Why Are We Still Talking About Response Rates?

By on October 30th, 2012

I’ve been thinking about response rates, and you know what? I’m starting to wonder why we use them. They are in every case study. Every Webinar. Every presentation slide. Yet they don’t really tell us much of anything.

Response rates simply tell us whether the basic marketing elements of the piece are compelling enough to get people to take an initial first step. The respondent makes a phone call. They scan a QR Code. They log into a personalized URL.

If they do, great! But you can have an 80% response rate and the campaign can be a money-loser. Why? Because simply taking the initial action doesn’t necessarily translate into a purchase. If they make the call, scan the code, or log in but don’t actually make a purchase, sign up for the loyalty card, or take the other desired action, the response rate didn’t do you much good at all. That’s why we need to know conversion rates.

At the same time, you can have a high conversion rate but the campaign still loses money. Why? What is the cost to develop and execute the campaign? How much did it generate? If it costs $2.00 each to send the postcard, but each postcard only generated $1.80 in revenue, you’re going to lose money no matter how high your response rate and conversion rates are. That’s why we look at metrics like dollars per sale and ROI.

Here’s a look at some of the common metrics used in evaluating campaign success today:

  • Response rate
  • Conversation rate
  • Cost per sale
  • Revenue per sale
  • Return on investment
  • Lifetime customer value

There are additional metrics for online campaigns, such as open rate, click-through rate, form fill rate, and more.

Do you know which marketing metrics are most effective? Do you talk to your clients about using the right metrics to evaluate the true success of their campaigns? (For info on a brandable white paper on this topic, click here.) If not, this is a conversation you should start having . . . because knowing the response rate isn’t enough.

Be Sociable, Share!

    9 Responses to “Why Are We Still Talking About Response Rates?”

    1. John Leininger Says:

      Great points, but I still think you need to talk about response rates. When you try to figure out what really worked (or failed) in a campaign, you need to see all the elements to debrief. You cannot stop tracking or talking about response rates, it is one of the tools you need to address the issues. I think that is what you were saying, but never actually said it. ROI is a great concept, but when the ROI is low and you are trying to figure out what to do next time or if it is great and you are trying to figure out what you need to do to replicate the campaign, response rates are certainly an element of the campaign to analyze and see how it made a difference.

    2. Heidi Tolliver-Walker Says:

      Agreed — response rates still need to be talked about. What I really meant to say is that we focus too heavily (sometimes exclusively) on them to the exclusion of these other metrics. Response rates cannot stand alone, although they are typically used that way. Thanks for pointing that out.

    3. Diann Roffe Says:

      Response rates are extremely valuable as long as the “RESPONSE” has value. Particularly; dollar value. Are you only measuring who scanned a QR code or tag? This may be an important aspect of your branding campaign, and the action may have impact and create a discussion around your brand.

      In reality, there is much more measurable value in putting more response emphasis in a call to action/purchase. For example, grocers measure participation, redemption and incremental sales and finally ROI.

      I think a greater link between response and revenue is a service we can provide marketers. After all, it is DIRECT marketing we are discussing.

    4. Heidi Tolliver-Walker Says:

      Agreed — the lack of connection between the mailing and the dollars generated is a gaping hole that needs to be addressed. The question is how to tie the revenues back to the mailing without requiring clients to make capital investments (such as retail scanners) they made not be willing to make. Online is easier, of course, but brick-and-mortar is challenging. Any ideas?

    5. Joe Manos Says:

      Heidi – greta post and here are a couple of additional points to consider.

      Response rates are important for the marketing program messaging and creating lead opportunities! It’s a metric that we have to evaluate to insure we are creating potential lead opportunities for sales.

      In my training and education when guest speaking with marketing professionals I NOW talk about two areas. The marketing campaign results and that includes the response rate and the sales conversion results.

      As you pointed out you can have a great response rate and still not create any new revenue from the campaign.

      This is because most companies aren’t using technology to create real time leads to their sales team. This single point – real time response to lead opportunities created by the marketing campaign -is a game changer in todays marketing world.

      A Marketing Sherpa study shows that if you respond to a lead in 5 minutes versus 30 minutes you are 100 times more likely to speak to the prospect and 21 times more likely to qualify the opportunity.

      This step is essential for converting leads to opportunities yet 99% of marketers don’t have this process in place.

      Summary – you can create lots of potential opportunities but without the correct real-time follow-up (and proper engagement process) for each opportunity many sellable leads go by the way side.

      So we have to evaluate our marketing campaign effectiveness as well as our sales conversion effectiveness.

      If more marketers worked with sales to manage the last area they would see improved results across all marketing campaigns.

      In today’s world marketers have to have – great marketing automations technology, great sales/marketing processes and tracking and measurement to identify how conversions are taking place.

      When all three areas are integrated with their marketing the results achieved are exceptional!

    6. Diann Roffe Says:

      Brick and Mortar is straightforward. Pay attention to your customers and the data you do have. Reverse append your purchasers and use data processors like Experian Mosaic to fill in gaps, particularly if you don’t scan SKUs. Communicate with people in the environment they want to be reached. Use multi-channel tactics, then cater your offers to select customers with relevance and use their and vehicle of choice. (mail, email, text) Focus the offers on drivers to bring ‘em in. Make the offers personal, not just with their name in fancy fonts. The other kicker is people like to see this regularly!

      Stores with a high frequency of visits, and diverse product offerings tend to have a better ROI on mail than using email, but customers like both.

    7. Tony Hodgson Says:

      Heidi,

      Another thought-provoking piece of yours which seems to be getting quite a good response rate from your readers! Let me add my two-penny worth.

      Of course, conversion rates are as important as response rates. But I think one of the reasons why you read so much more about response rates is because it’s the metric that marketing services providers and direct marketing agencies can have more influence over. It’s something they talk about more because they can do more about it.

      Joe’s point is quite right. A good response rate is wasted if sales follow up is slow or the online purchasing is process is difficult. But fixing those things often
      involves organisational change which can be harder to do.

      Conversion into a sale depends on many factors which are often beyond the control of the marketer – sales capability, price, product features etc. But if the marketer is smart in the way they use data, timing, offer, creative and personalisation to make the marketing communication more relevant then it will increase the response rate and the ROI even if conversion remains a constant.

      At PODi we have just published our free Top Ten Tips (www.podi.eu/news) on successful cross-media marketing – and it’s not just about response rates!

    8. Seth Rodness Says:

      All valid points – however if one is looking at mailing postcards that cost $2.00 to produce in order to sell that product for $1.80 – perhaps then the Response Rate isn’t the real issue : )

    9. Heidi Tolliver-Walker Says:

      @ Seth — ha, ha! Yes, it probably (definitely) would have been better stated that if your cost per lead is, say, $40, and your average dollars per sale is $38, then it doesn’t matter how good your response rate is. Or if your cost per lead is $100 and your average sale is $90. Or . . . That was the point I was trying to make.