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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
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
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
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
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.