Melissa Johnson has been on the Flipping Junkie Podcast multiple times (she and Danny run the business together and are married, so it goes without saying she’s an important member of the REI community). She runs the house flipping side of their business and does a great job doing it!
After years of running their real estate investing business, Melissa made the decision to cut out direct mail marketing at the start of 2018. Their yearly goal was to stop direct mail marketing all together. But why?? Hasn’t direct mail been working for so many investors?
The truth is…direct mail is dead. Real estate investing direct mail marketing has been declining for years, so much so that Melissa said it’s time to stop. In it’s place, Danny and Melissa are going to be focusing on online lead generation.
Melissa didn’t make the decision to cut out direct mail overnight, though. At the beginning of 2017 she had noticed that their direct mail wasn’t consistent and wasn’t performing well. Instead of cutting it off then, she decided to go all in and get that marketing strategy back up and running.
“We started a bunch of mailing campaigns and the year went on, and we were getting some deals, but it wasn’t performing the way I hoped it would when I looked at what we were spending on it,” Melissa tells. “I started looking at the numbers half way through the year and was pretty disappointed.”
Melissa’s direct mail plan started by mailing to high equity for most of the year, then they started adding in unknown equity. The unknown equity didn’t produce any leads at all, so they quickly stopped that campaign.
“We had about 30k addresses in our mailing list, based on our criteria,” Melissa explains, “We were had them separated by zip codes so that it wouldn’t be so much at one time. Every mailing was between $2400 - $2500 per week.”
The criteria for the high equity lists was anything under $250k with more than 50% equity, at people over age 40. The criteria for the unknown equity lists was just not stated how much equity the homeowners had. The equity could be unknown, unstated, they could have some, they could have none; it just means that the equity field wasn’t filled in. This list did not produce leads, so Melissa stopped that campaign.
“About half way through the year I took a look at the numbers,” Melissa says, “In September I said ‘look we’ve been spending a lot of money on this and it’s not getting us leads. We need to stop what we’re doing and reevaluate all of it’.”
The mailing lists were the same addresses, but it was all sent in a cycle. Each address would get a piece of mail from them every 4 - 6 weeks. With 30,000 addresses, that adds up.
Once Melissa looked deeper into the process and the direct mail findings, she learned that direct mail just isn’t enough to keep a business at this scale going. There’s a huge difference between a high quality lead and just another throw-away lead.
Melissa sat down and took about 8 hours just looking over every single lead from 2017 to see which ones were high quality and which ones weren’t. She read all of the notes on every property to see where that lead went, how far it got, and if it turned into a deal or not. And if it did turn into a deal, how profitable was the deal?
Overall, Melissa found that the cost of direct mail wasn’t worth the kinds of leads that they were getting. Their higher quality leads were coming from online marketing strategies and their website. The leads that came in through direct mail either weren’t quality leads or weren’t leads that converted to deals.
So when the question is asked: is direct mail dead? Melissa’s answer is, “For us, direct mail died about a year ago. We dropped it and moved to online lead generation.”
