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Do Direct Mail Response Rates Justify Its Use?

Posted by | Jul 31, 2012

How does direct mail compare to email and online ads when it comes to marketing effectiveness? There are a number of sources that compile overall metrics that provide that information. Do such measures have any bearing with your campaigns?

The Direct Marketing Association (DMA) released its latest data in June on response rates. The DMA report, initially created in 2003 to look at the typical response rates for direct mail campaigns in specific professions and channels. The 2012 report, for the first time, incorporates transactional data from Epsilon and Bizo on emails and online display ads respectively.

Another source for average response rates for direct mail can be obtained from the National Mail Order Association.

The DMA report is considered one of the best sources for direct mail response trends. Adding the data from email and online display ads allows DMA to make comparisons among these marketing channels. The 2012 edition of the report also compares direct mail response rates over time for the first time.

A few of the more significant results include:

  • Direct mail response rates have dropped nearly 25 percent over the last nine years. Because they are providing average response rates and do not segment by age, we cannot draw conclusions as to how the decline relates to specific demographic groups. If I had to venture a guess based upon other data I’ve reviewed, I would say that the decline is most significant in younger age groups and less so, if at all, with seniors. While I haven’t seen it quantified anywhere, the rise of digital communication channels has had an impact on direct mail response rates.
  • Even with the decline, the DMA study found that mail campaigns draw a better overall response than digital channels. The reasoning is simple enough. Direct mail to existing customers generates 30 times greater response rate than email (3.4% compared to 0.12 percent respectively). Of course the much higher costs for direct mail means, according to the DMA report, that the equivalent costs are roughly the same for direct mail, email and paid search per sale or lead. The cost per order or lead for marketing campaigns was roughly equivalent for direct mail ($51.40), post card ($54.10), email ($55.24), and paid search ($52.58).
  • Because of its low cost, email had a much higher Return On Investment (ROI) than direct mail. The DMA study determined that the ROI for email was 28.5 compared to 7.0 for direct mail.
  • The highest direct response rates are associated with telemarketing (nearly 13% for existing customers according to DMA). Of course, telemarketing also had the highest costs per order or lead as well ($78 for existing customers).

While such reports are useful for benchmarking your results with national data, they should not be used for setting your own response rate expectations. There are just too many variables involved with the offer, the mailing list and the timing of the mailing. Remember the difference between a 0.5 percent response rate and a 1.5 percent response rate is 300 percent!

There are a number of things you can do to help assure a successful outcome for your direct mail campaign.

  1. Break even analysis: What kind of a response rate do you need to break even? A high cost and high profit luxury item will need a much smaller response rate to break even than a "buy one, get one free" pizza offer. Once you know all of your costs, you can compute what it will take to break even.
  2. Test: The only way to determine what your response rate is likely to be is to test the list and offers using a sample number of addresses from your overall mailing list. Select a sample size that will give you confidence in the results, but minimizes the costs involved. If the response rates are too low, you may want to review your offer (call to action, price, design, photography, words, etc). Testing different offers is important for a large mailing. You should also review how you are selecting the group being targeted.
  3. Target/segment: The better you target the people you want to reach, the better your response rates will be. Even existing customers can be segmented by interests or past purchasing behaviors.Your test results and third party data can allow you to better segment your list and do predictive modeling of which subsets of the larger list are more likely to convert.
  4. Integrate cross-channel campaigns: Response increases when direct mail and email are used as part of an integrated marketing campaign. Integrated means that the channels are brand consistent. The slogans, logo and design theme should be uniform in the print, email and other marketing channels. They should also reference each other.
  5. Repetition: It is much more effective to mail to a targeted list repeatedly instead of mailing to a large list only once. Response rates usually increase significantly in subsequent mailings to the same audience.

What are your thoughts on these national average response rates? Do you use them in planning your campaigns?

What strategies have you found to increase response rates?  Please share them with us.

Topics: Direct Marketing

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