Direct Mail: Outsource or Keep In-House?

Standard-Yellow-LetterMarketing is often a hot topic because it’s the critical component to creating a continuous stream of leads.  It’s also one of the most overwhelming and subjective business tasks for a real estate investor.  Subjective because everyone has a different way to market for leads and what works for one person may not work for someone else.  There is no shortcut to effective marketing, you’ll need to learn through trial and error and tracking your marketing campaigns is crucial.

I started marketing to private sellers about 1.5 years ago.  At that time I was doing everything in-house – creating the marketing lists, writing the copy, printing the letters, stuffing the envelopes, and stamping all the letters that went out.  It was taking me about 4-5 hours to generate 200 letters each week and as I became more efficient, I was able to hammer out 500 letters in about 6 hours.  This was working fine for me at the time because I have a natural interest in learning every task in the business, whether I plan to outsource it or not and I also wanted to keep my marketing costs low.  On the other hand, 6 hours was a significant portion of my allotted weekly real estate time so I had to think about the cost/time trade off.  Remember, I have a day job and 2 young kids so I’m only working on real estate after the kids go to bed and as time allows during the weekends.

Two months after I began marketing, I got a deal.  Sweet!!  Ok, now that I got a deal, my focus changed from marketing to getting funding in place, setting up insurance, putting the utilities in my business name, creating a detailed scope of work, vetting contractors, paying contractors, filing paperwork, bookkeeping, drawing CAD plans when there were significant floor plan changes, selecting and ordering finish materials…  As you can see, there is a ton of work that goes into each project.  While doing all of this there was absolutely no way that I had time to keep up with my marketing.  So I stopped.  This inconsistency went on for months, marketing –> get a deal –> stop –> repeat.  This is not the way you build a lead funnel.  You need to be consistent and touch your audience 3, 4, 5 times to start to get good results and I knew this.

Fast-forward to April and I shut down all of my marketing campaigns to really think about how to streamline the process and make it scalable.  I wanted to create a marketing machine that would run with or without me spending time on the details.  Also, now that I had some deals under my belt, it was more feasible to spend the extra money to outsource this.  But I needed to justify the added expense.  Looking at it from a time perspective, it was a no brainer that I had to outsource if I wanted to be consistent.  Then I looked at it from a cost perspective.  Here is the cost comparison between me doing my direct mail in-house (excluding the cost of my labor) versus outsourcing the process.

Direct Mail Costs

 

That’s not a misprint for the postcards cost.  It was actually costing me more to generate postcards than to outsource.  One of the reasons a company can do this cheaper than me is because they have a first class mail permit which reduces their stamp cost.  Now, if you extrapolate my output at 500 letters and 500 postcards every other week, this would equate to $14,170 for me to keep my direct mail in-house versus $17,940 to outsource it.  That’s a savings of $3,770 a year.  If you look at this savings in a different way, you could say that I’m valuing my time for the 221 hours it would take me to work on direct mail over the year at $17.06 an hour.  I don’t know about others but I value my time a lot more than this.  So in the 2 minutes that it took me to quantify my $ per hour, I was fully committed to outsourcing.

My next step was to figure out who to use and how to get them my lead list.  Here are some of the services that I researched:

postcard

Based on my research and discussions with the people who run each company, they all seemed to have many commonalities with some minute differences.  But it is these differences that, I feel, will have a big impact on my marketing:

  • Minimums.  Most services have minimums on the number of letters that you can send at once.  So if you only want to send 200 letters a week, you would be limited to a couple of these services.  If I recall correctly, click2mail.com and hellosign.com have low minimums.
  • Handwritten envelopes.  Most of these services provide a computer generated font that looks like handwriting.  For all intents and purposes, many people won’t be able to tell the difference, however I do feel that the open rate will increase if the handwriting is authentic.  I only found yellowletter.com to actually handwrite their envelopes.
  • Envelope style.  Most services provided some variation in envelope style.  I want to have the option to use invitation style envelopes for some mailings and business style envelopes for others.  Again, all of this will be tracked to identify which is working the best.  I should mention that I pair an invitation style envelope with handwritten addresses to give the recipient the impression that the mail piece is an actual invitation and I use computer generated font on the business envelopes.
  • Customization and Options.  Some of these services only provide yellow letters and not postcards.  Also, some of these services only allow for certain font color and templates for your message.  Having more options is key for me because I want to test, track, change, and test again.  I want to know if using a red font gets a better response rate than blue font or if a longer message provides more quality leads.
  • Ease of Use.  It’s important that the service is easy to use so I don’t have to spend time setting up the template or wasting time with glitchy software.  The only service that I’ve heard takes some getting used to is click2mail.com.  I’ve heard, that although it’s a good service, the process to customize your direct mail can be pretty daunting.

 

After all of this, I decided to go with yellowletter.com.  It’s not the cheapest service but it does offer a lot of flexibility and is very easy to use.  I basically email my list in an excel format to the sales department, describe which letter or postcard to use, and specify the mailing frequency and they take care of the rest.  I’ve been using this company for a couple of months and I’m really happy with their service.

Stay tuned for future posts on marketing because there is a lot I want to cover on this topic.

 

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  • I am looking at various outsourcing options as well as doing some “in house” stuff so this was really helpful Justin.

    One question is when doing postcards yourself why did you use a first class stamp vs. a normal postcard stamp at $0.33? Also I have not looked into it but is there a reason you could not get a bulk permit for your postcards since as you point out that is what companies do and you did it for letters?

    Also since you are using yellowletters.com have you tried any of their more unique products like pink letters, zip letters, yellow express etc.?

    • Shaun – all good questions. I was using regular first class stamps because my postcards were 5.5″ x 8″ (half a sheet of paper) and did not meet the postcard size per the USPS. The postcards that I use on yellowletters.com do meet the postcard size, so that is also one of the reasons they get it for cheaper. I suppose I could have made smaller postcards but it was easier just to make 2 postcards out of 1 sheet.

      Yes, I could get a bulk permit for first class mail but based on my analysis and time commitment to do my own letters/postcards, it made more sense to outsource.

      I haven’t tried those products yet, but I willnin the next couple of mailings.

      • Okay that all makes sense.

        I’ll be interested in hearing how the use of some of those other options work out.
        They all seem to be good ideas.

        • I’ll be sharing my results with all my marketing in future posts.

  • Mikhail

    Hello Justin, I have listened to the BP podcast with you and I had several questions regarding you self performing the YL mailing. Where do you buy yellow lined paper, what font do you use, how do you print on envelope ( or you hand write envelope )? Did you have better luck with letters versus postcards? Sorry for too many questions at once!

    Would you recommend to stick to the postcards to eliminate all this hassle?

    • Mikhail – When I was doing yellow letters, I was using 20lb yellow lined paper from Amazon. It was a real pain to get the words on the lines but I recently found out that most people just buy 20lb canary copy paper and print the lines with the words. I created my own font through http://www.myfonts.com/. I started by handwriting my envelopes but switched over to printing on them using the font that I created.

      In my experience, letters receive more responses with more tire kickers and postcards receive less responses. I would recommend that you try both at first so you can draw your own conclusions. What works in my area will be different than what works in your area. Also, marketing is a HUGE part of this business so don’t shortcut the learning process. You want to know what works and why to get an advantage over your competition. Good luck.