Do You Believe Those Response Rates?

By | June 19, 2010

Currently, there is a discussion on one of the LinkedIn boards about elevated response rates that got me all riled up. Those conversations always do. The question was whether or not to believe elevated response rates (30%, 40%) for direct mail campaigns.

I’ve got a few opinions about that. After all, for my Marketer’s Primer Series of reports (digital print, 1:1 print, personalized URLs, Web-to-print, green marketing), I read every case study in the Print on Demand Initiative (PODi) database. Plus, I’ve written hundreds of my own. There are some very clear trends in terms of elevated response rates.

Response rates tend to be very high when marketers are . . .

1. using an in-house list

2. aren’t asking people to buy something

3. using other attention-getting techniques like over-sized cards, lumpy mail, and audio chips

4. using multi-touch campaigns (email, SMS to non-responders)

5. using extremely targeted, relevant lists

6. offering a very compelling incentive for little effort on the recipient’s part

Among others.

That’s why it’s so critical to dissect each campaign and understand what caused the elevated (or not so elevated) response rates.

It’s also important to put response rates into perspective. I’ve seen plenty of campaigns with single-digit response rates that were phenomenally successful. Before evaluating response rates, you need to know the conversion rate. There are plenty of campaigns that are so targeted that a low response rate still yields a high conversion rate and great ROI.

It also depends on the value of the product being sold. High-value products don’t need high response rates to get great ROI.

In my opinion, the response rate conversation is really outdated and offers very little value. Really, it should be about ROI. It’s weaning marketers off that response rate discussion that will be hard.

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9 thoughts on “Do You Believe Those Response Rates?

  1. Vibrant Graphics

    I definitely believe your findings are accurate — when I began researching the topic about one month ago, I myself did not believe that a direct mail campaign actaully stood a chance. Something to note is that “the print/broadcast duo doubled the impact of using any one medium alone.” This is a great website that explains these trend finds further: http://www.artboxcreative.com/why-print.htm.

    Have a great Monday!

  2. Todd Butler

    You can NOT discuss response rates without defining your meaning of “response”.

    On-line, a response is universally defined as a click. All a click gets you is a new screen shot that you may or may not read. A click on-line is no different than opening a direct mail piece. Averaged over the last five years, the USPS’s Household Diary Study says this happens 82% of the time. Actually it says that 82% of recipients of direct mail read or partially read their advertising mail. So if a response is defined as a “click”, direct mail has an 82% response rate.

    If you are going to talk about a response is it a click response, a purchase response, or a test drive response.

    Measuring conversions is equally confusing. In direct mail a conversion usually means a sale. On-line a conversion may mean as little as filling out a one question yes/no form.

    Finally don’t confuse open rates in email with open rates in direct mail. In a case study provided by a list company, a marketer purchased 19,204 addresses. This campaign generated 2,837 opens. Opens are defined in email campaigns as recipients that download the graphics in the email so they can read the email.

    In this case 19,204 emails were sent, 2,837 people downloaded and were therefore able to read the contents of the email with 16,367 people unable to read the email, since their email’s contained no graphics/content. A direct corollary in direct mail would be to mail 19,204 post cards with 16,367 of them BLANK!

    Everyone always wants to compare email distribution costs to direct mail’s cost of distribution, so lets make that cost comparison. 19,204 email addresses purchased at a cost of $300/m equals $5,761. 2,837 post cards mailed at $0.50 each (in-mail cost) equals $1,419 with a savings of $1,418. In other words, a direct mail campaign costs half what an email campaign would cost to deliver 2,837 (readable) marketing messages!

    Why only mail 2,837 cards? Because there is no reason to incur the cost of mailing 16,367 blank cards! If physical media is going to compete with digital media we have to make sure we are competing on the same terms, using their (on-line) definitions. And in this environment we can compete, delivering greater value at a lower cost.

    Todd Butler

  3. Heidi Tolliver-Nigro

    Great point! I have an entire section in my 1:1 and personalized URL reports talking about this exact issue.

    I’m of the opinion that as an industry, we need to create a new metric. Say, response rate x conversion rate to create an “action” rate or something. This is a metric that would be much more revealing that response rate alone.

    A low response rate campaign with a very high conversion rate, for example, might have a much higher “action rate” than a high response rate campaign with an extremely low conversion rate. Of course, the best metric is ROI, which takes into consideration costs and dollars generated, too, but at least as a simple metric, something like a response rate x conversion rate would be a start at creating meaningful metrics.

  4. Michael Harris

    I agree with the point of not comparing digital with print. That’s definitely comparing apples and oranges. It also has changed over the years because several years ago, email was a terrific ROI marketing solution. Now, every firewall and virus software is looking for any reason to send your message to the SPAM folder.

    Ultimately, whether you are running an online campaign or printed campaign, the biggest variable (and the most important) is always going to be the same – your database.

    If you only think sending out 2,837 direct mailers is beneficial because the others are just “blank”, then you don’t have the right database/list. If these 2,837 are ideal for your conversion, then why not expand it to include 10,000 in the same list? Your cost per conversion should stay the same if the list is good.

    The old days of throwing it up against the wall and hoping something sticks are over. Today, we can better define our lists and audience to drive very specific messages leading to higher returns. And when I mean returns, I mean sales. Realistically, marketing is there to drive qualified leads to either a sales department or directly to revenue generation. Even those campaigns that lead an audience to fill out a survey, it eventually leads to a more qualified audience and higher conversion.

    Nowadays, you NEED to communicate to your targeted audience using multiple marketing vehicles. Hitting them 4 or 5 times with the same vehicle is not as effective as hitting them with email, direct mail, social media, editorial or information articles, etc. Some are more indirect and do not have the direct response initiative, but if one vehicle provides a much higher result, it makes sense to expand on that and reduce some of your higher cost per conversion vehicles.

    Ultimately, companies need to get better at measuring and tracking campaigns.

    Lastly, in my opinion, direct mail and email are now considered “traditional” vehicles. Mobile marketing is definitely where a lot of companies should be looking.

  5. Todd Butler

    The point of my original comment was that direct mail is forced to compete with on-line advertising on an uneven playing field. The advertising industry compares a click response on-line with a direct mail purchase response as if they were equal. They compare the cost of distributing email with the cost of distributing (postal) direct mail. If direct mail is going to compete in the future, we have to adopt the terminology and definitions used on-line so customers can accurately compare costs between the two mediums.

    My comments about the 2,837 post card mailing was that, even on a cost of distribution basis, if you compare the cost of distributing 19,204 emails, 2,837 readable (meaning the recipient downloaded the contents), with the cost of mailing 2,837 readable post cards you will substantially reduce your spend by using direct mail. It is not fair to compare the cost of distributing 16,367 unreadable emails with the cost of distributing 16,367 readable post cards.

    If we adopt the same terminology and definitions used on-line and then calculate, not the cost of distribution but the cost to generate specific consumer actions, direct mail will be very price competitive with its on-line competition. But you are right, price isn’t everything. When it comes to functionality and effectiveness, direct mail beats all on-line advertising hands down!

    As far as mobile is concerned, it is just the newest technology everyone is rushing too. The goal of marketers is to get potential consumers to interact with their marketing messages. If your target market has given permission for advertisers to dominate their cell phones the way marketers dominate email inboxes, then mobile will probably be equally effective. Personally, I will NEVER give the advertising world access to my cell phone!

    Good luck with mobile ever being more than a niche market.

    Todd Butler

  6. James Shand

    Surely there is no ‘single’ measure for the success of a campaign as each will have its own measure of success and in many cases now be a cocktail of communication channels.
    Most marketers I speak with today are interested in the ‘value’ of the desired action or outcome from their campaign. I agree ‘response’ is a myth as the effective measure – it’s akin to the old days of booth managers at trade shows looking for ‘foot-fall’ as the effective measure for success. I am involved in a project at the moment where we are going through the elements which will determine the success of a campaign and the expectations are single digit but with multiple measurement points the real decider is the ‘net income’ derived from each positive action – value. Despite one of the measurements showing an increase in production cost of some 220% to reach a desired outcome of 2% the net income is 0.5% but on a large number. This is a pilot application but has helped identify the areas of the process where we know we can improve with rollout therefore help increase that ‘net income’ figure. It’s all about objective measurement rather than subjective and to me response rates fits in the subjective category (although its objective by the mere fact it is measured) unless you have other measurements to support it.

    James

  7. Elizabeth Gooding

    The whole issue of response rates gets turned on its ear when you start adding multiple channels layered onto print (or potentially instead of print – sorry guys). Take a look at Mashable’s post on Coca Cola’s promoted trends on Twitter http://mashable.com/2010/06/25/coca-cola-promoted-trend/

    Coca Cola netted 86 million “impressions” from this campaign with a 6% “engagement rate” for a relatively low cost during the World Cup. Promoted trends on Twitter are very new, and just one more channel for marketers to add to the mix and attempt to measure.

  8. Paul Edwards

    You can discuss all of this from many different angles. At the end of the discussion, there are only two things that are a true test for most companies: revenue and profit…plus possibly the ‘lifetime value of a new customer’

  9. David Dodd

    I agree with Heidi’s statement in her original post that, “Really, it should be about ROI.” Ultimately, marketing performance must be measured based on ROI if marketers want to be viewed as credible in the C-suite.

    But problems can arise if we try to use ROI at an overly “grandular” level. For example, suppose that you are a B2B company that sells a complex product with a relatively high price tag. Because of the complexity and price, the average sales cycle is fairly long – let’s say six to eight months.

    Now suppose that you run a direct mail/PURL campaign to generate new leads. Your “offer” is a white paper that discusses a business issue that you believe will resonate with your potential buyers. Individuals who visit the landing page and download the white paper are placed in a “lead nurturing” program that will send several communications to the prospect over a period of several months. These communications will make a variety of other offers – other white papers, case studies, Webinars, etc. When a prospect’s behavior indicates that he/she has reached the appropriate point in the buying process, the prospect will be “handed-off” by marketing to sales to begin a sales conversation.

    If a prospect buys, what marketing program or programs should receive “credit” for the incremental profit for the purpose of calculating ROI, and what marketing costs should be included in the ROI calculation. The original direct mail/PURL campaign? Some component or all of the lead nurturing program? And since personal selling activities are a necessary part of the revenue cycle, shouldn’t we include some selling costs and well as marketing costs when we measure the ROI of our “demand generation” process?

    To measure ROI accurately, you must be able to accurately attribute both incremental margins and costs to whatever marketing activity you are evaluating. In the scenario described above, it may not be possible to calculate an accurate ROI for, say, the direct mail campaign alone. That campaign may have started a process that ultimately resulted in increased profits, but many other marketing/sales activities also influenced the decision to buy. Many companies do allocate margins and costs across multiple marketing activities when calculating ROI, but if these allocations are arbitrary, the resulting ROI won’t reflect reality.

    Because it is not always possible to determine an accurate ROI for every individual marketing activity, intermediate marketing measures such as response rates, page views, conversion rates, and click-throughs still have value. Just don’t confuse these intermediate measures with ROI.

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