Sometimes the most obvious statements are the ones that are also the most helpful. Here’s one of my favorites when it comes to the topic of direct mail.
The key to direct mail success is to do more of the things that work and fewer of the things that don’t work.
As I said, it’s pretty obvious. That, however, doesn’t make it automatic. You can’t do more of the things that work and eliminate the things that don’t work if you aren’t keeping track of performance. How do you measure whether a campaign is performing well or not?
You’ll want to track response. You need to know how many recipients respond for every 1,000 pieces of mail you send out. That requires that you have some kind of identifying code (a custom URL, a phone number, or a promotion code) that’s tied directly to each specific mailing you do. If you mail 50,000 pieces that generate 1,500 responses that’s a response rate of 3 percent. That’s fairly straightforward. You can (and should) track all of your mailings so that you have a sense for which mailings work better.
But response rates alone aren’t the only thing you should check. What kind of responses are you getting? If you’re using your mailings to sell, you’ll also want to know how many sales (and the amounts) each mailing generated. And you’ll also want to know what your cost per sale is. If you spent $40,000 to mail 50,000 pieces and had 1,500 responses with an average sale of $75 each you would have generated $112,500. Take out the $40,000 you spent and you’ve netted $72,500.
These days, however, a lot of direct mail isn’t used to generate sales. It’s used to generate leads. It’s important to know what it’s costing you to generate a lead. Let’s say again that you spent $40,000 to send out 50,000 pieces of mail. And let’s say that mailing generated 2,500 leads (people who responded and said they wanted to know more about your goods or services). That means it cost you $16 for each lead. You, of course, have to decide how much each lead is worth, and whether $16 is a good price to pay for a lead.
You should also take that one step further. You can actually keep track of how many of those leads (from that mailing) ended up becoming customers. Let’s say that 250 of the leads ended up becoming customers. You spent $40,000 to gain 250 customers. That means each customer cost you $160 to acquire. Is that a good investment?
That depends on the lifetime value of a customer in your business. If your average customer spends $300 a year with you, and remains a customer for 10 years, the lifetime value of a customer is $3,000. That makes a $160 investment look pretty good. Obviously, you’ll want to plug in your own numbers and costs, but if you do that, you can know if your mailings are really performing for you or not.
By the way, here’s a post that discusses how direct mail integrates with your online efforts, which makes it easy to track responses and stay connected faster and more inexpensively.
The only way you’ll know what’s working and what’s not is if you measure the results of everything you mail. It may be obvious, but it’s also effective.