Billions of direct mail solicitations are delivered to mailboxes across the country every year. This marketing medium is ubiquitous for a simple reason–it works. Called "junk mail" by some detractors, direct mail is–for those smart about using it–more gold than fool’s gold. Many a major business has been created by this so-called "junk," including Sears Roebuck, L.L. Bean and The Sharper Image.

Direct mail is essentially a call to action. Its goal: motivate the prospect to buy right then and there, or take other action such as requesting a catalog. More conventional forms of advertising, including television and much of print, primarily build awareness of a business or product (think of the advertising for Coca-Cola or a Hollywood movie). While it’s not impossible for direct mail to do the same, its primary purpose is to get prospects moving.

Direct mail is also, in some ways, less creative than other advertising media. The success of a mailing is largely independent of how attractively designed is the letter or brochure, or how snazzy is the writing. Other, more prosaic, elements are far more important, as covered below. For the entrepreneur, this is a plus–the little guy doesn’t have to worry about lacking the creative talents found at large ad agencies that cater to big and more affluent companies.

Be warned, however: If you don’t know what you’re doing, direct mail marketing can make off with your money faster than the most adept pickpocket. It may look easy–but it is not.

More than most marketing media, direct mail can target very specific groups, which is one of its primary benefits. Using specialized lists, you can mail to executives of a particular industry, buyers of a particular product, those living in particular zip codes and enthusiasts of particular hobbies. Direct mail can also be personalized for specific recipients, designed for many different needs ranging from a quick one-page letter to a catalog of several hundred pages, and measured with great precision.

Of course, not everything about direct mail is positive. On a per-prospect basis, it is generally more expensive than other advertising media. And certain aspects are beyond your control, such as when the Postal Service delivers your advertising pieces (although generally you have considerable control over timing). Finally, because it doesn’t take much money to engage in a direct mail campaign, you face lots of competition for the public’s attention (just look in your mailbox).

There’s a cliché that just about everything can be sold by direct mail, and while true to a degree, some things lend themselves more to this marketing medium than others. "The best prospects are things that normally aren’t available in typical retail outlets, are impulse items or are not too expensive," claims James L. Bartel, owner of Vegas Publications Inc., a Las Vegas-based publisher of newsletters for stock market investors and lottery players that sells subscriptions by mail.

The key to mail order success, concurs Barbara Kimmelman of Idea Farm LLC, Los Angeles, is to carry products no one else has. With her partner Daleet Zigelboim, Kimmelman markets advertising specialty items with innovative design, and that’s how the firm distinguishes itself from competitors.

Maggie Smith, president of ArtSource Inc., New Berlin, Wisconsin, has built a $4 million a year operation selling framed artwork to businesses through mail order catalogs. "We’ve found that most people don’t feel qualified to buy pictures," she says. "In our catalog, we organize selections and coordinate them by style and color, which removes some of the risk and fear." For example, her catalog includes a group of architecturally-themed prints, with the note, "These four prints work well as a set grouped around a larger architectural image." Such detailed selling is much harder to do in media other than direct mail.

Commodity products are difficult to market. Paper clips can be sold, for example, but not by themselves–they need to be part of a catalog so buyers will purchase large quantities of goods. Perishables are also difficult (though not impossible) to sell by mail.

Remember, too, that direct mail can also promote a business. If you have a retail store, a direct mail campaign is often able to bring customers through your doors. A service such as bookkeeping, house cleaning or consulting is also promotable this way.

To improve your chances of success, you need a plan. Ask yourself:

Who am I selling to? The more you know about your customers, the better you can tailor your mailing to their wants and needs. Don’t forget to ascertain if these customers buy by mail. While everyone buys shoes, few traditionally purchase them by mail. You need mail order buyers.

What motivates your buyers? Janis M. Roelker, vice president of client development at Harte-Hanks, a direct mail advertising agency in Jacksonville, Florida, notes that generally four factors motivate buyers: need, greed, fear and exclusivity. A claim such as "You are one of the few who…" caters to exclusivity.

Bill Harrison has a writing service, Harrison Consulting Group. He finds sales letters that list a number of services–writing of proposals, policy manuals, brochures, advertisements–pull better than those lacking specifics. By identifying what’s offered, he’s appealing to the prospect’s needs.

Where are they located? If you sell a house cleaning service, you probably want to target higher income neighborhoods. Not every service or product sells as well in every location, or you may not be able to service customers from a distance. Harrison’s writing service operates in Washington, D.C. and Los Angeles, and when he mails to target groups, which include associations, health care and marketing communications companies, he rents lists of prospects only from those two metropolitan areas.

Are buyers reachable? Do mailing lists exist of prospects in your target market? Tom Vitelli of Salt Lake City tried marketing a genealogy book to Vitellis around the country, only to find that while he was able to get addresses of people with his surname, no lists existed that told him if these prospects bought by mail or were interested in genealogy. Bartel once tried to market a newsletter that used an innovative cash flow approach to stock market analysis, only to find that there was no efficient way to identify investors interested in this sophisticated investment strategy.

Is the market large enough to sustain your business? If you sell a $10 product to a market consisting of only 5,000 people, it’s unlikely you can make this idea work. (Keep in mind that most mailings average only a three percent response, although the rate can be considerably less.)

How much are you willing to spend to acquire a customer? Bartel notes that many products and services don’t initially make money but, over time, by selling additional products and services–called the "back end"–the prospect can become highly profitable. Bartel is willing to lose $3 to $5 per newsletter subscriber because during the course of a year, the average subscriber will buy $15 to $25 worth of additional products (including subscription renewals, list rentals and books), which is enough to cover his up-front losses and generate a good profit.

What do you want to accomplish? While the obvious answer to this question in the long run is, "I want to sell my product or service," it may not be your goal in the short term. Webster Bull, owner of Memoirs Unlimited, Beverly, Massachusetts, writes corporate histories and personal memoirs for individuals. Every month he mails about 1,000 brochures. Often, prospects wait months or even years to subsequently contact him. "I think of myself as Johnny Appleseed," he says. "I see the value of seeding the countryside with the name of my company and the services we provide."

Steven J. Chen, Ph.D., head of Assessment Resources, a Salt Lake City-based employment consultancy, offers free seminars by mail. His goal is not so much to sell his services directly by mail, but rather to meet qualified prospects face to face where he can more fully demonstrate his abilities.

In developing your plan, remember that direct mail requires a long-term commitment. "You have to be consistent. You can’t do direct mail on a one-time basis and expect to get a return," warns Don Richie, president of Sequel Data Systems Inc., a computer reseller in Austin, Texas.

What’s the single most critical element of a direct mail campaign? If you answered price, product or anything other than the mailing list, you’d be wrong. Bartel estimates that 50 percent of a mailing’s success depends on the mailing lists used, 40 percent on the offer and 10 percent on everything else. Roelker agrees, assigning 50 percent of a mailing’s success to the mailing lists, 30 to 35 percent to the offer and the rest to everything else.

Tip: If the mailing lists used are not suitable for your offer, product or service, you are unlikely to be successful, no matter how well you do everything else. Someone selling hair tonic will not be successful with a crowd of bald men.

"You can spend a bundle sending a lot of materials to people who could care less about what it is you’re trying to convince them to do. Understand your market," warns Gene Del Polito, president of the Advertising Mail Marketing Association in Washington, D.C. The surest way to create real junk mail is to send your stuff to the wrong people.

Mailing lists are simply lists of names created in various ways. There are thousands of lists on the market, including subscribers to publications, customers of various companies, and those with particular attributes such as executives of certain types of companies, or those of a certain age who have purchased particular products or services.

Tip: The best lists are ones that have worked well for a product or service very similar to yours. The more similar the situation, the more likely the list will be a winner for you. Geoff Wolf owns Back In The Saddle, a catalog company selling apparel and accessories for horse lovers based in Durango, Colorado. He has a better chance of success mailing to attendees of rodeos than those who attend boat shows, as well as people who have bought horse-oriented apparel and accessories from a competitor. (Of course, his best list is his own customers.) The further afield you go, the less response you are likely to get. Because of the limited size of the universe of prospects available, however, you might have to go far afield, but start with those most like your ideal customers.

There are ways of fine-tuning lists to improve their performance. For example, you can order "selects" that are comprised of subsets of a list. For a given list, selects can be based on such criteria as age, sex, geography, size of the prospect’s purchase, those who purchased at least three times within the last six months, presidents and CEOs only, or sales managers. Expect to pay $5 to $20 per thousand names for each select. Your list broker can help you choose those selects from among the dozens available that are most likely to pay off.

And what is a list broker? Generally, your source of mailing lists is list brokers–companies that represent the owners of lists and arrange to rent them to direct mailers for a one-time use only. (However, people on the list who respond to your offer become your names and can be used as you choose.) The brokers get a commission, paid by the owner of the list, for each rental.

To find list brokers, look in the Yellow Pages under "mailing lists." Also try the Internet. One site with a list of brokers is: http://www.morganprice.com/pyp/000002nq.htm.

As with most professionals, the best way to find a list broker is by referral. Ask those you know in the mail order business for recommendations. Your printer may also be able to recommend one.

Your list broker can make or break your business, especially if you are an inexperienced direct mailer. "The broker’s responsibility is to help you make sense out of the 20,000 to 30,000 lists on the market," notes Rick Buck, vice president of business list services for Harte-Hanks, Billerica, Massachusetts. A good broker helps identify lists likely to work with your offer, makes reasonably accurate predictions about how a list performs, and knows how well a list is maintained. (List owners are responsible for eliminating duplicate names, out-of-date addresses and other potential problems.)

Ask list broker candidates what industries they are strong in. Some have a great deal of experience in certain industries, and little know-how in others. You want someone who has had clients in businesses similar to yours; this experience can be invaluable.

Also, don’t consider price as the primary determinant when making your selection. Think of list brokers like accountants or lawyers: those who charge little but provide poor service can end up, in the long run, being far more expensive to you than those who charge more but are effective and knowledgeable.

"List brokers are like used car dealers. There are a lot of them who talk fast and have an answer no matter what your problem is," warns Richard Pavely, president of Corporate Management & Marketing Inc., Mount Freedom, New Jersey. As always, "buyer beware."

It’s also possible to create your own list. Suti Prakash, director of strategic marketing at Pitney Bowes, Stamford, Connecticut, recommends starting such a list with your own customers. Entrepreneurs can ask customers to fill out a card or drop their business card in a bowl for a drawing. These names and addresses become the basis of the mailing.

Be creative. Chen of Assessment Resources sends out 113 faxes a month to companies that place want ads in the local newspaper. Since he helps companies improve their hiring function, these free names are good prospects, and have proven consistently profitable for him.

Depending on your business, you don’t necessarily need hundreds of thousands of names. "For a bakery, 113 names is a good list. For widgets, you may need thousands of names," observes Joan Throckmorton, an author and well known direct mail guru who has a consulting firm, Joan Throckmorton Inc., in Pound Ridge, New York.

The price of lists varies enormously. Generally, list prices increase the more specific the list, the more unusual the criteria for choosing the names, and the more potentially profitable the names. The least expensive are "compiled" lists, which are lists taken from general sources such as telephone books and industry directories and merged together. According to Buck, these generally rent for $20 to $80 per 1,000 names. Compiled lists generally bring in the lowest response rates. Other lists, such as subscribers to publications, rent for about $75 to $150 per 1,000 names. Highly specialized lists can rent for hundreds of dollars per thousand. As a rule, you must rent at least 5,000 names at a time, and 10,000 for more popular or larger lists.

However, if you rent 5,000 names, you don’t have to mail them all. You can mail some now and see how they work, before spending money to mail more. What you need to do is test.

Every successful direct mail company, no matter how long it has been in operation, tests. "In direct mail," says Pavey, "the axiom that everyone lives by is test, test, test." You must test because you never know what will work nor how long it will work.

What is testing? It simply entails trying out different aspects of your mail campaign to see what works and what doesn’t. Typical components to test: mailing lists (of course!), price, product or service, offer (such as a free bonus), graphic look of the mailing, the written copy, a headline, color or size of the paper, or the copy you place on the envelope. Practically, since you can’t test everything, you need to focus. Experts concur that the most important things to test are the list and the offer.

Testing is worthless if you don’t carefully and completely track your results. By coding the mailing labels, you can track which list a respondent came from, what the offer was and other details.

Don’t test quantities so small that the results are meaningless. Try to have each test big enough to generate at least 20 to 40 responses. If you get a two percent response, that would mean the minimum size of each test should be 1,000 to 2,000 pieces (20/.02=1,000 and 40/.02=2,000).

Never rest on your laurels. What works today may not work next month or next year. That’s why sophisticated mailers always continue to test, no matter how long they’ve been in business or how much money they make.

Although the right lists and offer are more critical components, the copy–or words used in your direct mail piece–still has an effect on the response rate. Chen used to send out letters claiming to have helped hundreds of companies with their hiring practices. "Prospects weren’t interested in how much experience I had," he recalls. "They wanted to know what I could do for them." His response rates rose when he started to offer free seminars.

Bull, of Memoirs Unlimited, boosted his response rates when, after a few years in business, he included testimonials from satisfied customers in his brochure.

The word "free" is magical in the direct mail business. One marketer saw the response to her catalogs measurably increase when she started offering free bonuses–which she often obtained at no charge from suppliers who were only too happy to give away free promotional items with their names on them.

As noted earlier, direct mail is a call to action, so the best copy does not consist of mere descriptions of products or services, but motivates the prospect to do something. Smith of ArtSource peppers her catalogs with calls to action: "Need a quote done quickly? Our FAX line is open 24 hours a day…"; "If you have a project that requires 25 or more pieces of Southwest or Western art, call…we have several sources who specialize in this subject matter"; "For a unique custom look, check out our…"; "Here’s a great gift idea…"; "If you’re debating which wood frame to put on your artwork, why not order a few frame samples for only $1.00 each?" These are all motivators.

Direct mail is a proven, powerful medium that can boost an existing business or create a thriving new one. It’s admittedly a morass for those who don’t understand it, but for those willing to learn its nuances, it’s an effective way to turn junk into valuable greenbacks.

The New Pig Corporation, in Tipton, Pennsylvania (on Pork Avenue, of course), sells nothing related to porkers. It’s a catalog company offering industrial products used to keep factories and other workplaces clean. According to Doug Hershey, executive vice president, the firm began in 1985 by selling large "socks" containing absorbent materials to soak up spills. The socks, while more effective than existing products, were also more expensive, and did not move well. So the company decided to package seven in a box (the usual box held 50) and mail them out free to prospects, with a note saying that "we’d love you to purchase 43 more." Recalls Hershey, "We sent out free samples because we were in a survival mode at the time." Since then, New Pig Corporation has perfected its marketing and now has sales of $70 million annually, with more than 300 employees.

While direct mail generally isn’t dependent on scintillating copy, creativity can help. Brendan Mattingly is a commercial photographer whose business, Brendan Mattingly Photography Inc., is in Silver Spring, Maryland. One recent Halloween, he sent out a package that included a laminated coaster with a eye-catching picture of a scarecrow holding a brain spray-painted gray with the teaser, "Accept no substitutes," along with his name, address and phone number. Mattingly mailed these to local art directors, and followed up with a telephone call. He reports that 80 percent of those who received the mailing and the call responded, while the mailing generated more than $113,000 in business in less than six months.

The following year Mattingly mailed postcards that had a picture of a former Miss Maryland holding a telephone and the copy, "The next time you see this image...you’ll want to give me a call," Several days later, respondents received a mailing tube that, when opened, emitted a sound like a phone ringing (created by a light sensitive chip). Enclosed was a yellow string, at the end of which hung a phone card with 10 minutes of long distance calls and a picture of the former Miss Maryland, along with a note that said, "When you have 10 minutes, I’d like to show you my book." Many recipients called before Mattingly had a chance to contact them, and he quickly booked more than $113,000 in business directly from this mailing, including one job that paid $35,000.

Have you ever subscribed to a magazine and gotten a letter asking you to renew before you even received your first issue of the publication? That’s because the best customers are current ones, and the faster you go back to a new customer with an offer, the better your chances of selling additional products or services. Don’t think your selling has ended once you make an initial sale. Your customers are a gold mine waiting to be developed, and the quicker you sell again to them, the better your response rate.

Pitney Bowes recommends that before sending out a mailing, ask yourself:

- Can you or your staff deal with a sudden rush of incoming mail and still keep up with your other regular duties?

- Are you sure you have adequate inventory to fulfill an influx of orders?

- Do you have space and staff for storing, packing and sending out the product?

- Can you turn an order around in 48 hours?

- Do you have an efficient system, computer or manual, for processing orders and capturing information?

Excerpted with permission from Small Business Success, Volume XI, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.