And then let's compare the customer behaviors for those who receive a catalog versus those who only receive Email like business as usual. Let's see what happens. Right? That short piece became a 2022 HBR. And afterwards I wanted to figure out what happened, right? So then I conducted interviews about the respondents and they say, oh, because I feel like when I'm reading the catalog, I feel like the watch spoke to me, right? Again, it's this kind of a physical proximity, right? And then, as you guys know, there's a lot of neuroscience about this touch, right? The touch of paper. And then if the product is hedonic and aspirational, uh, and emotional purchase, it feels closer, right? Physically, psychologically, closer to you, right? So that was 2020. We established that there is a promise for catalog. And the, uh, title of the article is that why are Catalogs making a Comeback? And it was making a comeback because Amazon started to, uh, do it. And then fast forward to two years later during COVID right? Nobody could do anything, right? All the stores were closed, right? Nobody was going to the stores, right. I want to know whether this effect kind of persisted during COVID right? And also because of the first HBR piece, more retailers got interested. So I was able to partner with a much, uh, bigger retailer than just online luxury watch. Because I wanted to figure out, does this effect persist across different categories or only like, you know, luxury products, right? So we run a multi product category field study and that was published in 2020 in Harvard Business Review. But again, it's just only one retailer, right? So then fast forward again. You know, 2024, you know, the USPS reach out and say, okay, you know, what if we get you in touch with a, uh, by the way, I was the only one in marketing academia who's doing, like, direct mail, right? Because, you know, all of my colleagues are saying, oh, you know, John, hey, why are you taking junk mail? It's like, you know, I say, wow, hold on, hold on a second. You know, it should be a. You know, I always believe in a balance, right? Uh, there should be a balance. It should be a mix. Just like some of us prefer to buy everything online on Amazon. We don't want to go to store. Some of us prefer to go to store, right? Just like some of us prefer to rekindle, you know, some of us prefer to read paper, right? Just like our brains are different. You cannot just say there's one technological solution that solves all problems. So anyways, so then usps, uh, said, you know what, what if we get you in touch with an agency that has, uh, uh, a lot more campaigns across different years, right? Much More robust than just your one retailer. Can you run a, uh, econometric model and uh, estimate at scale what is the impact of direct, uh, mail on firm performance in terms of revenue and sales and profitability. So I did that. So they got me in touch with cohere1, which is, as you guys know, is agency. Right. So, um, that was great because, uh, it's lots of campaign over the years across different type of not only product categories.

Speaker B: Right.

Speaker A: But also different tiers of companies. Right. Some companies are more well known than others. Right, right. So then we're able to figure it out, you know, based on my um. Because I have a economics and stat background. Based on the models you were able to pinpoint when is the direct mail most useful, which type of companies, which type of uh, industry. Right. Seasonality. Because the data is, you know, is rich. We could generalize and have a statistically significant measurement of that translates, you know, from direct mail to, to uh, performance, which think that. And based on my conversation with CMOs and CFOs in particular, that is a major pain point measurement issue.

Speaker B: Right.

Speaker A: Data measurement. I think that's where you guys, you know, post, post pilot, that you guys are trying to solve exactly the same problem that my observation and my conversation and my research identifies, which is, you know, measurement. Right. What type of data are needed? Right. Uh, how to measure roi. Right. How long to measure it for? And then once you have that kind of, uh, measurement, uh, stack, then how do you orchestrate, Right. So that the operators that subscribe to your uh, service can have some sort of a plug and play interface.

Speaker C: Interestingly, you were finding that CAC when you spoke to, I think a Couple hundred brands, CACs were lower on direct mail than even some of the digital channels. I'd love to hear sort of your summary of the results on a metric level, how you saw it performing relative to some of these other channels.

Speaker A: Again, this is Another problem that CFOs and CMOs and marketing directors, people who are trying to use this, and also kind of financial officers who are trying to justify the investment. What they always express is that, you know, what, um, the cost per impression is cheaper. Right. For, for digital versus direct mail. Which is true. Right. But then if you think about it, cost per impression is cheaper. But what is the. Well, you know, you don't build a business based on impression. You know, business is essentially you acquire new customers, you make them purchase and you retain them and then you make them buy more. Right. That's how any business runs. Whether it's B2B or B2C. You guys agree, right? So then let's forget about the cost per impression. Let's figure out what is the actual cost of uh, acquisition. Right? Sure. You know, getting someone, uh, um, a uh, mail piece is m. More expensive because, you know, your production piece, uh, you know, mailing all that stuff. Right. You know, is more expensive than a Google impression or Facebook impression. But then, you know, the conversion rate is much higher. Right. So then not only commercial is higher, but customers acquired from the direct mail, not only they made a higher amount of purchase, the initial purchase. Right. They also were more frequent buyers. Our observation period is four months. This is a field study again, AB testing. So I spent quite a bit of time getting this, um, cosmetic and beauty retailer on board. And um, we built up this uh, measurement infrastructure, right. To, to. To able to run this A B testing similar to a, uh, clinical trial. Our observation period is four months. Right. Because the reason why you want to have 4 month is that customers that were acquired through mail pieces because mail pieces are more sensory rich, you know, they have more information, they linger at the home longer. Then they should develop a stronger understanding of the brand and as a result they should be more interested in the brand and they should buy more frequently. So then we needed to say, you know what, we cannot just like observe what happens next week right. After we send out the mail. We need to observe a. We need to give a sufficient amount of time for the repurchase to come in. So then based on the category skin cream, all these other things, we cannot measure forever. Right. Ideally, I want to measure for longer, for a year or two because I think the effects will get amplified if you have a longer window. Right. But say, you know, four month is a good compromise because the company wants to know as well. Right. Because, you know, like those companies, they, they run on quarters. They, we don't. They don't have the luxury of, uh, academics where measure things anyways. So, uh, but within four months you could see, you could see already. You know, not only they purchase more in the beginning, they also have made more frequent purchase. Right. And also they made um, more categories, they purchased more categories compared to customers who are acquired only through a digital channel. Which is consistent with the psychological theory that, you know, customers that saw the direct mail, they have a better understanding of the entire product portfolio.

Speaker B: It's in line with this Black Friday benchmark report we did where we looked at several thousand brands over the last few Black Fridays. We saw first, uh, purchase AOV higher for customers who touch Direct mail, we saw lifetime value higher.

Speaker A: The observation window really differentiates first by product category and also the customer journey. Right, sure. I mean, like for something that is impulse buy. Right. Lower ticket item, you know, let's say like a skin cream that costs like $10. You could have a shorter window versus a car. I mean, I think eventually, if you have enough categories, uh, and then you have a better understanding of the customer journey across different type of product categories and also, you know, across different seasonality, you could have almost an, uh, industry specific observation window.

Speaker C: Yeah, I imagine that's true. I mean, we see certainly significant differences in performance across verticals and categories.

Speaker A: Right.

Speaker C: Primarily driven by AOV or frequency of purchase. A consumable product will look a lot different than a pizza oven. That speaks to something that I also found really interesting that you highlighted a lot. You did a lot of analysis of sort of the psychological impacts of direct mail relative to other channels. What is like the endowment effect applied to marketing tactics or marketing channels.

Speaker A: I try to summarize these effects into two quote, unquote sound bites. The first one I think is like, you know, direct mail is like a channel you cannot unsubscribe. It sits on your kitchen counter for a little bit, even if you receive it from your mailbox. You look at it and then you're on the way to the recycle bin. That walk for 10 seconds. That 10 seconds is probably 9.5 seconds more than an email that you just saw it and then you don't even open it if it's a well produced piece. Right. So you did a lot of work with catalogs, you know, like, again, you know, more hedonic. So you can think about luxury like watch and jewelry or clothing. You see a lot of clothing restoration hardware that, you know, they don't do it anymore, I don't think. They used to have those huge, uh, uh, books. Right. You know, hundreds of pages of furniture. They could do that because the AOV is so high for their products. Those things sit around, you know, on the coffee table for like, for months. And then people forget to throw them away. And then what happens that every time you sit down, you look at it, it's a constant reminder. Super effective. Right. So, you know, whatever. Let's say $10 to produce a glossy magazine like catalog, if that produces reminder 20, 30, 40 times over the span of the lifetime, you know, in your living room. I mean, not only the cost per impression is relatively low. Right. Compared to digital, but it's effective. Right. Because you're flipping through it and also part of it. Uh, okay, so, and then going back to the second point, like, you know, there's like idea of endowment effects. I think the endowment effect applies to again, beautifully produced, almost like a magazine type of uh, uh, catalog.

Speaker B: Right.

Speaker A: It has narratives and pictures and you know, like I think a lot of luxury brands are very good at doing this. Cruise lines, they do that as well. You know, they tell you about the vacation spots, they have those pictures. So well done. You don't want to throw it away, you keep it around for a while. Again, it's not a magic. Right. These are the reasons why, you know, direct mail, when it's done well, is effective. They stay around for longer and people's attention lingers for longer.

Speaker C: Yeah. And you talk about how you spoke to a bunch of CMOs and CFOs primarily in your research. What were the differences between how those different leaders thought about direct mail and investing in the channel and how they thought about measuring performance or just their approach to the channel? And how should those two work together to be successful with this channel? Because I imagine they come at it from slightly different perspectives. You got the brand person over here, you got the pure sort of finance spreadsheet person over there. How do they think about it differently? How do they come together to execute the channel successfully?

Speaker A: You know, based on the companies that I've talked to, there are two types of companies. Right. One is that they've uh, never really done much with direct mail. Again, I think a lot of it's cultural thing.

Speaker B: Right.

Speaker A: So it also depends on the age of the cmo. Right. So you know, if it's uh, some of the companies I talk to, you know, especially tech driven retailers, you know, their age could be like in the mid-30s. Uh, they never believed it. I think the focus on the wrong metric, they're still focusing on cost per impression. Right. They focus on reach. But again, you know, the metric problem is there. I think the measurement is a big deal. I think all three of us are collectively trying to solve the problem of measurement. But once they tried it, especially after I shared my semi preliminary results with them and uh, some of them have tried it, they see a bigger promise. Now the other hurdle, especially from a CMO, uh, perspective is that there's like a gap over the past 10 years. Nobody talk about omnichannel marketing. When they think about omnichannel marketing. They think about, okay, Facebook, Google, TikTok. But I think there's a lack of training, I think among business schools as ah, a result there's a lack of understanding among the current marketing practitioners how to utilize various version of digital versus analog or tactile channels. I don't know if that's something that you guys are seeing. It's a disconnect, right? So, like the marketers that use direct mail before they get it again, I think the folks who are in their 30s, the prime that are making big decisions for, for the next, uh, decade or two, I think there's a general lack of talent in this space, certainly experience.

Speaker B: If you look at the typical Shopify store, first, no one has an mba. Not like you need an MBA to run a Shopify store. The second is they skew a bit younger. And so I would say you've got this entire generation of marketers who grew up just throwing money at Facebook. It was like money and money out. And that's kind of how they think they think in terms of a Facebook funnel, an email, you know, maybe Warby Parker and Peter Federation. A lot of those brands that came out of Wharton sort of started a dialogue around lifetime value. And all of a sudden I think that manifested in, okay, now I've got to not only watch Facebook, I've got to figure out email so that I can maximize lifetime value. But typically when we're having conversations with a brand and they've done direct mail, the person on the other end of the call is 40 years old or older. Typically. Also, the bigger brands doing 100 million in revenue went up a billion dollars in revenue. Like, that's where you find some experience with that channel.

Speaker A: Yeah. So I think part of the problem is that the business school, the professors, my colleagues, have been neglecting this domain for the past like 15 years. My first HPR published five years ago, and I think even to this day, I'm the only one doing this. I try to get some other folks interested. They're like, nah, I care about ad measurement on Amazon. I said, sure, that's also very important. But when digitals are getting more expensive, if you think about it, if you are a pure play e commerce company, if the digital ads are getting not only they're getting more expensive, but the trackability goes down because of privacy concerns, I mean, what are your alternatives besides opening up a store? I mean, that's even more expensive than direct mail. So I feel like now, hopefully companies are seeing the pun. I think they definitely see the urgency. That's my experience talking to the CFOs, the CMOs. They want to know because they complain. They say, you know what, 10 years ago, uh, These big platforms, the costs were lower, right? But now over the past decade they've got more powerful, right? And uh, as a result, once you have more power, you increase your price. So now they're getting more expensive. The ROI is going down. Like, what can we do next? I think they all feel the urgency to find alternative, more effective ways to acquire customers and retain them. So I think the um, stores are always good. That's another area of my research. Having physical stores, especially onboarding new customers, assuming the stores are well run, right. They're not like run down stores. But again that's a luxury that a lot of smaller, uh, companies, they can't afford to have. Something that I wanted to explore next is that speaking of omnichannel. So really omnichannel. So again, you have digital, you have email, you have direct mail. And then I want to know how these things kind of uh, interact with having a physical store presence. I think there's a synergistic effect if they're used well in the right sequence.

Speaker C: You called that out across marketing channels as well. In the research. You were seeing that halo effect as brands added more channels to their overall mix. You were seeing increased efficacy, see, across the entire mix. Is that accurate also?

Speaker A: I think part of it is, you know, you can think of as reminder, right? Reminder, multiple touch points. And then, you know, um, one thing I also wanted to explore more, I think it just also adds more credibility, right? Just like, you know, we see a company with a store, right? We feel like this is a real company. You see a company that's sending out a well produced, uh, direct mail piece. You feel like, oh, this company has the capital and the, you know, kind of the production value to do this. It must, must be a legitimate company. That kind of a branding halo carries over across channels.

Speaker C: For brands that are thinking about entering the channels, how would you think about allocation of budget if they've been pure play digital up to this point? How should a brand or CFO think about allocating some test budget to exploring it as a new channel?

Speaker A: I'll give you my kind of, uh, back of the envelope answer I want to hear also I'm curious to hear, uh, what you guys have recommended to your folks. I would say depends on the type of products that you're in, right? The category you're in. If you are in a kind of what I call kind of emotional m. Hedonic products. So get, for example clothing, I think you should at least devote in 2025 in this environment. Probably devote 20% at least 20% even as a test case. Right. Or even if not more. Because we know that direct mail is more effective with those type of uh, discretionary hedonic products with higher price t. If you are in a utilitarian type of product that lacks those kind of emotional effect, it's harder to say. Right. So then I'll be a little bit more cautious. You know, I would say maybe like 5 to 10% just to see.

Speaker C: Yeah.

Speaker A: But at least I think having the infrastructure because Even if it's 5 to 10% it forces the company to build up some sort of a capacity and capability. Right. So that even later on if they wanted to diversify the marketing mix, they could do it because otherwise, you know, they're just stuck with the same M

Speaker C: loop and enough that you can get sort of statistically significant read on how things are performing. And you also saw basically a one to one correlation on spend into the channel to top line revenue.

Speaker A: Yeah. And that's just a very coarse type of uh, analysis.

Speaker B: Right.

Speaker A: Because the data was there, but then it's not as detailed as I would like. So. Yeah. So even with that you could see a uh, one to one conversion again for some type of companies. And uh, that's just overall across all kinds of companies and all sizes or industries.

Speaker B: Right.

Speaker A: But if you break it down to more details, you know, you could see some of the companies again, the usa well in the right season, like if it right in the right shopping season, the ROI is even higher.

Speaker C: And what are some of those characteristics of the companies that you saw having the most success with the channel?

Speaker A: Bigger brands uh, benefit more from uh, direct mail because they already benefit from a halo effect. But they're well known. Few people pay more attention to the direct mail piece. They register more. So I think that's the main fact that I found. I think clothing and furniture benefit more, you know, versus uh, you know, non clothing, non furniture, which is also not surprising there are any luxury brands. But I would imagine like again if the psychological theory that um, direct mail, you know, produces kind of a stronger consumer emotion, consumer affect, I would imagine like chocolates, vacation, those type of industries would benefit more like Holland America, you know, Carnival and you know, celebrity, they send out those uh, vacation packages.

Speaker B: Right.

Speaker A: So those companies, the reason why they're doing it, they've been doing it for years, is that they see a ROI

Speaker C: that's consistent with what we see particularly on the acquisition side. Brands that have a little more baseline brand awareness where it's maybe less likely to be the first Interaction or first touch point that someone has ever had with the brand versus maybe it's uh, a brand that they remember seeing a Facebook ad at some point. They remember seeing even a billboard or something like that and then direct mail. We all know that it takes multiple touches to convert a new customer. So I think to your point, brands that have some general awareness in the market are going to be able to see success on the acquisition side in particular.

Speaker A: One thing I have explored, I hope to do in future, the type of offers. Imagine you're an unknown brand. Let's say three of us started a clothing company, right. We're not known, uh, which means that it's risky to buy our products, right? So then how do you get your name out there? How do you even build awareness? Right. I could imagine that if some sort of postcard with a very heavy discount then um, might get people to try it out. Let's say like 70% off, I don't know, just like a new customer only, whatever, right. You know, we're launching a new company and then you know, maybe that's like a good way to build the initial brand awareness because building a brand takes a long time and costs a lot. Right? But then how do you, if you're a brand new company and then nobody knows, how do you even like get people to try it out for the first time? You know, I think it's like a chicken egg problem. I think direct mail. I think if it's, if you, if you make a um, like a eye popping type of almost like a free shirt or whatever. Like you know, maybe doing that if you do the math to induce first trial, doesn't have to be expensive thing. Let's say, let's say you give them a shirt, a basic shirt, right? Like a white shirt. Let's say uh, Cox is $10, right. Let's say they sell it for $40 online. But then you say, you know what, you just get it for free. That allows them to see the package, the shipping, the experience and then the customer become a customer. Sure you're neg begin with but I wonder if you do the math in aggregate, is that cheaper to build a brand this way than to have like TV commercials and that kind of stuff. So there are alternative ways to use direct mail not only just to as a customer acquisition tool for like known firms, but even for potentially as a brand building.

Speaker B: We do get that question all the time on is it better to put a discount in the postcard? A lot of brands don't like to discount and they might just want a brand enhancing postcard. Yeah.

Speaker A: Or even free. I mean, I'll imagine, like again, I use a clothing example, right? I just do some math. Three of us start a company, we sell T shirts, and our most basic one is a white T shirt that cost us, I don't know, $10 to make to get to our warehouse sells a 40. Let's say, uh, nobody knows us, we want to get people to buy. So let's say we devote $100,000 as, uh, our branding campaign, right? We can either put it online ads, banner ads, or like on their, you know, kind of, uh, connected tv. Right? Or we say, you know what, let's send out 10,000 free shirts to people. Which one is more effective over a span of six months.

Speaker B: We've seen some data where if you acquire a new customer on a discount, they typically wait for a discount to buy again, a free one.

Speaker A: A discount is a different thing, right? At discount, like 50%, people might still not want to try. They're like, oh my God, I never heard of this company. 50%, even 50% is still $20. But what if it's free? I mean, I just have some bold idea that, uh, you know, because you think about it, if you direct mail gets people's attention and if the offer is so outrageously free, it's free, right? It's so outrageous, it also gets people attention. And assuming the product is good in the past $40 white t shirt on the market, and we believe our product, that's why we exist to begin with. Right. That's why we started a company.

Speaker B: Beauty brands often send samples, free samples, Food and Bev.

Speaker C: Great way to get samples out to a large scale. What was maybe the most surprising thing that you learned in your research or something that was maybe the thing that you expected the least when you went.

Speaker A: I think two, uh, surprising things is that once I've shown the CMOs and CFOs how to measure, like what kind of data to track, how to measure, and then the measurement window and what type of metrics to pay attention to instead of cost per impression. Looking at, you know, CAG and clv, I was surprised to see how many of them are open to giving a serious consideration. I could see, like, those guys are pragmatic. I think they're, you know, once you see the number, once they see the number, the numbers don't lie. They're compelling. They, they get it. At the end of the day, it's really a data measurement problem. Right. I think you guys are kind of Leading that shift as helping to lead that shift as well. So that's one result which is hopeful, which bodes well for the omnichannel kind of a mix. The second thing is that just like paper books, right, we thought it's the older generation of consumers who like these things. But no, I mean, I think based, uh, on my interview, because I also interviewed about 300 consumers, uh, surveyed them about what's your view of the catalogs of their direct mail, how you interact with them, do you like them, Ask them a whole bunch of questions, um, across different demographics, across different age group. It's the millennials and it's, you know, and then, uh, Gen Z. So the younger generation, uh, you know, educated younger generation of consumers who find these things most appealing, which also bodes well.

Speaker C: That's fascinating. Which we've uncovered a lot of that as well in our research. But it's very surprising to most brands.

Speaker A: Okay, let me ask you a mic, Andrew. Why do you think that's the case?

Speaker C: My hypothesis is that this is the same audience that if you ask to look at their phone is going to have 100,000 unread emails and like 50,000 unread text messages showing up on their home screen. It's a surprise, it's almost a novelty to them to get something tangible from a brand that they recognize or potentially have done business with versus the constant stream of digital ads that they are exposed to on a daily basis. And it's really essentially turned into noise for them. That's my hypothesis and we tend to see that in the data as well. Because again, brands ask us all the time. I don't target older people, so I don't know if I'm a good fit for this. And our response is like, most of our brands don't, they target the Gen Z millennial audience and have a ton of success with it. Again, the theory is for that reason, but very interesting that you found that as well.

Speaker A: Yeah, you know, I actually, uh, I'm glad you mentioned it because our results, uh, triangulate. Um, I, uh, explicitly did a follow up. Why do you find this? Uh, you know, you're a 25 year old, right? You know, you don't even remember junk mail as much. Right. Like, why do you find this appealing? I think a lot of it is novelty, right? They're like, oh, wow, you know, this brand, um, I've only encountered online or in store is a novelty thing. I think it's exactly because the fact that they have not had a, uh, bad experience with untargeted junk mail of the 1990s. This feels refreshing and I think with a better targeting technology, you know, data and targeting technology, I think, I think uh, the days of junk mails hopefully are near the end and uh, mails be targeted to be more effective. Uh, which also bodes well for the number of trees.

Speaker B: Yeah.

Speaker C: While still being limited overall relative to the frequency or volume of digital ads or emails that you're getting. I mean that number is not going down.

Speaker A: We have established your company and also I think Ivy stash over the course of three articles that is effective and then currently is more effective potentially than the digital channels. The next step is try to figure out how to orchestrate like sequencing or what is the right frequency. What is it, is it initially that initially mail some email and then when you send the next mail the content. You know what I mean? Now we know it's effective, we should not ignore it. What is the orchestration layer? And also I think Drew and I, you and I, we talk a little bit about in the current environment where there's a lot of consumer data, loss of our noises and also there's a privacy consideration. So we cannot collect everything under the sun. Right. What is the minimal amount of effective data that we need to do it? So then firms don't have liability.

Speaker B: Our data team is knee deep in this problem. In the orchestration problem or opportunity. Yeah.

Speaker C: Uh, I think in general, when we target existing customers, the idea that most brands are most comfortable with is trigger it at the time after you've emailed somebody at least once and given them a chance to respond to email. Obviously that's going to be cheaper. So if you're trying to get them to take a specific action, set up your email sequences around that cadence. And then when they don't respond to email, that's the time to trigger direct mail because they become increasingly less likely to take that desired action as time goes on. You saw in your research, with recency being such a primary factor in response rate, but as soon as they sort of get past that expected period where you expect them to take a certain action and you've emailed them and they haven't taken that action, it becomes incumbent on you to ensure that that message gets through to them in a way that they're more likely to take that action before you risk losing them permanently.

Speaker A: Did you guys also look at if you have customer touchpoint data at a customer level across the customer lifespan with a firm, do you also have a sense of um, when you start marketing? Because at Some point, the customer just not going to respond.

Speaker C: Our best practice is to measure across all these different cohorts, primarily based on recency and frequency, and get validation that certain cohorts are responsive to direct mail. And then scale into those cohorts that you're seeing a high response rate. And for different brands, it varies. So for one brand, you might be able to go back three years profitably and still get a, uh, high enough response rate from that audience that it justifies the continued investment. Another brand, it might be one year. Another brand, it might be five years. But being able to get that data, you know, testing a relatively modest volume into these different cohorts and then scaling what you see as having proven what works is generally our strategy. And brands tend to be very comfortable with that.

Speaker A: Do you have a sense of what type of brand would trigger a response rate, even for a customer that were five years ago versus like three years

Speaker B: ago, Other than recency? It's the nature of the product, I think, and maybe what kind of experience they had with their initial purchase.

Speaker C: Health and beauty or health and wellness products in particular. Like, things just change in someone's life and they stop for whatever reason and doesn't mean that they're gone for good, but it is finding the right opportunity to get back in front of them and catching them at the time where they're receptive to sort of reactivating or getting back into the routine. We see a lot of good results in reactivating customers that have long defected or long been dormant across these consumable products, and particularly, I think, in that health and wellness space.

Speaker A: Yeah, and then when you say reactivation, you mean using direct mail as a reactive reactivation channel, right?

Speaker C: Yeah. So somebody who stopped buying a year plus ago.

Speaker A: The one thing I haven't looked at is, uh, using direct mail as a, how effective it is as a reactivation.

Speaker B: What we find is if you're talking about a customer who hasn't been around in a while, he or she is most likely unsubscribed from email. So what the brand needs to do is consider that almost new customer acquisition and compare how well they do in pulling those customers back versus going and acquiring a whole new group of customers. There's really no other way to reach

Speaker A: that customer because it's easy to unsubscribe. I mean, we all unsubscribe things before. And then I like a, uh, couple months later, it's like, oh, I wish I didn't unsubscribe, but it's too late, right? And then life gets busy and you forget about it. Theory will say across all people who unsubscribe, who lapse.

Speaker C: Right.

Speaker A: There's no way to reach them. You know, reactivating them will give you a higher ROI than acquiring a new set of customers, would you say?

Speaker C: And once the customer's gone a year, two years without buying, they're pretty gone at that point. So if you can acquire them at a lower CAC than a cold prospect or a net new customer, there's a lot of profitability there. That was kind of a genesis of post pilot was Drew and I used them in a lot of. Of turnarounds that we ran on the E. Comm side because they would have millions of customers. Most of them had long defected from the brand, were no longer engaged.

Speaker A: Trying to think about what are the, you know, kind of company's main issues as acquisition. We get it like, you know, retention, you know, keep them interested. Uh, this is brand building. Okay. So I think they get it, but the reactivation, which is also another way to acquire customers, but at a, at a, at a lower cost. Right. I think that's a, uh, I don't think there's a. There's a comprehensive study done on that. Maybe us CPS and you guys might be interested in doing some of that stuff.

Speaker C: I was a part of our Black Friday report was looking at incremental lift amongst existing customer cohorts as well as new customer acronyms.

Speaker A: Fill me in on the legal and regulatory, uh, framework. So once a customer unsubscribes through, let's say from mailchimp or whatever, you cannot add them back. The guy customer is gone forever. Is there a way to, like, unsubscribe from, like, mail?

Speaker C: Well, we'll honor a request from somebody who asked to not be mailed anymore.

Speaker A: What would the request look like?

Speaker C: They'll just email the brand and say, I don't want to get any more catalogs or I don't want to get any more cards from you. There's no can spam. There's no compliance or regulation around it. It's simply a request that we will honor because we don't want to obviously bother someone who explicitly doesn't want it. But the number of people out of the hundreds of millions of cards that we send is like, I could probably count on two hands how many people

Speaker A: the person must really now want to receive the mail. Just go through the trouble finding the contact email, and then it's like, email the company. I see.

Speaker B: Yeah.

Speaker C: I mean, there are certain Categories where maybe that's more expected. So, you know, they don't want to receive a physical mailer for certain types of products, but other than that, you just never see it.

Speaker A: That's what I thought. So there's no regulation against like sending too much mail to direct mail to someone?

Speaker C: No. Same reason you get catalogs and other things from, you know, it's a reason that junk mail. There's not regulation around not being able to send that.

Speaker B: Yeah.

Speaker A: Yeah. Okay. That's what I thought. Interesting. Yeah, I think that also helps. Right. Because then, uh, I think a lot of people unsubscribe because they feel like overwhelmed at that moment with their phone. They're like, oh, I don't need this. But then next day they're like, oh man, what do I do? But then it's too late.

Speaker C: Yeah, but Gmail and Apple Mail and all these ESPs are making it increasingly easy to do it. Whether they're moving all these to the promo tab or they're just creating the one click unsubscribe and they're putting the unsubscribe button everywhere.

Speaker A: I bet there's a study and a very compelling article and data driven study that revolves around this trend like inadvertent unsubscribe. And also the platforms are making easy for the email marketing. Right. This is email marketing. Right. Easy for the email marketing to disappear, uh, because of the promo tab. As a result, you have customers who lapsed not because they don't want the products, because they just like out of sight, out of mind situation. They're like regretful, uh, almost like a regretful lost customer, lapsed customer. And, uh, the only way to bring those back is through direct mail. I think that's a very good angle. I think that's a fresh angle that will resonate well with CMOs and CFOs, wouldn't you say?

Speaker C: That's why we exist.

Speaker B: We've been pounding the pavement on that angle. Yes.

Speaker A: Maybe we can work on something like that. You know, I think Drew and I would talk a little bit about what's possible.

Speaker B: We'd love to, we'd love to share some data with you and put a study together.

Speaker A: You know, ideas that make sense for you guys. I mean, I think it's, uh, you know, to me this is very compelling.

Speaker B: Right.

Speaker A: For business. You know, how do we. Again, businesses are very simple. It doesn't matter what they sell, right. Vacations, beauty products, watch and jewelry, chocolate. They want to get customers, they want to keep them, they want to make them spend more, right? And then they wanted to acquire, like, lost customers as cheaply as possible. I mean, that's the entire business model. I think all of these metrics and this and that. I think it's just like noise, right? I think if we can just say, boil it down and say, forget about cost per impression. Like the cost per impression, those days are over. That's like 2010 metric. 2025. Let's go back to the basics. Like, you get, uh, how much you get the new customer for, how much did they spend? And, uh, did you make money on that? Maybe that's a good title. The cost per impression is over. The era of cost per impression is over.

Speaker B: That's a great way to end. Stay tuned for the next study.

Speaker A: Thanks for listening to Nerd Marketing. Don't forget to check out all of the other great episodes, some of which include interviews with e commerce marketing masters working with Mr. Beast and Joe Rogan, plus Drew and Michael's experiences in private equity, advice from VC firms on what they look for in investments, and so much more. Like Share, subscribe and tune in every week for a new episode.