New Customers, Fresh in Town: Costs

Costs

C-AM has arranged that at clients' option, the net cost can be zero - or even less, meaning that we pay you more than you pay us! This is explained on the page about the Zero Cost Option. We hope you'll take advantage of that, for it's good for both parties.
Here, however, are shown the normal gross costs of your new-resident project, and they have three components:

The cost of your mailer
The cost of postage, and
Our charges for the names & addresses
Your mailer might be printed for 10 cents to 20 cents.
Postage will be 45 cents for first-class mail, or less than 20 cents if you mail Bulk Rate and buy the needed license; the minimum is 200 pieces per mailing. Or you might choose a postcard, for 32 cents.
Our charges vary from 45 cents on down, depending on the forward commitment you choose to make:-

Commit to buy
this many names
over any period
up to five years Pay this price
per name
0, just begin 45 cents
2,000 43 cents
4,000 41 cents
0, prepay $400 40 cents

Commit to buy
this many names
over any period
up to five years Pay this price
per name
8,000 39 cents
16,000 37 cents
32,000 35 cents
64,000 32 cents

So unless you choose to mail a postcard or use Bulk Mail to bring it even lower, the total usually comes to around $1 each.

Suppose your costs totalled (17 + 45 + 43 =) 105 cents per mailer and we found you an average of 200 newcomer names & addresses per month (request a Custom Proposal to find what it will actually be in your case.) Then your costs would total $210 per month.
"Cost" must always be compared with something, to see whether it's worth while. What this project buys you is new customers, so we suggest you find the Lifetime Value of a Customer (LVC). The LVC for any business is defined as:

How long customers continue

Multiplied by total annual profits

Divided by the total number of regular customers

So if a business earns $250,000 a year from 1,250 customers who patronize it for 5 years on average, the applicable LVC is...

(5 x 250000 / 1250 =) $1,000
It's now easy to see that if this enterprise spends 104 cents on each mailer to newcomers, the break-even response rate is...

($1000 / $1.05 =) 952 mailers per new customer
- which is many times higher than typical Direct Mail advertising requires, especially when "targeted" this well.
Put another way, this project will produce a positive cash flow provided the response exceeds about one tenth of one percent; and if it doesn't produce that much, something else is very seriously wrong!
Bottom-line: this project is very well cost-justified.

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