One of the most powerful tools available to small businesses is direct mail. By this I don't mean electronic, Internet-based mail, but the old-fashioned kind that requires a stamp and a trip to the post office.

Why is direct mail such a powerful tool?

It's a way for small businesses, especially retailers, to separate themselves from the big box stores such as Best Buy and Wal-mart, and to compete successfully with the Amazon.coms and Ovestock.coms of this world.

The power of direct mail, if done right, is that it's like getting a letter from your sister, mother or aunt. The postman brings it to your home. It's addressed to you personally. And when was the last time you received a letter from Best Buy, Wal-mart, Amazon.com or any Internet retailer? If so, it was undoubtedly via email and designed to be read by hundreds of thousands of customers - not much personalization there.

The first thing you need to do to start an effective direct mail campaign is capture the names and addresses of your customers. This is easy for service organizations like carpet cleaners, auto repair firms, instant printers, and the like. They already have their customers' names and addresses. All they have to do is put them together as a mailing list. Retailers such as jewelry stores, antique dealers, liquor stores, restaurants, etc. have a tougher time because they don't have an easy way to capture their customer's names and addresses.

There are a couple of answers to this. One is the old fishbowl gimmick, where you ask customers to deposit their business cards in a fishbowl with a prize to be given away in a drawing at some later date. I personally think this has been overdone. Plus, I have heard stories of unscrupulous sales people cleaning out the fishbowls themselves and using the business cards as sales leads.

A second alternative is to post a "guestbook" somewhere near your cash register with a sign offering a free newsletter to all those who register. To make this work, you and your employees have to be kind of aggressive in urging all your customers to sign up, and you can expect that many will not. However, persistence is a virtue and if you keep this up long enough, you will capture enough names and addresses to make the effort worthwhile.

I also like the idea of offering customers some small reward for providing their names and addresses. One version of this that seems to work well is a "frequent diner," "frequent buyer," or "frequent customer" card. Give your customers small, inexpensive cards that you can punch whenever they buy from you (or just visit your store) with the promise of a free something after 10 or 12 punches. Naturally, they have to register for the card and viola! You have their names and addresses.

Last, and most expensive, you can buy a direct mail list targeted toward your best prospects. Chances are, there is at least one company in your area selling lists of prospects by criteria such as recent home buyers, camera buyers, child care customers, etc.

Once you have captured enough names and addresses (maybe 100 or more) to begin a direct mail campaign, you have a couple of alternatives. One, you can input the information yourself. Or, two, if you're strapped for time, you should be able to find a local high school or college student to input the information for you. He or she can use either a word processing program or a database program to build the list. It's just simple data entry and you might offer $0.5 or $0.10 for each name/address input. I like to use a word processing program because once the list has been built; it's fairly easy to create personalized letters, etc. using the program's mail merge features.

What do you then mail customers? I like newsletters a lot. They can be as simple as a single page printed on both sides or as complex as four to eight pages. Another good alternative is personalized letters. Just make sure that whatever you choose to send your customers is important and meaningful and always include an offer designed to bring them into your store or to call you for more information or to make an appointment.

It takes time, money and dedication to develop and implement a direct mail campaign. But it's a powerful tool that can pay for itself in just a few months and then keep paying off for years to come.

For more information on creating an effective newsletter, be sure to look for my article, "Small Business Power Tool: Customer Newsletters."

Article by Douglas Hanna. Douglas is a retired advertising and marketing executive and long-time Denver resident. He is the webmaster of http://www.all-in-one-info.com, a free resource for information on a variety of subjects. Please visit his site to subscribe to his free newsletter, "Tips & Tricks to Save Money & Live Better."