Direct Mail Lead Generation Response Rates Can Deceive Marketers

Jul 13

Response rates represent only a part of your direct mail effectiveness.

Should you consider them when evaluating your direct mail program? Of course, you should. But experienced direct response marketers use far more useful Key Performance Indicators other than just response rates.

Marketers who consider only response rates focus too much on the expense side of their programs. They also overlook breakthrough opportunities by striving for lead volumes at the expense of lead quality.

An emphasis on response rates also undervalues customer quality and leads to sales conversion rates.

The KPIs used by marketers reflects their professional skills or lack thereof.

Let’s look at some of the factors direct marketers look at when evaluating direct mail effectiveness.

Direct mail generates either tight (lower lead volumes with high conversion rates) and loose leads that convert to sales at varying percentages. It is possible that a .5% response rate can greatly outperform a 1% lead response rate based on conversion rates alone.

The direct mail list source, list selection, offer and service or product sold all affect the average sale, sales profitability and customer quality. The KPIs must find a way to look at this data as a single number. Otherwise, the variables will mislead the marketer into thinking that his response rate alone assures success. Nothing could be further from reality.

In addition to the above variables, the list and direct mail package costs change as needed to improve performance.

How do you take all of these variables and wrap them in into your Key Performance Indicators?

Listed below are what I consider the best KPIs for determining your direct mail program's effectiveness.

Cost Per Customer: Incorporates the customer's anticipated lifetime value

Cost Per Sale: Calculated by dividing campaign expenses by the total of new customers acquired

Cost Per Lead: Calculated by dividing the campaign expenses by the total number of leads

Cost Per Call: Same as the Cost per Lead except that this is for inbound calls

Response Rate: Percentage response rate

Average Sale: Total of all sales and divided by the number of customers who responded and bought something as a result of receiving the mailing

Several books could be written about these KPIs and how they can help you develop more effective direct response marketing strategies.

What are your KPIs and how reliable are they in determining your direct mail initiatives successful or unsuccessful?

Ted Grigg

Ted Grigg is a direct response strategist who helps growth-focused companies reduce risk by identifying weak assumptions before they become costly mistakes.

Over the course of his career, Ted has evaluated several hundred million dollars in direct response testing across direct mail, digital, print, television, telephone, and other channels. His work combines direct response strategy, acquisition economics, customer analysis, creative evaluation, offer development, and disciplined testing.

Ted has worked on both the client and agency sides of the business. That experience gives him a practical understanding of the pressures facing executives, marketing teams, agencies, and service providers—and of the problems that arise when activity, media volume, or creative preference replaces a clear economic objective.

His consulting work helps organizations examine such questions as:

Are acquisition goals economically realistic?
Is the allowable Cost Per Sale supported by customer value?
Are targeting, offers, creative, media, and response paths working together?
Are tests structured to produce reliable business decisions?
Are unproven assumptions being treated as facts?
Is the organization measuring sales outcomes rather than convenient proxies?

Ted’s experience includes the development of direct mail and multichannel acquisition programs for insurance, healthcare, financial services, technology, nonprofit, manufacturing, retail, transportation, communications, government, and business-to-business organizations.

For a national direct-to-consumer insurance company, he developed a direct mail format that defeated established controls and helped expand the productive use of compiled prospect lists from less than 10 percent to more than 30 percent of total direct mail circulation within one year. He also planned Medicare lead-generation programs for more than 60 regional and national HMO and PPO organizations, with some programs exceeding sales projections by as much as 60 percent.

Ted founded Wyse Direct, a direct marketing division of Wyse Advertising in Cleveland, where he developed acquisition programs and helped launch a new technology product for Seiko Instruments by generating a predictable flow of qualified sales leads for its national sales organization. As vice president of new business development for the Grizzard Agency, he helped broaden the agency’s strategic capabilities and pursue new commercial and fundraising opportunities.

He is the author of The HMO/PPO Marketing Plan—A Step-by-Step Guide, published by Executive Enterprises, and has written numerous articles and conducted webinars on direct response strategy, testing, creative development, and marketing economics.

Ted earned a Bachelor of Arts degree from Abilene Christian University and completed two years of graduate study at Texas Tech University. He is the founder of DMCG, LLC.

http://www.dmcgresults.com

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