Why direct mail trumps the internet as a means of reaching note sellers

I used to think that the future of direct mail was dead. That was when the internet came into vogue and began to turn towards mainstream, back around 1996-97 or so.

I was thinking that eventually, almost nobody would do business through direct mail anymore with the advent of websites and emails. Well, I was right only to a certain extent in that paper utility bills and bank statements have almost become a thing of the past as electronic delivery became the norm. But, if you’ve paid attention to the types of direct mail you yourself typically receive in this day and age, certainly you’ve noticed that direct mail solicitations from credit card companies, realtors and the like haven’t slowed down at all. This is because this type of advertising works and in many cases delivers better results than web-based campaigning.

In the note industry, direct mail delivers far superior response rates per advertising dollar spent

Many note brokers and investors who are forgoing direct mail while relying exclusively on web-based lead generation report much higher advertising spend then their direct mailing counterparts. It’s not hard to understand why. While any business should certainly maintain a web presence, relying on search traffic or pay per click advertising for quality responses is not only an expensive proposition but this approach also causes you to miss out on a high percentage of potential business.

Let’s explore this a bit. Let’s say you are a note holder searching for “note buyers”. The search results are going to return competitors’ ads up at the top in the prime “above the fold’ area of the search results page. If you want to compete for, say, positions 1-3 at the top, you will likely be paying around 40 cents per click at the bare minimum and, more likely, could be paying upwards of $2.00 (depending on other bids) in order to compete in this arena. Let’s just say you top your bid out at $1.00 and run the PPC ad for one month. Let’s further say, so as not to break the bank, you limit your spend to $20 per day. (We’re assuming you’re even going to gain any kind of a search position at only one dollar, which is questionable at best). This would come out to approximately $600 per month. So, if you’re actually getting the clicks you’re bidding for, that’s 600 clicks per month which is a far cry from 3,000 highly targeted direct mail hits per month for the same $600 (assuming 0.20 per lead and you can sometimes get these cheaper).

Granted, you’ve got some postage expense as well, but you’re reaching far more note holders. Let’s further break this down. With the direct mail list, you know you are reaching bona fide private note holders who are holding notes with the exact parameters, i.e. LTV 90 or below, secured by SFRs with just the right amount of seasoning (meaning the age of the note) that you or your investors specify. What’s more, you are practically guaranteed to have your message read by the target prospect, especially if you use post cards. Assuming the grand scale industry response rate of around 2%, it’s fair to assume you’ll end up with, say, 8-25 requests for quotes per mailing from note holders holding closable notes you’re targeted.

Contrast this with pay per click. Say you’re getting 20 clicks a day on your specified budget and let’s be generous and assume you’ll end up with 600 clicks a month. Go ahead and try this for a month and monitor the responses you get. Guaranteed that the number of quality responses will be very low at best. You will get “tire kickers”, you will also certainly get clicked on by curiosity seekers who may not even be holding a note let alone a qualifying one. You are also practically guaranteed to get clicked on by “joker brokers” who are rank beginners looking to broker worthless leads that have been passed around everywhere and this represents a negative profit for you because you are wasting your ad money. You are also going to get clicked on more than once (any maybe several times) by the same person (that’s just the nature of PPC advertising) and you will be losing additional money every time this occurs..

Think about the prospect you are targeting. Our target note holders are very unlikely to be actively searching the internet for note buyers, and even if they were, what’s the likelihood of finding you and much less actually contacting you with a bona fide inquiry. To find you amongst the competition and then actually follow through to contact you assumes that your website is so compelling and your call to action message is so prominent and up front that the note holder is going to contact you above others. This is an overly optimistic assumption.

In reality, the note holders we are targeting are only going to call the first (and maybe second) broker who solicits them with a clear message and ‘can’t miss” contact information at the exact time they are starting to think about selling their note. That time almost invariably comes sometime after the first couple of months after they first take back the note. It’s probably fair to assume that most of them haven’t even looked online when your first direct mailing hits them in about month number three (which is after your competitors have already done the initial work for you by “warming them up” to the idea of selling their note with their initial flood of mailings during the first month or two and then stop altogether) So, you are swooping in at an optimal point in time with a clear call to action and very minimal competition at best.

Remember, in our industry, experienced brokers should command a $2,000 or more return for every $500 spent on direct mail. Good luck achieving those kinds of numbers with pay per click.

Hopefully, I’ve convinced you that direct mail is the way to go when marketing to find note sellers.. You do absolutely want to have a website as well; just not as your main lead-generation tool. Your direct mailings can serve to steer the prospect back to your website so as to reinforce your message.

OK, that’s it for today, be sure to visit our site at NoteInvestors.com for the right programs and information that will help you gain maximum effectiveness in your note investment activities.

Bye for now.