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?