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Direct-mail couponers are cashing in on a cost-conscious America.

IN THE COST-CONSCIOUS '90s, it's chic to be cheap. Just look at the expansion of discount clothing stores, such as TJ Maxx and Marshalls, and the plethora of warehouse-sized superstores, like Sam's Club, where mind-boggling bargains can be found every day.

Indeed, says Arnold Brown, chairman of Weiner, Edrich, Brown Inc., a trends analysis firm in New York City, Americans take pride in being knowledgeable consumers who know better than to pay full price for anything. "If you spend a lot of money on something when you can get it for a lower price," he adds, "you're not 'with it' anymore."

Just what is considered "with it"? Why, using coupons, of course. Keep in mind, however, these aren't only your mother's coupons for detergent and dog food. Today, Americans use coupons to save money on everything from chiroprac- tors to triple-cheese pizzas. And direct-mail coupon entrepreneurs are behind it all. After persuading local businesses to advertise with them, they print up the savings certificates, package them either in booklet form or in value-pack envelopes, and deliver them by direct mail to consumers' mailboxes.

The direct-mail couponing industry has had its ups and downs in the past few years. A 1994 Donnelley Marketing Survey of Promotional Practices found that the use of direct-mail couponing declined slightly in 1993, to 78 percent of companies using promotions, as compared with 1992 responses where 84 percent of businesses used this method. However, the same survey determined that 53 percent of companies consider direct-mail couponing their "most important" consumer promotion in terms of dollars spent on such programs.

Clipping Coupons

Those in the industry say the time has never been better for direct-mail businesses. Besides the appeal of saving money, Gary Kadi, 32, whose San Diego company, Adworks, distributes coupon booklets to shoppers in California, believes the entrepreneurial revolution is boosting the attraction of direct-mail couponing. "People see more stability in owning their own businesses [than in being employed]," Kadi says. And the best way for these businesses to draw in customers is by advertising locally--but not through any old advertising medium.

Newspapers, for example, don't always inspire shoppers to shop, says Myrna O'Reilly, 49, owner of Coupon Cash Saver in Deerfield, Illinois. But coupons do. "Coupons let people take action, more than just seeing a company name in the newspaper," she says.

"The benefit of a direct-mail campaign is you can target the market and measure your results [by the number of coupons customers redeem]," says Michael Teitelbaum, 38, owner of a Money Mailer direct-mail couponing fran- chise in Baltimore. This way, there is no question about whether your advertising is working.

Where To Begin

To run a successful direct-mail coupon business, you'll need to become more familiar with the printing, graphics and mailing industries. Just ask Gary Kadi: Even though he had owned a Money Mailer franchise in New Jersey for five years before he moved to San Diego to start his own company, he found he had to start at square one.

"As a franchisee, everything was handed to me," Kadi says. As an independent, he had to create his own advertising copy, price several printing and graphics services to produce the coupons--or attempt to do it all himself. He also had to learn how to organize everything from production to accounts payable.

After trying to start his own printing and graphics company, and losing his shirt in the process, Kadi decided to focus on what he knew best--selling, thanks to years of experience as a pharmaceuticals salesman--and leave the graphics, finance and production jobs to the experts. Today, he outsources everything and officially has no employees.

O'Reilly shares Kadi's philosophy on outsourcing. To do printing and produc- tion yourself is like getting into "a whole other business," she says. "You need a bigger facility, more equipment, more people." For a business just get- ting off the ground, this kind of overhead doesn't make much sense.

O'Reilly has outsourced from her very first mailing in 1984. And it's paid off: Coupon Cash Saver has gone from mailing to 15,000 homes in Northbrook, Illinois, to nearly 2.5 million homes per year in the greater Chicago area plus Racine and Kenosha, Wisconsin. Her sales last year reached $1 million, a 30 percent increase over 1994.

Selling Savings

The other key requirement for success in this industry is a background in sales or, at the very least, being a people person. Teitelbaum once sold magazine advertising; he also worked as a salesperson for another direct-mail coupon business. Kadi credits his pharmaceutical sales background with giving him the stamina he says he needed to "hit the streets, visiting 50 to 100 businesses a day."

While O'Reilly never worked as a salesperson, she has learned to deal with people, thanks to the 25 years she and her husband have owned a dry cleaning business. In fact, she created the coupon booklet that inspired Coupon Cash Saver to drum up business for her dry cleaning business and the other stores in the shopping center.

As the owner of a business that benefited from direct-mail coupon advertising, O'Reilly knows firsthand that the right promotion can bring customers through the door. In fact, all three entrepreneurs say almost any business can benefit from direct-mail coupons--meaning the market is wide open for those with the requisite sales skills.

"Given the right promotion, this can work for any type of business," says Teitelbaum, who once persuaded a local chimney sweep to advertise in his bimonthly mailing. That ad garnered a phenomenal response: The chimney sweep's initial $2,000 investment generated more than $100,000 in business.

In general, the companies that reap the most rewards from direct-mail coupons are those with mass appeal, such as restaurants and auto-service shops. Because there is usually more than one business offering these services in the same town, it's important that direct-mail couponers limit the number of com- petitors in each mailing so each client gets a great response.

O'Reilly uses this unscientific formula for her quarterly mailings: "I figure out how many times in three months a customer might use a coupon," she says. For example, someone may eat pizza a few times during that time period but only get his or her carpet cleaned once. So she'll include a few pizza parlors in her coupon booklet but only one carpet cleaning company.

By being sensitive to clients' and consumers' needs, you create a win-win situation. You help local companies garner new business, generate sales and keep their customers coming back. At the same time, you build goodwill with those clients so they continue advertising with you. And suddenly, you've suc- ceeded in the direct-mail business.

Want To Know More?

The Advertising Mail Marketing Association represents supporters and users of mail as an advertising, marketing and fund-raising medium. Contact them at 1333 F St. N.W., #710, Washington, DC 20004-1108, (202) 347-0055.

Members of the Direct Marketing Association include companies from every aspect of direct-mail and direct-response advertising. For more information, contact them at 1120 Ave. of the Americas, New York, NY 10036, (212) 768-7277.

Entrepreneur magazine's business guide 1232, Co-Op (Coupon) Mailing Service, is available for $69.50. Call (800) 421-2300.

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Adworks, 204 N. El Camino Real, Ste. E-107, Encinitas, CA 92024, (619) 793-6245; Coupon Cash Saver, 1020 Milwaukee Dr., Deerfield, IL 60015, (847) 537-6420; Direct Marketing Association, 1120 Ave. of the Americas, New York, NY 10036, (212) 768-7277; Frankel & Co., 111 E. Wacker Dr., Chicago, IL 60601, (312) 938-1900; Money Mailer, 1726 Reisterstown Rd., #200, Baltimore, MD 21208, (410) 653-0744; Weiner, Edrich, Brown Inc., 200 E. 33rd St., #9-I, New York, NY 10016, (212) 889-7007.