You put a lot of time and effort into your direct mail marketing campaigns. Naturally, you want to know if your strategy succeeded or failed. You want to know the results. How many people received it? Do you know how many responded to it? How many placed an order for your product or service? That’s where direct mail marketing metrics can help—provided you know what figures to look for and how to measure them.
The information you find can have a significant impact on your next direct mail marketing campaign. What you learn today will help you achieve more tomorrow. Here are the four direct mail marketing metrics that matter most and how you can use them to your advantage.
1. Response Rate
The response rate is the percentage of people on your mailing list who respond to your direct mail campaign. According to the Association of National Advertisers, the average response rate for a “house list” is around 9%. If you rent a list, on the other hand, you can expect around a 5% response rate. Naturally, your results will vary depending on a variety of factors, including the type of product or service you’re selling.
To determine your response rate, divide the number of responses by the number of pieces sent. For example, if you sent out a 5,000-piece mailing and you received 200 responses, that would give you a 4% response rate. So what constitutes responses and how do you track them? Let’s look at the ways you can track your direct mail campaign.
4 Ways to Track Your Direct Mail Campaign
To set up tracking on your next direct mail marketing campaign, it should come as no surprise that you need to include a point of contact on each piece. This is how you’ll credit sales or leads to each campaign. Here are a few ideas. You can use one or more on each direct mail piece.
Provide a promo or coupon code that’s unique to each campaign. This is an easy way to track your responses over the phone, via your website, or in person at your retail location (if you have one). Just make sure you’ve trained your staff to request and record the code.
Call tracking is a great way to measure your response rate if you have a dedicated line that only takes calls based on a particular campaign. For example, you could set up a number that forwards to your main business line. You’ll see how many calls you receive when you track the number of calls to that dedicated number.
Create a unique QR code and include it somewhere on your direct mail piece. When people take a picture of it with their smartphones, it forwards them to a landing page. You can look at your website stats to determine how many visitors you had and what their actions were once they landed on the page.
Website Landing Page URL
As an alternative to a QR code, you could set up a unique webpage URL that serves as a landing page for that particular campaign. You can take this concept further by providing each recipient with their own personalized URL, or pURL. This makes it ultra easy to track each recipient’s actions. If they visited the page, you’ll know. You’ll also know if they clicked on any links, asked for more information, placed an order, etc.
Again, your results may vary, but the top response rate tracking methods are QR codes or PURLs (61%), telephone calls (53%), and coupon codes (42%). If you include a variety of tracking methods on your direct mail piece, it will be easy to compare one against the others to see what works best for your business.
2. Cost Per Acquisition
You’re getting new customers. Congratulations. But wouldn’t you love to know what you spent to get those customers? Was the expense worth it?
Luckily, it’s not complicated to find out. Your cost per acquisition (CPA) will tell you. In this scenario, you can compare your direct mail marketing efforts to your other marketing channels, like email campaigns, print ads, paid search, social media, etc. This will help you determine your most cost-effective marketing methods.
How to Determine Your Cost Per Acquisition
To determine your CPA, divide the total campaign cost by the number of orders you received. Let’s refer to the previous example with the 5,000-piece mailing. You don’t need to know how many pieces you mailed. But you do need to know the total cost of the campaign. Let’s say it was $5,000. If you had 200 responses, your CPA would be $25. This is right around the industry average of $26.40 for direct mail. You will likely have a higher CPA for direct mail than other marketing channels. Despite this, your average response rate and return on investment will probably be competitive enough to make it worth your while.
3. Customer Lifetime Value
Studies show that it costs businesses 5-12x more to earn a new customer than it does to keep a current one. So while it’s important to always look for new customers with your marketing efforts, don’t forget about your current corps of supporters. If you don’t keep them happy—if you don’t solve their problems and give them what they need—there’s nothing to stop them from taking their business elsewhere.
Determining customer lifetime value (CLV) can be a bit more complicated than the other numbers, but it’s one of the most important direct mail marketing metrics to measure. The CLV tells you how much revenue you can expect from a customer during their lifetime. The longer a customer makes purchases from your company, the higher their CLV. Businesses use this figure to identify the customer segments that are most valuable to their company.
How to Calculate Customer Lifetime Value
The simplest way to calculate a customer’s CLV is to take the total revenue you made from that customer and subtract the costs of acquiring and serving them. If your customer’s CLV is $2,000 and you’re spending that much to acquire them (based on your marketing expenditures, etc.), your business is in trouble. You have to find a way to reduce your acquisition costs.
Here’s an example to illustrate. Let’s say you sell custom t-shirts via an online store. You spend $5 in advertising to bring in a customer. This customer proceeds to buy seven tees each year for 10 years. You’re making $10 per t-shirt. So, you’re making $70 per year from this particular customer. Over a 10-year span, that amounts to $700. Since you only spent $5 to get this customer, their lifetime value is $695.
You can calculate CLV by actual purchases over the years—like with the previous example—or you can predict what your customers will spend. Naturally, it’s easier to figure CLV if you have a subscription-based business. For example, businesses like BarkBox or HelloFresh charge the same amount each month for their products/services. Their customers can pay monthly or annually. Thus, it’s easier to predict a customer’s lifetime value as opposed to the aforementioned online business.
The important thing to remember is you don’t need to frustrate yourself with lots of calculations. Just understand the value a customer provides over their lifetime relationship with you and focus on retaining them via all your marketing channels.
4. Return on Investment
Your return on investment is arguably the most important of the direct mail marketing metrics. Your ROI will provide details about the success (or failure) of your campaign. The average ROI for direct mail campaigns is between 18-20%, so you can use that percentage to gauge your business’s success.
How to Calculate ROI
To calculate your ROI, take your revenue and subtract the total cost of your campaign. Then, divide that number by the campaign cost. For example, if you made $6,000 on a campaign and you spent $5,000, your number would be $1,000. Pretty straightforward. Now take that number ($1,000) and divide it by $5,000. You’d have an ROI of 20%, which is right around the industry average.
Understanding Your Direct Mail Marketing Metrics
All that sounds pretty good, right? But how do you achieve it? There’s one software program that does it all. MSP is pioneering new ways to streamline and manage high-volume direct mail campaigns with Direct Mail Panorama. It’s the future of direct mail management.
Direct Mail Panorama provides transparency into mail deliverability performance and enables marketers to track and analyze direct mail KPIs and every step of the mailing process. To find out more, contact one of our direct mail experts for a free consultation.
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