Direct mail marketing is still an effective way for businesses to reach customers. However, in today’s data-driven world, it’s important to track key metrics that demonstrate the return on investment (ROI) of direct mail campaigns.
This article will discuss the most important metrics to measure and how to track them.
Measuring Direct Mail ROI: Actionable Tips for Tracking Success
Measuring the return on investment (ROI) for your direct mail campaigns is crucial to understand their effectiveness and optimize future efforts. Here are some specific, actionable tips to accurately track and measure your direct mail ROI:
1. Define Clear Objectives & KPIs:
- Start with the End in Mind: Before launching your campaign, clearly define your objectives. Are you aiming for website traffic, leads, sales, or brand awareness?
- Choose Relevant KPIs: Select Key Performance Indicators (KPIs) directly tied to your objectives. For example:
- Website Traffic: Unique website visits, landing page views, time spent on site
- Leads: Number of leads generated, cost per lead, lead conversion rate
- Sales: Number of sales, average order value, revenue generated
- Brand Awareness: Social media mentions, brand surveys, website traffic from branded searches
2. Implement Tracking Mechanisms:
- Unique URLs: Create dedicated landing pages with unique URLs for each direct mail piece or campaign. This allows you to track website traffic directly attributable to specific mailings.
- Promo Codes: Include unique promo codes on your mailers to track responses and attribute sales. Ensure the codes are easy to remember and clearly linked to the specific campaign.
- QR Codes: Integrate QR codes that, when scanned, lead to dedicated landing pages, online forms, or special offers. This provides a convenient way for recipients to engage with your campaign.
- Personalized Phone Numbers: Use dedicated phone numbers on different mail pieces to track call volume and conversions from specific campaigns.
- Survey or Response Forms: Include brief surveys or response forms (online or physical) to gather feedback, track response rates, and collect valuable customer data.
3. Accurately Track Costs:
- Direct Costs: Account for all direct costs associated with your campaign, including:
- Printing and materials
- Postage and mailing services
- Design and copywriting
- List acquisition (if applicable)
- Indirect Costs: Factor in indirect costs such as:
- Staff time spent on campaign development and execution
- Data analysis and reporting
4. Calculate Your ROI:
- Gather Your Data: Once your campaign has run its course, collect all the data from your tracking mechanisms (website analytics, promo code redemptions, call tracking, etc.).
- Calculate ROI: Use the following formula to calculate your ROI:
- ROI = [(Value of Gain from Campaign – Cost of Campaign) / Cost of Campaign] x 100
- Example: If you spent $1,000 on a campaign that generated $2,500 in sales:
- ROI = [(2500 – 1000) / 1000] x 100 = 150%
5. Analyze and Optimize:
- Go Beyond the Numbers: Don’t just look at the overall ROI. Analyze the performance of different elements within your campaign – headlines, offers, visuals, calls to action.
- Segment Your Results: Break down your data by target audience segments, geographic locations, or offer types to identify what resonated best with different groups.
- Test and Refine: Use your insights to continuously test and refine your direct mail strategies. Experiment with different formats, messaging, offers, and targeting to improve future campaign performance.
Remember: Measuring direct mail ROI is an ongoing process. By diligently tracking, analyzing, and optimizing your campaigns, you can maximize your return on investment and make direct mail a powerful driver of business growth.
Response Rate
One of the primary metrics for any direct mail campaign is the response rate.
This is calculated by taking the number of customers who responded in some way (e.g. made a purchase, called a phone number, visited a website) and dividing it by the total number of mailers sent. Aim for a response rate of at least 1-2% for most direct mail campaigns.
Cost per Response
Cost per response shows how much was spent to generate each response. To calculate it, divide the total campaign cost by the number of responses. Tracking this metric over time can show if costs are being controlled effectively.
Lower is better when it comes to cost per response.
Revenue per Piece
Revenue per piece indicates the profit generated from each mailer sent. Add up all revenue from responses (e.g. purchases, leads) and divide by the number of pieces mailed. This metric shows if the campaign generated a positive ROI or not.
Revenue per piece should be higher than the cost of producing/mailing each piece.
Lifetime Customer Value
While direct mail aims to drive short-term responses, tracking the lifetime value of new customers is important too. Calculate the average total revenue generated over time from each new customer acquired through the campaign.
Seeing this metric grow over time from repeat purchases/engagements shows the long-term impact.
FAQ
Q: How do I track response rates for direct mail?
A: Use unique codes, phone numbers or URLs on campaign materials so each response can be tied back to a specific campaign. Analytics tools on your website or in your CRM can then track how many used each code to attribute responses correctly.
Q: What is a good cost per response for direct mail?
A: This varies significantly by industry and campaign objectives. As a general guideline, cost per response below $5 for B2C and below $25 for B2B are considered good. However, lower is always better if it doesn’t compromise response quality. Test different approaches to lower costs over time.
Q: How often should we send direct mail?
A: Most experts recommend sending non-response triggered campaigns every 6-12 weeks for B2C, and every 3-6 months for B2B. This gives previous mailings a chance to generate responses but doesn’t leave too much time in between. You can also send follow up mailings to previous respondents more frequently.
Q: What is the best format for direct mail – postcards, letters or catalogs?
A: There is no single best format – it depends on your brand, product, target audience and goals. Testing different formats can help determine what works best. Postcards tend to get a higher open rate but letters allow more content. Catalogs work well for retailers but cost more. A/B testing can help decide the optimal mix.
Q: How do I improve response rates for direct mail campaigns?
A: Some tips for improving response rates include sending to the most relevant list possible, testing different offers, including personalized content, using attention-grabbing design elements, making it very clear what action you want the recipient to take, including response incentives, and tracking and analyzing results of tests to refine future mailings. Sending optimized direct mail requires ongoing testing and improvement.
Conclusion
By tracking the right metrics like response rate, cost per response, revenue per piece and lifetime customer value, marketers can demonstrate the true ROI of their direct mail campaigns.
With ongoing testing and refinement informed by metrics, direct mail can continue delivering profitable customer acquisition for many businesses.
