Small Firms Reach Customers Via Coupon-Stuffed Envelopes : Clipping Ad Costs
That envelope stuffed with discount coupons may be junk mail to you, but it’s become a cost-effective way for a growing number of small businesses to get inside your home to peddle their products.
It has also become a gold mine for Money Mailer, a Huntington Beach direct-mail firm that specializes in helping proprietors of small businesses band together to pitch their wares in one mailing.
Money Mailer is one of a few national firms that specialize in what is called “cooperative” advertising. Such marketing gives small companies a chance to share the cost of direct mail by sharing space with other firms in that envelope you get in the mail.
The technique also lets firms from weight-loss consultants to handymen target their appeals to just a few, carefully selected communities that are most likely to use their products or services.
“I probably get at least one to two dozen calls a week from the coupons,” said painting contractor Richard Scott of Anaheim. Karen Thomas, who owns a Yorba Linda carpet-cleaning business, estimates that 90% of her new customers come with coupons in hand.
“Everyone wants a deal. No one wants to pay retail,” said Kris O. Friedrich, Money Mailer’s 36-year-old president and founder.
The growing popularity of coupon advertising has resulted in the rapid expansion of Money Mailer. In its 10-year existence, the company has extended the boundaries of its coupon advertising business from Orange County to 34 states.
Friedrich said Money Mailer has sold franchises and rallied a national sales force of 500 people that has helped the company acquire a client roster of 18,000 businesses and a mailing list that gets those coupons into 8 million homes.
He said the company now has 230 regional and local franchises and is adding more at a clip of five to six a month.
In the company’s last fiscal year, ended in November, it earned $689,000 on sales of $8.3 million, he said. This year, he said he expects to garner net income of about $1 million on sales of $12 million.
The way the business is set up, he said, the franchises reap the advertising sales revenue while “we (the franchiser) get the printing and mailing business.”
The company’s printing and mailing headquarters in Huntington Beach has gradually expanded to 110 employees and to 18,000 square feet in two buildings. Automated assembly lines churn out 320,000 coupons every day and stuff them into envelopes, which are delivered to post offices.
Friedrich said each Money Mailer franchisee divides its territory into zones of 10,000 homes with similar demographics. Friedrich then uses surveys and demographic data to determine which services and products would sell best in a given area.
In affluent communities like Beverly Hills and Villa Park, Friedrich said, maid service and car leasing are “hot” coupon items. In middle-income areas like Anaheim, residents are more interested in do-it-yourself products. Young residents in places like Irvine have a penchant for health-and-fitness services, while older folks in communities like Leisure World are interested in estate planners, he said.
To encourage homeowners to open Money Mailer’s oversize red, white and blue envelopes, the company emblazons on the outside of the envelopes the deal with the widest appeal. A Lamppost Pizza ad beckons the recipient to “Look inside for family special and free cash,” while another coaxes him to look for information about a drawing for $1,000 of free groceries.
Some advertisers have sure-fire consumer appeal, Friedrich said, and that rubs off on the rest. “If you get a McDonald’s in your envelope, you can increase the (customer) response for all the advertisers by as much as a third,” he said.
An important feature of all coupon advertising by mail, Friedrich said, is that each advertiser is promised that his business will be the only one in its category that’s inserted in a mailing, saving him the potential embarrassment of having his discount offer beaten by a competitor.
Chris La Bong, executive vice president of Smith, Hemmings, Gosden--a direct-marketing advertising agency based in El Monte--said cooperative advertising has been gaining in popularity with the rapidly rising cost of direct mail.
La Bong said coupon advertising companies like Money Mailer “can approach the dry cleaners and carwash and pizza stand and give them a relatively sophisticated marketing tool at a low cost.”
The “down side” of such marketing, he added, is that “you have your message stuffed in with dozens of other messages. You are sacrificing quality and the opportunity to make a large statement.”
By sharing space in an envelope with 15 to 18 other businesses, a Money Mailer client can reach households at a cost of about 4 cents a home, or $410 for a minimum mailing to 10,000 households. The advertisers usually have long-term contracts to pay for mailings to the same addresses every other month.
By contrast, William Junkin, president of Wakeman & de Forrest, a direct-marketing and advertising agency in Irvine, said it would cost at least $3,500 for a business to send a separate mailing to 10,000 homes.
Jill Robinson, a marketing consultant for medical professionals, said she finds that coupons work best in growth areas such as Rancho Santa Margarita and Irvine, where newcomers are looking for new dentists, chiropractors and optometrists. They are least effective in areas such as Anaheim and Garden Grove, where residents have established buying patterns.
Robinson and others have found that the very success of coupon mail is diluting its effectiveness in some cases. As more mailing companies sprout up, some areas have become saturated with coupons.
Dr. Gary Jacobson, an El Toro optometrist, said he started advertising with coupons 10 years ago and got an 8% to 9% response from people who received them. With more coupon firms invading the area--each pushing its own optometrist--his response rate dropped to 1% to 2%, he said.
