It seems odd that a number like 1% or 3% or 4.9% can mean such big dollars for your company. Yet that’s the nature of a direct mail response rate that gets you plenty of good leads, first, to pay for your mailing and, second, to generate a sizeable profit well beyond the breakeven point.
How well is your direct mail working for you? Your response rate is a key figure to guide your analysis. Fair warning: math will be involved.
Let’s say you send out 2000 pieces to a targeted list of prospects, and you get 98 phone calls that you can trace to the mailing. You’ve got a 4.9% response rate. According to the ANA/DMA Response Rate Report 2018, that’s an average rate in their surveys (though results clearly vary based on industry, offer details, etc.)
But let’s keep going with that example rate. The math adjusts with the size of your mailing list, even if the rate of response were to stay the same. So, if you sent out 10,000 pieces to a targeted list of prospects, and you get 490 phone calls that you can trace to the mailing, you’ve still got a 4.9% response rate – but with a lot more leads and profit potential.
Larger mailing numbers put the breakeven point out just a bit further, while the increase in the number of leads sends the profit potential up much higher.
Calculate Your Goals
There’s more math involved. How will you know you’ve achieved success? Add up the numbers of the direct costs for your creative (copywriting, design), the production of the piece (print run for your selected quantity) and the mailing (including postage as well as any cost associated with your list). Consider as well some of the indirect costs, such as the time you’ll spend moving this marketing project to completion. Once you calculate your total investment, you can determine your breakeven point. How much do you need to earn to cover these costs?
Next, estimate how many people you believe will respond to your mailing (that’s your estimated response rate), then estimate how many will go on to make a purchase, as well as the average amount you expect them to spend. How many systems would you need to close to breakeven? What, beyond that, is likely to be your profit? With results you believe are realistic, use this info to set your return goal.
Response Quality
The list, offer and call to action also influence response quality. If 40 of the 98 calls you get are from people who want an unrelated freebie but don’t actually need the contracting service you provide, aren’t quality leads. Or there may be other non-qualified characteristics that are not going to result in them giving the go-ahead on the project. However, if your marketing piece has worked to prompt quality leads – homeowners persuadable about an installation – to follow up, it’s done a great job.
Also, remember that averages aren’t scientific fact. For example, the typical response rate for direct mail has been somewhere between 3% and 5% – so if your mailing of 2000 had a 3% response rate, you’d get 60 leads.
A house list – which is weighted heavily by names of customers who already know you and trust you – gets a higher response rate. According to that same ANA/DMA 2018 report, the house list response was almost double the prospect list at 9% (though earlier years had that number around 5ish%). Either way, your own list does better because reputation and image, excellent customer service and retention marketing have done a lot of the work in advance to build that trust. Plus, a response from a house list is easier to close.
Other Factors for Success
A successful direct mail piece doesn’t just fall out of the sky and land in the mailboxes of responding prospects. There are also other factors to consider – such as timing, benefits, incentives and call to action – that will prompt a response.
Again, it doesn’t just happen. The creative has to be strong, providing a solution to a problem customers are experiencing. Leads will likely need to be nurtured, and sales teams need to be effective at closing the deal. Your business and marketing and sales arms work together to turn quality leads into satisfied customers, while retention marketing keeps them happily on that house list for future response.
And that brings up another point. When you are conducting an integrated marketing campaign where your prospects are seeing multiple impressions of your message in digital ads, social posts and direct mail, they all work together to build your response.
The direct mail may have been the third impression that sent them to the phone, or the social ad may have been the reminder they needed after seeing your direct mail. Either may follow to your website before making contact.
Direct mail is known to pull a higher response rate than email, paid search or social media – as much as five to nine times greater than any of the digital marketing outlets. Yet they are all companions in your campaigns, and each helps lift response.
A little more math to go… The general rule for direct marking success is 40/40/20. This is the breakdown that says 40% of your direct mail success depends on the mailing list (house vs prospect), 40% is dependent on the offer itself, and 20% is affected by the creative. All these elements build on each other.
Successful direct mail campaigns work best as part of an integrated marketing campaign that puts your message in front of your market through several media, as each one pushes qualified leads toward a next-step action. Choosing the right list sets you up for success, creating a strong direct mail letter persuades your market to take an action, mailing the letter at the right time for the offer creates incentive and stirring response with impressions in other media is the framework that leads to direct mail success. As a result, the math works out profitably for your company.