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Case Study: Direct Mail vs. Email Invoices

Date: August, 2013 --

Certainly one can’t beat the price of sending invoices by email. At least it appears that way, until one captures all the real costs of doing so. When testing the letter versus email question, a Danish utility company was quite enlightened by the outcome. This Fresh Data Case Study will analyze the true costs of both options and present the quantitative results outlining which is really the most cost effective method. Possible spoiler alert, the results may surprise you. This case study was compiled by Data Services, Inc. with cooperation from our friends at the Prescott Report.

Natur-Energi A/S is a Danish energy company dedicated to locating, generating and delivering simple and effective energy supplies and solutions that result in lower CO2 generation.  Their customers are, for the most part, private small and medium-sized companies who are committed to CO2 reduction and arresting climate change. 

Natur-Energi wanted to test whether switching to paper invoices with a new population of customers would improve the speed of payment. It also used the campaign to determine the total operational costs of using digital invoices and physical invoices.

A test population group of 2,879 new customers was selected and their behavior through a two-month billing and payment cycle was carefully monitored.  Records were kept of the type of invoice sent, date and medium of the first and second reminders, traffic to Customer Service and date of write-off. 

The results are extremely enlightening: 

59% of those billed by email failed to pay on first billing and needed a reminder. Compare this with the statistic that only 29% of those billed by direct mail failed to pay on first billing and required a follow-up message.

After the reminder message, 80% of those unpaid who had been billed by email called Customer Service. That is to say, 47% of those receiving an initial invoice by email called Customer Service after a reminder.   But, only 50% of those customers originally billed by direct mail and sent a reminder called Customer Service. That is to say, only 14.5% of customers receiving an initial invoice via direct mail called Customer Service.   

A call to Customer Service was calculated to cost about $9 per call. On these calls, the customers were asked why they had not paid on first billing. The common responses were that either they had not received the first bill, or “Maybe it’s in the SPAM folder.”  Or, put another way, about 38% of the customers billed by email ended up costing the company an additional $9 (80% of 59%).  However, only 14.5% of those billed by mail cost the company that $9 (50% of 29%). 

And, of course, there were non-payers in both groups who failed to pay after a second bill and the management of each of these customers was customer specific and calculated to cost on average of  $11.

The bottom line is that it cost the company $3.25 per customer to get paid by paper invoice and $5.75 per customer billed by email. That’s a difference of 42.8%. Naturally, questions remain about the transferability of this experiment to other markets. For example, direct mail is pricey in Denmark. Each of those invoices cost Kr6 in postage, which is $1.06! But which way does that cut? Doesn’t it make the case even stronger in the US market where the invoice can go for under $.45, perhaps $.75 all in? And of course we’d like to see that paper invoice and it’s creative, if any! 

But the message is truly very clear: A paper invoice is more than a dunning or a billing device even leaving aside the brilliant transpromo marketing opportunities or the opportunity to test QR Codes in Customer Billing Statements. It’s a means of getting paid without pressure and it’s more than a reminder. It’s a money saver. 

No matter how you bill your customers, you need to know where they are, physically or digitally. Rely on Data Services, Inc. to make sure you data is accurate and efficiently managed.