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Direct Mail ROI

In direct mail marketing, the response rate is the percentage of mail recipients that respond to a particular campaign. Response rates can vary according to many variables such as the type of mailing, creative design and mailing frequency.

The Direct Marketing Association (DMA) in a study analyzed over 1,122 industry campaigns and discovered that the average response rate for direct mail is 2.61%. While that may seem low, response rates can be as high as 20% when sending to existing customers with targeted offers or as low as 0-1% when the mail piece is not targeted and/or is poorly designed. The latter makes up the vast majority of direct mail ROI.

Most organizations have limited advertising budgets and direct mail marketing campaigns are no exception. A savvy marketer will begin a direct mail campaign by establishing a budget and determining a break-even point, or the number of respondents that must buy to generate enough profit to pay for the cost of your direct mail marketing campaign

After this point is met, you can generate a positive Direct Mail ROI. If the break-even response rate is too high, then the campaign may be restructured to lower the customer acquisition cost and therefore lower the break-even response rate. Direct mail ROI is all about investing initial funds in the correct way to maximize your return.

You can always start with smaller more conservative campaigns to test response rates. This keeps you from committing to an ineffective campaign. If your response rates are good, you should expand your number of targets.

It has been demonstrated that direct mail marketing is more effective when it is concentrated on a smaller number of targets repetitively instead of sending to a large list in a single campaign. An undesirable response rate in the initial campaign may simply indicate that you’ve got to go back at them a few times to achieve success. Repetition can be a key component of Direct Mail ROI.

Keep your expectations reasonable, better to be conservative and exceed your expectations than to forecast optimistically and be disappointed. We can help you estimate your investment in direct mail marketing and your expected return Direct Mail ROI.

Let’s put this all into perspective with a few examples that calculate direct mail ROI:

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