Cost or outlay – how to think about a sales letter

I quoted a sales letter task at the weekend for a man with a business that specifies and supplies high end commercial interiors solutions.

He had a sales letter that he’d written himself a long time ago and that wasn’t really, in truth, a sales letter at all. He wanted a new one.

So I sent him a modular quote, showing him what it might cost to do the letter, then what it might cost to produce a supporting leaflet to go with the letter. A la carte: see what you like, see what it costs, tell me what you’d like.

A few hours after receiving the quote, the man replied that he’d already spent most of his budget on printing folders and… and here’s the bit in which the thinking is totally beyond me… couldn’t justify the cost of copywriting.

Now lets put aside the question of why, then, he was looking for a copywriter to begin with.

What I don’t get is this.

Let’s say the man mailed 1000 companies with a new sales letter. And let’s say we got just a 2% response. That’s 20 responses expressing interest.

Now let’s say he was able to convert just 10% of these qualified enquiries. That’s 2 new customers.

Now I didn’t get as far as discovering what the value of a typical order is in his business, but I’m willing to bet it’s not low. So let’s be fair and imagine that one of these two imaginary orders were then to have a modest value of, say, £5,000, but that the other turned out to be a very decent contract with a value of £50,000.

These are just the first orders as well, mind. Who knows what these two customers may go on to be worth to this business in the future?

So let’s guess that the guy does £55,000 worth of business now, and a further … oooh… let’s see.. let’s just say as much again in the months ahead.

So in total, the sales letter he couldn’t justify the cost of might have pulled him £110,000 worth of sales.

Given that the fee for writing it would have been significantly less than 1% of this, how on earth can he have reached the view he did?

The answer lies in his choice of the word ‘cost‘. “We can’t justify the cost of the copywriting.”

To think of this, up-front, as a cost, he must be expecting zero return! In which case… why bother?

But sales letters are an investment, generally quite an effective one, producing handsome return on the outlay.

In this case, even my conservative calculation suggests he might have expected an almost fifteen thousand per cent return (that’s about 150 times) on the fee.

I don’t see how he could afford not to!

3 Responses to “Cost or outlay – how to think about a sales letter”

  1. Laurence Blume

    Rick, It’s a cost in accounting terms. That’s to say it’s a cost of obtaining the sale. But it’s not a cost in the absolute terms this guy was referencing. In that case it has to be thought of, in ‘non accounting’ terms, as an investment, surely?
    “If you outlay this, it might reasonably be expected to return this.”
    He could simply have been saying that the cost (ie cost against likely sales) was too high, but the details of the conversation make that a bit unlikely, I think.

  2. rick

    And that has been the argument to client FDs for years – it’s an investment in the brand, not a cost. However, you could say DM is a cost if it is also your channel to market.