Tutorial What is a good direct mail response rate?
The direct mail response rate is one of the most common questions we get from clients interested in trying direct mail. Understandably, it is critical to your initial planning and expectations.
But you need to be realistic. Most importantly, you need to be aware that the answer will vary with different direct marketing objectives.
How do you measure response?
The response rate is the simplest, most common form of measuring the results of a direct mail program.
The response rate reflects the percentage of people who respond to a mailing.
To determine your response rate, you simply count up the number of responses the mailing generates, then divide by the quantity mailed.
100 responses divided by 5,000 pieces mailed = 2% response rate.
What is the average response rate?
You often hear about 2% being the average response rate. This is true for certain applications and situations, but not for all.
It’s important to understand the applications and situations before you try to predict your response rate.
A 2% response rate is a good approximation if:
1. you are mailing to an outside mailing list (meaning any list that is not your own)
The people on outside mailing lists have no relationship with you. You are a stranger to them so you have an uphill battle when it comes to generating a response.
2. you are using a free offer than requires little commitment on the part of your audience.
Free offers are central to all lead generation campaigns. The concept is simple. You create a free report or white paper on a topic closely related to what you sell. You then offer the report to your target audience and those people who are interested in the topic will respond. These leads are then considered potential customers.
Because these offers are free, you can expect more people to respond.
Of course, even if these two factors are in place, remember 2% is just the average. You could see a response rate of 1% or lower which is very likely. Or you could see a response as 3-5% which is very unlikely.
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When 2% doesn t work
In trying to project response rates for a business plan, 2% could be considered an average response rate (although 1% is safer and more realistic).
However, there are applications and situations in which 2% (or 1%) should not be part of your projections. Here are two scenarios:
1. If instead of mailing to an outside list, you mail to your house list of previous responders, you can expect a higher response rate – possibly several times higher than 2%. The logic should be obvious. The people on your house list already know you and have already demonstrated (from their previous response) some interest in your topic.
In direct marketing, they say the profit is in the list and this is what they mean. This is how catalog and other mail order businesses make their money by repeat mailings to their house list.
2. If instead of using a free offer, you use a price offer, you can expect to see a lower response rate – often fractions of 1 per cent. This is the difference between order generation and lead generation. In order generation, you are expecting an actual order in the form of a payment or an agreement to pay.
Even if the price is low (or discounted or spread out in payments over time), price is a barrier to high response rates. It s not unheard of to see response rates as low as 1/10 of 1% (.001).
Don t overlook response quality
The response rate tells you how many people responded to your mailing, but it doesn’t tell you anything about response quality.
For example, in lead generation, you can generate of leads with a free offer, but how many of those leads will convert into customers?
That should be another part of the equation. You need to think of both the quantity and quality of the response.
Consider, for example, these two mailings: One produces a 2% response rate, but that only 5% of the responses are able to convert to customers. The other produces a 1% response rate, but 30% convert to customers. The numbers should speak for themselves.
Campaign 1 mailed 10,000
Response Rate: 2% (200 leads)
Conversion Rate: 5% (10 customers)
Net Order Rate: .1% (.001)
Campaign 2 mailed 10,000
Response Rate: 1% (100 leads)
Convesion Rate: 30% (30 customers)
Net Order Rate: .3% (.003)
Although campaign 2 produces half the initial response rate, the lead quality was significantly higher resulting in a much higher conversion rate.
And don t forget your mailing costs
Mailing costs are an important consideration when measuring your direct mail results.
Consider, for example, a mailing package that includes multiple components, all printed in four color, fully personalized and mailed first class. This package could cost you $1.50 per piece. Then consider a postcard mailer that when all is added up, would cost you 50 cents per piece.
One package costs $1.50. The other mailer is one-third the cost at 50 cents. Based on a mailing of 10,000 pieces each, the larger mailing would cost $15,000; the postcard mailer would cost $5,000.
Now, what if they produced the same response rate of 1%?
Campaign 1 10,000
Cost per piece $1.50
Total cost $15,000
Response Rate 1% (100 responses)
Cost per Response $150
Campaign 2 10,000
Cost per piece $.50
Response Rate 1% (100 responses)
Cost per Response $50
This analysis only focuses on the cost per response. For more meaningful analysis, you will want to drill down even further to also explore the cost per qualified lead and the cost per order.
Comparing direct mail with advertising
Comparing one direct mail campaign with another direct mail campaign is a fairly simple and straightforward process.
But what if you are running an advertising campaign at the same time? How do you compare the results of your direct mail vs. your advertising?
You compare them on a cost per response basis. That is the common denominator between direct mail and advertising (and all marketing for that matter).