Advantages and disadvantages of direct marketing for small businesses

In this guide, we explain what direct marketing is plus the advantages and disadvantages of direct marketing for your small business

Direct marketing is as it sounds – marketing which goes straight to your target customer.

Here, we explain what direct marketing is, the pros and cons, and how you can apply it to your small business.

What is direct marketing?

Direct marketing is the promotion of your company or the product/service it provides to your target customer. Unlike mass marketing which doesn’t have a targeting but will reach a wide audience, such as a traditional TV advert.

One of the key components of direct marketing is a call to action. The aim is for your customer to do something measurable such as placing an order, visiting a website or signing up to a trial.

There are quite a few different methods of direct marketing, including:

  • Direct mail marketing (catalogues, brochures, postcards)
  • Phone or text message marketing
  • Chatbot messaging
  • Email marketing
  • Social media marketing
  • Print media advertising
  • Face-to-face marketing
  • Vouchers/coupons
  • Webinars/seminars

Though there is some debate as to what constitutes direct marketing: “For me, direct marketing concerns communicating and marketing directly to your consumer (with the intention to sell something directly from that activity) – so we are talking about email marketing, social media marketing, Google Adwords, text campaigns and mail campaigns” Jordan James of Unlockd Marketing tells Small Business. “Some of these activities can also be indirect marketing (it all depends on the intent).”  

Direct marketing should be weaved into your entire marketing plan rather than be the sole driver.

What are the advantages of direct marketing?

To help your decision of whether it’s right for you, let’s explore the benefits of direct marketing.

More direct targeting

Rather than spamming everyone in your database, direct marketing allows you to target the segments that your campaign is relevant to. So, if you run a local health club and are offering a women’s-only fitness class, you could filter out the women in your database and offer them a one-off discount.     

Dan Trotter, co-founder of PPC Geeks, said: “Be highly selective of your audience and make sure your offering is timely for them. You cannot sell someone something that has no need for it. Solidify your offering. Can you clearly explain how your product or service removes a pain point for your audience? If you can’t then it’s unlikely your audience will understand it either.”

You can personalise your campaign

Customers who have bought from you before may be inclined to do so again if they feel they are being talked to directly. Even addressing a customer by name can be enough.

On top of that, each campaign is tailored to your audience, so the chance of competition from your rivals is almost impossible. For example, Smart sent out helmets to cycling enthusiasts to promote a new range of e-bikes. Each recipient could build their own cardboard helmet and post it in social media.   

A number of options are available

As you can see from the list above, you’ve got so many options to choose from when it comes to direct marketing. Depending on your audience, this could be more traditional methods such as print media inserts or telephone marketing, right through to email newsletters and chatbot messaging. You by no means have to stick to one method – testing your results regularly is essential to finding the right method.  

Direct marketing is about utilising all available platforms to target specific existing and potential customers with carefully crafted messaging, says Be Marketing director, Rami El Bogdhadly. The data held by social media platforms such as Facebook, YouTube and LinkedIn makes it possible to target very specific demographics with content that has been orchestrated to meet their interests. Innovations such as Sky Adsmart has also made it possible to undertake direct marketing via mainstream television channels, which has made it an affordable option for small businesses. “Sky knows so much about its subscribers that you can select which viewers your adverts are shown to based on dozens or criteria, such as age of children, number of cars, postcode, shopping habits, income and much more” he said. 

“Consumer spending is strongest when they see brand exposure through multiple touch points, so coordinated campaigns across multiple platforms is always going to deliver the most success, but with so many options for how to market directly to customers, the challenge for smaller businesses with limited budgets is knowing exactly which options are best suited for them. For example, if targeting teenagers, then you do it through TikTok, YouTube and Snapchat, not Facebook and email” he continues.

Easy to measure

This brings us neatly to the next point. With direct marketing, it’s easier to judge whether your campaign was a success if you set out key performance indicators from the get-go. Ensure you put something trackable on your messaging like a code or a link.

It’s not even as if you have to opt for a traditional method or a digital method – you can combine the two. “What I suggest to people who do a [magazine or catalogue] insert is put a QR code on there with a specific landing page” Simon Rigby of Myflyerinserts told Small Business. “So when you get your insert and you’ve got a QR code on there, it takes you to a straight to a specific landing page on their website. The company will be able to say, ‘Well, look, we’ve sent out X number of those flyers.’”

Can be more affordable

If you opt for a digital direct marketing method, it’s likely to be cheaper than a more traditional flyering or telecalling campaign.

What are the disadvantages of direct marketing?

It’s not all magic and rainbows with direct marketing. Consider these disadvantages.

Can be annoying and intrusive

If the recipient gets an insert in a magazine, there’s no guarantee that they’ll read it – they may just chuck it straight in the bin. It could be even worse for an email campaign. Those who are annoyed by your direct email marketing may decide to block or unsubscribe from you. Cold calling can be especially annoying, and your staff will face some unsavoury backlash from angry households. With direct marketing, it’s important to master the fine balance between keeping your customers engaged and irritating them.   

Not environmentally friendly

If your business has a core sustainability policy, then paper leaflets could cause furore among your customers. Even emails have a carbon footprint (4g of CO2 emissions per email) – too many seemingly unnecessary emails could be a feather ruffler among a climate savvy audience.    

Low response rate

Though the targeting is directed, the response rate for direct is often very low. Direct mailing is most effective method, with a 4.4 per cent response rate, according to the Data and Marketing Association. For an email, it’s more like 0.12 per cent. Catalogues reportedly attract 4.26 per cent while telephone direct marketing gets 12.95 per cent. Again, it’s a case of balancing the income versus the outlay.

“You’ve got to really think about the long-term value of a customer,” said Rigby. “If I get you as a customer on day one, how much are you going to spend with me over the next two or three years? How much money will I make out of you? Let’s say, over three years, you’re going to spend £300 and I’m going to make £100 out of that. How much am I willing to spend to get someone who’s going to give me £100 pounds over the next three years? You don’t always make money on the first order, either.”

Competitive

Its low price point makes direct marketing competitive, potentially among your direct competitors that have a predominantly digital audience. You’ll have to make sure that your postal leaflet really stands out to catch your audience’s attention, for example. Putting your leaflet in an unmarked envelope might be helpful, as it could spark the recipients’ curiosity.

Can be more expensive

I know we just said it’d be cheaper, but if you go for a more traditional method, you’ll likely rack up staffing costs, printing costs and other expenses.

According to the Direct Mail Company, a direct mail campaign can cost from 30p to £5 per item. Here’s a breakdown of the costs:

Design: £0-£100
Marketing content: £0-£100
Gathering database: 3p to 20p
Printing: 2p to £1.50 per person
Distribution: 25p to £2 per item

How effective is direct marketing?

Although the response rate is generally low, you can boost your numbers with a strong offer. “If you are doing a direct mail campaign, you’ve got to make a really good offer,” said Rigby. “There’s no good faffing about with 5 per cent off with the first order.”

He talks about a particularly memorable direct marketing campaign he did with his stationery company.

“I had a colleague who had a mail order CD business. He would mail 100,000 catalogues, four times a year. He phoned me up and asked if I could put in an insert. I had these cards printed. It was a card that said all you have to do is enter your name and address on the back of his card, stick it in the post. I will send you a free sample pack of office stationery worth around £7.99.

“So, we put those into this 100,000-catalogue mailing and I spoke to my suppliers, I expected to get maybe 2,000 responses. A 2 per cent response is not bad for a mailing like that. But my offer was so good that I got a 10 per cent response. Instead of 2,000 packs I sent out 10,000. I increased my business by 20 per cent almost overnight and I retained those customers for about three years. It was a really profitable exercise.”

Where do I start?

If you’re a very small company, it makes sense to stay local at first. Philip Bacon, director of Bacon Marketing, started by delivering direct mail to local businesses by hand. “On average, this has yielded a 33 per cent response rate for us during the early days and as we have grown, we have trialled other ways, including using the postal service. The response rates dropped to around 10 per cent, but we could also cover a wider target audience.

“Taking things over to digital, direct outreach via LinkedIn has made a big impact, one in three of our leads come from outreach campaigns, one to one, fully personalised. It takes a little longer, but the time is well worth it.”

Speaking of digital, Jordan James of Unlockd Marketing recommends creating a funnel to maximise efficacy. He gives the outline of a simple funnel below:

STEP 1 – Use a free offer (a free consultation chat, a free quiz/survey, a free assessment) or 50 per cent discounted offer or sample as a Google ad and/or social media ad (conversion or lead ads work best) to build a newsletter list

You want a cheap cost per click/cost per lead here. Be broad in your demographic (within reason). Look-a-like audiences for social media ads work really well here (if you have an email list / client list already).

STEP 2 – Use that newsletter list (with a text campaign) to encourage subscribers to sign up to the offer (and other offers as you do them)

STEP 3 – Assessment/trial and error – look at how much it is costing you to sign someone up to the list, how many of those are taking up the offer and how many go on to buy from you (or buy from you again). Is it worth it? At each point, try new things – look at the content, the offer, graphics, the demographic.

STEP 4 – (Not direct marketing) – send out weekly content (that would interest your new email list audience) – have an option at the bottom for those subscribers to take you up on this or a new offer.

Make sure you know the legal issues

It’s essential you stay on the right side of the law, especially as you’re contacting customers directly. You must make sure that customers want to be contacted before you get in touch and that they’ve had the chance to object. This must also be easy – for example, giving the option to reply ‘STOP’ on an SMS marketing message or an ‘unsubscribe’ link at the bottom of an email. You’ve also got to get permission to share their information with another organisation.

If it’s a telesales call, you must state who you are and where you’re calling from, giving an address or telephone number if asked.

Check the Telephone Preference Service and the Fax Preference Service to see who’s opted out. The Mail Preference Service will tell you who has expressed wishes not to receive direct mailing.

You can only send direct emails and text messages if the recipient has given permission to receive them. In your messaging you must state who you are and what you’re selling, giving details of any offers or promotions. You must give the user the ability to unsubscribe on every email.

Finally, you must tell customers visiting your website how your website uses cookies and ask if they want to accept them. This information should be easy to understand.      

If you break the rules, you could be fined or made to pay compensation.      

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