As copywriters, we are often asked about response rates for direct mail and email marketing. My short answer is that a “good response is a profitable one”.
However, whether you are using direct mail for professional services such as legal or accounting, or have a retail product and are looking to generate leads, there are many variables to consider.
As we have explored elsewhere, the mailing list, the copywriting, the graphic design and the offer will ALL influence the outcome.
For example, while offering fuel at 50cents a litre would no doubt bring a terrific response, it isn’t likely to be a profitable one for the service station running the campaign!
Crazy, unprofitable offers aside, the three fundamental measures for a successful campaign are the:
- Response rate.
- Conversion rate.
- ROI (Return on Investment)
Your results comprise these three elements. Analysing them separately will give you a clearer understanding of what worked and why. Importantly, it will also give you some guidance when planing your next campaign.
1. The response rate.
The response rate is the percentage of people who clicked, phoned, visited, or took whatever other action you were asking them to do to get your offer. If you mail 200 letters and get 20 responses, your response rate is 10%. Simple. The question is of course, what is a GOOD response?
When using a cold direct mailing list…
Generally speaking, the results for a cold list (i.e. people who have never heard from you before) is perhaps between 1% and 3%. Of course, a 1% response with a highly profitable offer MAY be better than a 5% response with an out-and-out loser. More on this below.
When using a hot list…
When sending to your existing customers, anything is possible. Response rates as high as 25% or more are not uncommon. As always, this will depend on the relationship you have with them, the offer and the copywriting & graphic art. At any rate, as a rule, your email or direct mail to a hot list WILL produce a better response rate. Unless of course, you have made it your business to annoy, irritate and disappoint your customers. In which case, repeat business will be low.
2. The conversion rate.
The next thing to examine is your conversion rate. This is the percentage of people who responded to your initial offer, then went through your sales process to emerge as paying customer. As you can see, this introduces another variable. If your offer in the direct mail piece or email is to make a purchase right off the bat, then your conversion rate is the same as your response rate.
HOWEVER, if your mailout is a lead generation exercise, then your conversion rate going to be less than the response rate.
In this situation, your conversion rate is influenced by your sales process — and how effective you and your team are at selling leads. Also, the offer itself will make a difference as it will influence the the QUALITY of responses.
I worked with a Brisbane builder who was disappointed with the conversion rate of a campaign. Close examination showed that the initial offer was targeted at people who were CONSIDERING buying an investment property. There were plenty of responses, however the conversion rate was low as these people turned out to be WAY back in the buying cycle. They were still researching, learning and getting a feel for how it all worked.
Changing the initial offer to target more qualified buyers who were in a position to ACT NOW was the solution.
3. ROI – the REAL gauge of direct mail success
Where the rubber meets the road is your Return on Investment. It really overrides everything else.
You might be gloomy-faced at getting only a 0.0005% conversion out of a mailing. However if the whole exercise cost you $40K and you are selling… say… $400,000 house and land packages, then you’d have to put on a bit of a smile. Even with the low response rate, the campaign would be a profit-maker for your business.
And THAT, dear marketer, is why your actual ROI is the only figure that counts.
Of COURSE analysing your response rate and conversion rates are crucial. Even a small improvement on these can make a profound difference to the end ROI result. For that reason, any fine-tuning must be pursued vigorously — and we spend a great deal of time looking at this with our clients, to see where there may be weaknesses that can be fixed up.
But the main game when putting a direct mail or email campaign in place is ALWAYS going to be the ROI.
As my grandfather was fond of reminding me “You can’t go broke making a profit!”
