Direct Mail Response Rates and Other Metrics
Response rates are the most common ways to measure the success or failure of a direct mail campaign. But the response rate is a fairly simplistic measurement that provides limited analysis. Other metrics need to be used to gain further insight into a campaign’s performance.
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Looking beyond response rates
What has always drawn marketers to direct mail marketing is the ability to track and measure response. (If you use direct response, you can track and measure all media, by the way.)
The most common measurement in direct mail is the response rate.
While the response rate gives you a good read of the performance of a single direct mail campaign, it falls far short of what you need to do a serious analysis of your overall program.
As you see below, there are other metrics that need to come into play to analyze not just a single direct mail campaign but all of your marketing.
Understanding the Response Rate
The response rate is simply the percentage of your mailing quantity that responded to your mailing.
The response rate is usually no more than 1-3%. Occasionally it runs higher – and, in many cases, it runs lower into the fractions of 1%. We see tiny response rates when we are selling relatively expensive, complex products.
The major exception to these rates comes when you are mailing to your so-called House List which is made up people who have previously responded to you.
The mere fact that they have responded previously to you, puts them into an entirely new category for response potential.
The problems with the response rate
The response rate can be an effective measurement when you are comparing mailings that are exactly the same. Same offer, same format with different lists (if the lists cost the same).
Other ways to measure direct mail results
Other than the response rate, there are many ways to measure the results of your direct mail program. Here are many of them:
Qualified Response Rate – let’s say you generate 100 leads on a 5,000 piece mailing. That would be a 2% response rate. But if after you call those responses, you determine that only 50% of those leads have a serious interest in buying now or in the future, then your qualified response rate would be 1% (50 qualified leads on a 5,000 piece mailing).
Order Rate – the order rate is a better form of measurement than either the response rate or the qualified rate because it tells you what percentage of people actually bought what you were selling. If you have a long sales cycle, the order rate is not a practical metric to use however.
“Cost per” Analysis (Cost per response, cost per qualified response, cost per order) – measuring the cost per response helps take into account the different costs of two direct mail campaign. Sometimes the cost differential is minor but sometimes it can be significant. Also a cost per response analysis is useful when comparing a direct mail campaign with an advertising campaign or other marketing activity.
Customer Acquisition Cost – this provides a summary of all your costs that lead up to acquiring a new customer. It may include the direct mail campaign, the fulfillment and all the follow-up (including both telephone and in-person sales time).
Revenue per Order – this provides a snapshot of how much money your campaign produced on a per-order basis. (This may not apply to a lead generation campaign.) This is important when your customers are buying in various quantities or dollar amounts.
Return on Investment (ROI) – in the end, you want to know if your campaign made money. Add up all your all your revenue. Add up all your costs. It is not uncommon for a new customer acquisition campaign to lose money (have a negative ROI). Those marketers understand that their profits are going to be seen when those same buyers make a second or third purchase.
Renewal Rate – not applicable to all businesses, but could be an important for some. Special promotions are specifically developed for renewals and can be measured as a percentage of all new customers. Renewal rates are affected by how many incentives you used to get customers to make their first purchase.
Lifetime Value – over time, you’ll begin to notice that some customers continue to buy again and again over a long period of time while others buy only once. By tracking this information, you will be able to determine the average value of a customer over a lifetime (or at least an extended period) This is an important number because sometimes the cost to acquire a new customer exceeds your profits from that initial order.
Sometimes you need to look beyond the mailing itself
When your marketing program includes steps that extend beyond the actual mailing, you should be measuring the performance of those steps as well.
For example, the conversion rate.
If you are using a landing page for your direct mail responses, you want to see how that landing page is performing and what you can do to improve that performance.
Landing pages are designed to convert new visitors into captured leads (with contact information). They have nothing to do with how many people respond, but they have a huge impact on many convert. So test different landing pages to improve your conversion rate.
Similarly, if you are using a call center to capture inbound leads from your direct mail promotion, try different telephone methods to maximize the number of conversions you can get.
As with landing pages, your call center has nothing to do with generating the lead, but different approaches with inbound calls could dramatically improve your lead conversions.
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