Why US Financial Institutions Prefer Direct Mail Over Digital Media for Pre-Screen Campaigns

In 2018, there was a 11% increase in direct-mail offers in consumer lending. Despite the availability of less expensive digital media, many US financial institutions continue to rely on direct mail for pre-screen and pre-approved campaigns. Let’s delve into why this practice remains prevalent among lenders, insurance providers, and banks.

Understanding the Cost Perspective

Is it more cost-effective to use digital media, or do financial institutions benefit more from direct mail? The answer goes beyond a simple comparison of costs. When considering ‘less expensive,’ one must evaluate the return on investment (ROI) and effectiveness of each medium.

Direct Mail: An Effective Strategy with High ROI

Direct mail campaigns can yield a 3:1 return, making them a highly cost-effective solution. For instance, spending $3,000 on direct mail can result in $9,000 in revenue. In contrast, an investment of only $500 in digital media might not yield any returns, making direct mail a much better investment. The success of direct mail lies in its tangible and reliable nature.

Social Proof: Trust and Engagement

Brands like Google and Amazon exemplify the effectiveness of direct mail. Google, for example, sends regular direct mail to its users, reinforcing its brand perception and customer loyalty. Similarly, Amazon's catalog-style direct mail caters to its customers' needs, fostering a personal connection and encouraging repeat business.

Trust and Reliability in Direct Mail

Financial institutions such as lenders, insurance providers, and banks must maintain a high level of trust to earn customers' money and personal information. Direct mail is a trusted medium, backed by the reliable and secure postal service (USPS). The USPS has a proven track record of reliability, and stringent mail fraud laws add to the trustworthiness of the medium.

Furthermore, the physical nature of direct mail has been proven to yield more engagement and response rates. Neuroscience has shown that people tend to be more engaged with physical information, making direct mail a more effective communication medium.

Direct Mail for Nonprofits

Direct mail remains an effective medium for nonprofits, even when the initial investment is larger. Nonprofit organizations can see a return on investment (ROI) that is ten times greater than their initial investment. This high ROI justifies the initial expense and demonstrates the effectiveness of direct mail in achieving fundraising goals.

Technology-Averse Consumers

It's important to acknowledge that some consumers are tech-challenged or digital-averse. Moreover, evidence suggests that the US banking industry may be predatory or corrupt. In such an environment, direct mail-based scams can thrive due to the perceived vulnerability of the target audience. Despite the costs involved, direct mail can yield significant returns.

Conclusion

While digital media offers a plethora of options, financial institutions continue to favor direct mail due to its proven effectiveness, high ROI, and trust factor. By understanding the unique benefits of direct mail, organizations can justify their investment and continue to succeed in a competitive market. Whether it's for pre-screen campaigns or fundraising, direct mail remains a powerful tool in the marketing arsenal.