Predicting response rates is tricky business and not usually a good idea.
First, it’s too easy to be wrong. Second, it doesn’t mean very much. Getting a high response rate is only good if it comes along with a decent conversion rate. (Topic for another day.)
Yet many new clients and prospective clients are more than a little curious about potential response rates. Understandably, they want some type of benchmark. They’re not looking for anything specific or any guarantees. They just want a ballpark estimate to assist in their planning.
Unfortunately, the honest answer doesn’t make many people – especially newcomers – jump with excitement. Here’s what I mean:
If you’re mailing a soft offer (e.g., informational white paper) to a rented list, a routine response rate would be in the 1-3% range. A hard offer (e.g., an actual purchase or a request for an appointment) mailed to a rented list typically runs below the 1% mark – often well below.
I realize we all have our homeruns – even an occasional grand slam – in which we are somehow able to produce higher-than-usual response. But these “break-throughs” are not typical – and not something you can promise to new clients.
(Don’t be discouraged by these modest rates. These numbers can work very nicely into your overall ROI calculation. Another topic for another day.)
Clearly the response rate is a central concern for many clients – and, as a result, an important selling point for many companies in our industry.
Direct mail companies, lead generation firms, agencies and consultants – we all talk about our response rates. And we’re always careful to put our best stories forward.
But what about marketing companies that talk about 10%, 20% and 30% response rates as if they were routine … as if they were something future clients can expect? Is this possible? Is it an exaggeration? Or are they just making it up?
The power of the House List
For many of these claims, the response rate is the result of a mailing to a House List. The House List is made up of customers and prospects who have responded previously – and are much more likely to respond again.
Most direct marketers know that response rates to a house file can be five to 10 times higher than when mailing to an outside rented list.
This explains how many mail-order and catalog companies make their money. They might generate less than 1% response on the first sale – losing money initially – but will make it up later when they re-mail to these new customers.
Non-profits understand this too. Initial mailings to a new list will often raise money at a loss or breakeven, but this cost to acquire the new donor will be made up in future mailings to current donors.
So yes, mailing to your House List can explain some of these claims.
Beware of the cumulative response rate
But mailing to the House List isn’t the only explanation for some of these outlandish response rate claims.
Another is the so-called “cumulative response rate.”
The cumulative response rate is actually a combination of response rates that add up to one rate – which becomes the advertising claim.
It may be a mailing followed up by a phone call or it may be multiple mailings.
For example, let’s say you do a mailing to a target group that generates a response rate of 3%. Then you mail a second time to the same audience that generates another 2%. Then you do a third mailing that generates a 1% response rate.
The cumulative response rate is a combination of the three rates – 3%+2%+1%=6%.
The strategy of mailing multiple times to the same audience isn’t the problem. In certain situations, this is a very reasonable strategy.
The problem is in using these numbers this way as an advertising claim.
I could accept this if they used an average response rate. After all, if the target audience had 10,000 names and addresses, their total mailing quantity was 30,000 pieces which should be factored into the analysis. The average response rate would be 2%.
I could also accept it as a cost-per-response analysis. This would take into account the increased costs of the second and third mailing.
But sorry, the cumulative response rate is just misleading.
Marketers are always going to find creative ways to put their message in the best light. But buyers have a responsibility to ask questions and find out which response rate claims are verifiable – and which are exaggerations, deceptions or half-truths.