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Old 15th March 2010, 07:10 AM   #1
PTF
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Default What's A Good Response Rate?

I made this point on another thread, but I think it's worth making on its own.

So often, I hear clients and other businesses talking about "average response rates" for direct mail. One thinks 2% is average, another 4.5%.

The fact is, response rates don't mean a thing!

Let's say you send out 100 direct mail letters (or postcards, or whatever), and get 5 calls. That's 5% response (you can tell I'm a wizz at maths, can't you?!).

But you can't put 5% in the bank. You can't put 50% in the bank, and you can't put 0.0005% in the bank.

Now, let's say that 100 card mailing cost you $100 (including design, time, delivery, the lot). You get 5 calls, 1 becomes a customer and spends $120 - you're a winner.

OR... you get the same 5 calls, they all buy, but they spend $99.50 between them - you lose!

Don't panic about response rates. Measure the final outcome. Profit or loss on the exercise? That way, you'll know whether to send 1000 letters next month, or to head back to the drawing board!

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Old 15th March 2010, 05:20 PM   #2
JohnFenton
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Good post!

The industry average for a direct mail response rate is usually stated as somewhere between 1 to 3% and 1 to 1-1/2%. Those are just averages, actual results can and do vary wildly from those numbers. Also note those averages are for a cold list (people who don't know you.)

I've seen actual response rates all the way from 0% to 90% it depends on the list and what you are asking them to do.

I realize to someone that is unfamiliar with marketing 1%-3% would seem very low. However, compared to most other forms of advertising those numbers are pretty good.

You are spot on that it it the final result that is the important part. Normally when gauging response to a direct mail campaign we only run the numbers for those that actually converted. And often the value of that conversion is included in the calculation.

Some additions to your calculations... Do your customers buy from you more than once. If so you have to also consider the value of future sales into the calculation. Also when starting a new venture you will often run in the red a bit till you get it up and running.

Where the response rate becomes important is in gauging the results of one campaign to the next. At that point it is an invaluable measure of how effective the one campaign was compared to previous efforts.

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Old 17th March 2010, 07:26 AM   #3
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Excellent additions! Lifetime value of a client in particular is crucial.

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Old 18th March 2010, 11:29 AM   #4
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Default Thanks for sharing

Great posts. I had no idea that the direct mail was so low. I guess it would only benefit the large companies with increased promotional expenses.

Thanks again.

~ Sam

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Old 18th March 2010, 11:40 PM   #5
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Quote:
Originally Posted by SamTHorn View Post
Great posts. I had no idea that the direct mail was so low. I guess it would only benefit the large companies with increased promotional expenses.

Thanks again.

~ Sam
Where do you think your going to find a higher response & conversion rate?

Direct Mail is one of the most cost effective and affordable ways to market a small business.

But it does depend a bit on what your selling. If your average sale is 10 cents and your customers never come back after the first time it probably won't work for you.

As with any form of advertising, you do need to learn the ropes and do it right.

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Old 18th March 2010, 11:54 PM   #6
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So you don't get confused, the response rate isn't as important (as far as I am concerned) as the return generated. If 1,000 pieces of mail costs (as an example) $1,000 (all in), what do you need to sell to break even and then make money.

Like it was said, if you're selling nickel and dime stuff, you're going to have a battle with any form of advertisin. But if you only need 2-3 clients to make money on the mailing... that is a crazy low response for 1,000 pcs.

So when we do it, it's not as much about the response as it is about the profit. For us, it works.

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Old 26th March 2010, 01:01 AM   #7
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Default Response rates

Hi,
Great Post!! I was not knowing that the concept. Response rates are important for making new potential customers from the marketing strategies. Thanks for the great post.
Regards,
Lead Pile

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Old 3rd May 2010, 09:04 PM   #8
Bob McCarthy
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Default A broader view

A lot of good points here.

I agree your return on investment is the key metric, but it doesn’t have to happen right away. Many mail-order businesses acquire new customers at a loss, knowing that these same customers will usually buy many times later for a profit.

Response rates also need to be considered together with conversion rates because high responses rates typically produce low conversion rates – and visa versa.

As for industry averages, it depends mostly on two factors – the list and the offer.

If you are mailing to your house list – of customers and qualified prospects – you can expect very high responses, as much as 5-10 times the response from using (renting) an outside list. Outside lists are important to the new customer acquisition process, but they will never produce higher response rates than the house list.

But it’s the offer that I find most interesting because you can use the offer to regulate your response.

Offers represent the level of commitment you want someone to make.

If you are looking for an immediate sale (order generation), you are looking for the highest level of commitment – meaning a payment or commit to buy. When mailing to a rented list with this type of offer, you are usually looking at fractions of 1% - maybe 1/10 of 1% (.001) or one order for every 1,000 pieces mailed.

On the other hand, if you are just looking for a lead (lead generation) with the understanding that the lead will need to be followed up to close the sale, you would probably use as your offer something like a white paper or how-to booklet on a topic related to your product. Lead generation offers are usually high interest items that require low commitment. In this case, all we are asking people to do is raise their hands and say they are interested. Again when mailing to a rented list, you are looking at 2-3%. Once in a while, you will see 5-6% or even higher, but that is very unusual.

Hope this helps.

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Old 4th May 2010, 01:07 AM   #9
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Good morning, all

To have any success at all, any direct mail package has to have some kind of hook. An offer that gives the reader a reason to buy, something to make them think they are getting a good deal, and a reason to choose you over the competition.

There are many varieties of offer, and all have their place if the product or service supports it. The trick is to choose the most appropriate one in each case.

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Old 28th June 2010, 06:42 AM   #10
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Very interesting to hear someone bring up "lifetime client value" I use this # in all marketing calculations to determine ROI. I'm surprised when I speak with business owners that have no idea what the lifetime value of their clients is.

I actually hired a sales copywriter a few years ago that incorporated my response rate and lifetime client value into his fee for writing my sales letter.

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