Analyzing Your Campaign’s Performance
How do you know if your direct mail campaign was a success? You don’t have to guess. There are multiple metrics you can measure instead.
First, analyze the response rate to your mailing. The response rate is simply the percentage of people you mailed to who responded to your offer. The formula is:
Response rate = Number of responses/Number of pieces mailed
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For example, if you mailed 1,000 pieces and had 75 responses, your response rate is 75 divided by 1,000, or 7.5%.
What’s a good response rate? According to the 2018 ANA/DMA Response Rate Report, the average response rate for house lists is 9%, while the average for purchased lists is 5%. This can vary, however, dependent on the price of the product and the size of the offer.
Be careful when planning your campaign, however. Don’t assume you’ll get the same response rates as the averages presented here. These numbers are based on a small survey of experienced direct marketers who have spent a lot of time and money optimizing campaigns. Your results will probably be lower – for new campaigns with no history, a good projection would be a 1%-2% response.
Another important statistic is the conversion rate, also known as the order rate. This is the number of people who responded to your mailing and then took advantage of your offer. The formula is:
Conversion rate = Number of orders/Number of responses
For example, if you had 75 responses that resulted in 45 sales, your conversion rate is 45 divided by 75, or 60%.
This metric is useful for measuring the effectiveness of your offer. If your conversion rate is low, that means people were interested in your product but not in your offer.
REVENUE AND PROFIT
Tracking the revenue generated by a direct response is also important. You can track both total revenue and revenue per order. You can then compare the revenue generated to the costs involved (both marketing costs and direct product costs) to see if you generated a profit. Here’s the formula:
Profit = Total revenue - Cost of goods sold - Campaign costs
For example, if your campaign generated $10,000 in sales (revenue), your cost of goods sold was $6,000, and the cost of your direct mail campaign (design, printing, and postage) was $3,000, your net profit is $10,000 minus $6,000 minus $3,000, or $1,000.
The most useful metric, however, is the return on investment (ROI). The higher your ROI, the more successful your campaign. Use this formula:
ROI = Net profit/Campaign costs
Building on the previous example, if your net profit for the campaign was $1,000 and your marketing (campaign) costs were $3,000, divide $1,000 by $3,000 to get your ROI of 33.3%. Obviously, the higher the ROI, the more successful the campaign.