Understanding your direct mail response rate is a crucial aspect of understanding the value of your direct mail marketing campaign.
A direct mail response rate is a measurement that reflects the percentage of people that responded to your direct mailing campaign. While a good direct mail response rate[amsive_tooltip term=”deliverability-rate”] can objectively be discovered, its value is highly subjective. You may receive a good or high percentage of responses from your personalized direct mail marketing campaign, but the value of the campaign will be determined by your marketing objectives and the purpose of the campaign, rather than just responses.
There is a difference between a direct mail campaign that focuses on increasing sales and one that targets an audience to provide information and generate leads[amsive_tooltip term=”lead-generation”]. For example:
- If you are a company that provides solar energy solutions, you may start a solar direct mail campaign that is highly informational. Your direct mail[amsive_tooltip term=”direct-mail”] campaign sends out mail that informs your target audience about the benefits of solar and offers a sign-up for your audience to receive more information. A higher direct mail response rate would be valuable in this type of campaign that generates leads and provides information.
- If you are a mortgage provider and you instigate a mortgage direct mail campaign, chances are that many of your recipients may not be prepared to buy a home or need your services. The direct mail response rate may be low, but the profit made from the few qualified buyers that took advantage of your services may be high.
Average Direct Mail Response Rate
Though many businesses are tackling digital transformation — transitioning manual practices to digital processes — direct mail marketing is far from dying as an old-school marketing practice. Direct mail has an average response rate of 4.4 percent, compared to a 0.12 percent response rate for email. Response rates for direct mail tend to range 10 to 30 times higher than digital mail, and 60 percent of recipients note that receiving and handling direct mail makes a longer-lasting mental impression that is easier to recall later on.
Studies on direct mail and how to use it most effectively note that:
- Direct mail campaigns generate purchases five times larger than email campaigns.
- Direct mail stands out in a digital world and creates a unique physical experience for the customer.
- Direct mail is also more shareable as it is likely to be viewed by the entire household, and typically has a lifespan of 17 days.
While an average response rate may be 4.4 percent, direct mail has lasting impacts that should be considered when evaluating your marketing campaign. Additional direct mail statistics[amsive_tooltip term=”analytics”] show that 42.2 percent of direct mail recipients either read or scan the mail they receive. Though you may not be increasing your response rate, you are earning valuable impressions with your target audience. Additionally, 73 percent of American consumers say that they prefer direct mail, as they can read it at their leisure, which may not always be calculable for a response rate.
Direct Mail Campaign Costs
To weigh the value of a direct mail marketing campaign, you may include the response rate among other variables, including the overall cost of the campaign. There are different types of direct mail commonly used; postcards, letters, newsletters, and catalogs. Each type of direct mail will come at a different cost for design, printing, and dispersal.
If your business is sending out direct mail at a large scale for informational purposes, you might consider the difference between these two campaigns where the goal is to send out 5,000 pieces of direct mail.
Campaign A: 5,000 informational postcards:
- Cost per unit: $0.50
- Total cost: $2,500
- Response rate: 4.4 percent
- Cost per response: $110
Campaign B: 5,000 letters:
- Cost per unit: $1
- Total cost: $5,000
- Response rate: 4.4 percent
- Cost per response: $220
While this analysis focuses on the cost per response, you may also consider a more meaningful analysis by exploring the return on investment (ROI) — what your company gains or what goals are accomplished through your direct mail campaign. Businesses should consider using different direct mail materials for different target audiences and campaigns, and fine-tuning their mailing list to ensure that your more expensive campaigns are reaching your specific target audience for the greatest ROI.
Direct Mail Marketing ROI
A return on investment is a financial ratio that uses a formula to measure the gain, achievement, or profitability from an investment. The ROI[amsive_tooltip term=”return-on-investment”] formula is as follows:
- ROI = net return on investment (net return = profit – the cost of investment) ÷ cost of investment × 100 percent
Using the return on investment model alongside the direct mail response rate may provide you with an even deeper understanding of the value of your direct mail marketing campaign. In general, direct mail marketing statistics show that the average ROI for direct mail campaigns ranges between 18 percent to 20 percent.
Consider an automotive direct mail campaign for a car dealership:
- A car dealership spends $10,000 on a direct mail marketing campaign using catalogs that cost $1 per unit, to sell cars worth $15,000, accruing $5,000 in profit per vehicle sold.
- The campaign was able to send out 10,000 catalogs but had a low direct mail response rate, only .1 percent (10 purchases).
- Those 10 purchases equal $150,000 in total sales for the dealership, resulting in a $50,000 profit.
- The net profit for the dealership is $40,000 ($50,000 – $10,000).
- ROI = $40,000 ÷ $110,000 × 100 percent
- ROI = 36 percent
Even though the direct mail response rate was extremely low — .1 percent, the return on investment was 36 percent (due in part to the high cost of the product), and the net profit from the direct mail campaign was $40,000.
How to Measure Direct Mail Marketing Effectiveness
Measuring the effectiveness of your direct mail marketing campaign may extend beyond calculating your direct mail response rate and your ROI. You may also consider calculating your response quality — how many of your response rate made a purchase. Or, setting up tracking methods such as a phone number, coupon code, or URL to track the sales or leads generated by the campaign. To track the effectiveness of your direct mail marketing, you should first consider the key performance indicators[amsive_tooltip term=”key-performance-indicator”] (KPIs) that are used as metrics to discover the performance of your campaign.
Additional KPIs and marketing metrics for a direct mail campaign may include:
- The conversion rate, also known as the order rate. The conversion rate calculates the percentage of respondents that made a purchase after receiving your mail.
- Cost per acquisition (CPA). The CPA calculates the cost of each new lead, order, or purchase. You can compare your CPA for your direct mail campaign against other marketing campaigns to determine what is the most effective marketing solution and ROI.
- Average order size or revenue per order. You can calculate the average purchase or sale made or the revenue earned from sales that your mailing generated.
- Customer lifetime value. The customer lifetime value will help you to understand the acquisition and retention cost.
Understanding your direct mail response rate is a crucial aspect of understanding the value of your direct mail marketing campaign. However, to truly know the value of your direct marketing campaign, your direct mail response should be considered in tandem with other qualifying marketing factors and indicators.
