A couple months back I let you all in on a secret – not everyone wants to buy your stuff. I know, I know, your stuff is awesome! (I would expect no less from savvy marketers who read the Completely Interesting Direct Marketing Blog.) But, savvy marketers that we are, we know we should never expect 100% response to any offer. Let’s face it – we shouldn’t even expect 10% response to most any offer.
So, that begs the question: What should we expect?
This question harkens me back to the early ‘90s when Jay Leno was still an edgy, hip comedian. I was watching some bit where he was going on about the critically acclaimed, but hardly watched television show Thirtysomething:
”The husband is saying, ‘What about my needs?’ and the wife is saying, ‘What about my needs?’ and I’m sitting there thinking, ‘Hey! What about my needs? I’m looking for a little entertainment here!”
So, the question begs a question: What should you expect? Well, what are your needs?
Yes, in general, we direct mail folks tell clients to expect somewhere between a 1% and 2% response on a prospect list. Sure, based on a DMA study from a few years back the industry standard is 2.61%, but I still like to tell clients to make their plans based on 1 or 2 percent, just to be on the safe side.
But, really, the response rate only tells you part of the story.
A client once sent out a mailing advertising various cooking sauce mixes. The offer pulled over 6%. Six percent! That is an outstanding response rate … yet the campaign was an abysmal failure. Why? The average orders for the sauce mixes simply weren’t big enough. So even though a lot of folks responded and ordered, they didn’t order enough (or the client wasn’t charging enough … or something … either way, the revenue did not cover the cost of mailing).
Our friends over at Melissa Data offer a great example of someone having a successful campaign on a .04% response (that’s right – four tenths of one percent!):
At his old company, his average mailing was 40,000 pieces with a response rate of 5/10 of one percent at a cost per mailer of $.59 yielding 200 contracts worth $270 each or $54,000 in revenue. With a mailing cost of $23,600, the gross margin on the mailing was $30,400. Since he was selling a service, there were no product costs. Bottom line was that each mailer sent generated 76 cents in gross margin.
In his new position, he was mailing far more mailers - 80,000 per campaign at a lower per piece cost of $.52 each. With a response rate of 4/10 of one percent yielded 320 deals worth $325 each or $100,400. With a mailing cost of $41,600, the gross margin on the mailing was $62,400. Since he was still selling a service, then there were no product costs. Bottom line was that each mailer at the new company generated 78 cents in gross margin – two cents higher than at his last job.
Clearly, high response doesn’t always equate success and low response doesn’t always equate failure. Something inside drives us to always want a higher response, but what is paramount to figure out before you mail anything is: What response do you need to generate success for your specific campaign?
To get the answer, you need to figure out the costs of the mailing (don’t forget to add printing costs, postage, graphic designer, and – of course – the mailing list) as well as the cost of the product you’re selling. A simple direct mail ROI calculator can help you get a handle on your response needs.
Have you ever seen a seemingly low response rate turn into a successful campaign? Have you ever seen a show nearly as annoying as Thirtysomething?