You don’t want to waste money. Neither do we. This is one reason why direct mail is such a great marketing tool. It is highly trackable, easy to analyze, and provides clear cost/return accountability.
In fact, it is considered the most measurable media vehicle available. As a result, it is easy to measure whether your direct mail campaign has been a success or can be improved – if select the right metrics for your business.
There are a dozen or more metrics worth tracking, depending on the type of direct mail campaign you’re running. In this article, we’ll cover the three most popular kinds of campaign and some relevant metrics.
The holy grail of a lead generation campaign is cost per lead. How much do we pay, all expenses included, to earn a qualified lead? Should be simple right? Costs of the campaign divided by the number of inquiries. Unfortunately, that’s only half of the puzzle.This will get us the cost per inquiry — we still need to calculate the inquiry to lead conversion rate, or the rate at which our inquiries are already or eventually become qualified leads.
To get to a final campaign return on investment (ROI), we should calculate the lead-to-sales conversion rate. In optimizing the campaign, we’ll also want to calculate a response rate, namely how many initial responses (pre-inquiry) we get. Other concrete actions like first meetings and closed sales can be used to further identify direct mail results.
When calculating the return from direct sales, like a catalog mailer or a direct response sales letter, the response rate, likely pegged to the percentage of customers who make a purchase, is a crucial metric to track. Other worthwhile metrics are order size and cost per order, allowing three dimensions on which we can optimize our direct sales campaign. All three of these metrics – response rate, order size, and cost per order – can be optimized by selecting a better list, using more effective creative, having better products, upselling, etc.
Repurchase rate is the rate at which customers become repeat customers. While it’s an important metric to track, it’s not as valuable as a simple lifetime value calculation. Knowing a customer’s lifetime value makes our future spending easy to calculate. If our cost per lead is lower than a customer’s lifetime value, it’s a good campaign to scale up and make big investments in. Churn is the rate at which your users or customers, typically those who pay a monthly or annual subscription, cancel their subscription or otherwise end their relationship with your business.
So you’ve identified and calculated metrics for your direct mail campaign – what comes next? Now you can use the data to find out how successful your campaign was, and how you can improve moving forward. For instance, are response rates high, but inquiry-to-lead rates low? Maybe your offer is too good, and you’re getting unqualified leads. If your customer lifetime value is low, then maybe your churn rate is too high, and you need to focus on retaining customers.The effectiveness of your direct mail campaign is easy to evaluate when using the right metrics. Give these three metrics a try and see how you can use the data to help you save money and minimize waste.
To learn more on how to utilize direct marketing for your company, please contact us.