How important is the response rate?

I was talking to the marketing director of a travel company the other day.

He told me his direct mail typically produces a “one-tenth of one percent” response rate. That’s 1/10 of 1%. Or .001. Or one sale out of every 1,000 pieces mailed.

That’s a terrible response rate – right?  Not for him.

Here’s why: It costs him about 70 cents per mailing package or $700 for 1,000 pieces. His average sale is $4,000. So it costs him $700 to produce a $4,000 sale. Not bad.

Look at your cost per response

The response rate is by far the most common measurement in direct marketing, and while it has some value as a metric, it is often very deceptive. Consider this:

You prepare two different mailing packages – (1) a sales letter package that costs 60 cents per piece to mail and (2) a glitzy three-dimensional package that cost $3 per piece to mail. They both produce a 3% response rate. Were they equally successful? Not at all.

The cost to mail 1,000 sales letter packages was just $600, compared to $3,000 for the three-dimensional package. Some quick division (costs divided by responses) will show you that your cost to produce one response was just $20 using the sales letter but $100 using the three-dimensional package.

Factoring in your costs is critical to any true measurement of a direct mail campaign. It’s just common sense.

Also look at the quality of your response

But cost isn’t the only factor. You also need to think about the quality of response. This is particularly important in lead generation in which responses are not buyers but prospective buyers. Let’s look at this example:

In one campaign, you offer a white paper that produces a 3% response, but in another campaign, you invite prospects to a seminar which produces a 1% response. Which campaign was better? The white paper had the higher response rate but how much commitment did it take to respond? The seminar brought in people who were willing to spend an hour or two with you – not as many people perhaps but more committed.

In this example, the response rate is only part of the story. You also need to look at the quality of the leads and for that, you need to determine the “qualified response rate.” Start by establishing some criteria for determining a qualified lead, then use that criteria to compare the programs.

I have nothing against response rates. (Frankly I’m happy when anything is measured.) But response rates can only go so far and can only tell us so much.

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Written by Bob McCarthy

This article may be reprinted without permission as long as the article includes the following credit: Bob McCarthy is a freelance copywriter and consultant specializing in direct marketing and lead generation. His website is www.mccarthyandking.com. He can be reached at 508-473-8643 or by email at bob@mccarthyandking.com

About Bob McCarthy

Bob McCarthy is a direct response consultant and copywriter with a focus on direct mail, email and digital marketing. Bob works with B2B, B2C and Non-Profit clients. You can download his free ebook, "Making Snail Mail Work: 13 Lessons in Direct Mail Strategy."

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