Response Rates: What’s Really Being Said?

By | November 6, 2012

Last week, I started a lively discussion on Digital Nirvana with a post about the limited role that response rates should be playing in evaluating the success of marketing campaigns. Response rates have a role — and an important one — but not as the primary measure.

Yesterday, I read yet another example of why this is so important. In a press release — I mean article — posted on PR Web, a company was promoting personalized direct mail, saying, “Some companies have seen response rates rise by more than 3% when simply personalizing an ad.”

I have three issues with this particular statement.

1. What does this author mean by “have seen response rates rise by more than 3%”? Does she mean a rise of 3 percentage points or whether she was referring to lift?  The way the statement was worded, the wording is actually referring to lift. Yet the author more likely intends 3 percentage points. The author’s intent here matters because there can be a big difference between a 3% lift and 3 percentage points.

As I wrote in “Evaluating Marketing Campaign Success: Understanding Response Rates, Conversion Rates, ROI, and Other Metrics“:

This is a tricky metric that is often used to make improvements in response rates or other metrics appear greater than they really are. For example, you may hear that Campaign A had a lift of 27% over Campaign B. In terms of real numbers, however, Campaign A might have achieved a response rate of 1.3% and Campaign B a response rate of 1.7%. That’s a lift of 27%, but whether that is significant depends on the value and volume of products being sold. It also depends on the LCV.

2. As I discussed in my previous post, a rise in response rates doesn’t necessarily mean an increase in ROI. How much your ROI increases as a result of personalization (if at all) will depend on metrics such as cost per lead and dollars generated per sale. You can have an increase in response rates  without any increase in profitability whatsoever.

3. Is the author talking about personalized ads or direct mail? The author writes about achieving this 3% increase by “personalizing ads,” but the discussion revolved around direct mail. The picture that went with the article also showed an envelope with a personalized sticky note. From what I remember, direct mail pieces with sticky notes are not ads. Once again, this kind of imprecision matters because, if you’re promoting products or services related to personalized marketing, that kind of sloppy language can make the difference between being credible and not.

We’re all imprecise sometimes. I am, too. (The comments to last week’s post as Exhibit A!) I just hope we’re all astute enough to be able to recognize imprecision when we see it and know the real issues if and when we are more tightly clued in. If not . . . we may as well believe all the political ads we’ve been watching for the past six months, too!

Speaking of which, I want to quote a woman in the poll line this morning: “Are you registered to vote? No? Then I don’t want to hear your political opinion!”

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6 thoughts on “Response Rates: What’s Really Being Said?

  1. David Dodd

    Heidi,

    Thank you for both of these important posts. Response rates are one, but only one, of the data points you need to determine the ROI of a marketing program. As you wrote, the other major pieces of information you need are customer value (based on the gross profit margin the customer will produce) and lead conversion rates. For a “nerdy” discussion of this topic, you can take a look at these two blog posts (http://bit.ly/MRqyKe and http://bit.ly/NPzAKJ).

    Thanks again for the great posts!

  2. John Leininger

    Heidi,

    I have sat more than a few presentations at trade shows and conferences and heard high-level marketing people quote statistics of 20% improvement. When I ask them after the talk if they were talking about raw percentages (lift) or a percentage of the percentage you are trying to improve, they always tell me it is the raw percentage. When I ask to see their data I always find out they were wrong. I think it has more to do with people trying to make things look good and I think the high level marketing people are just sharing the facts as they have been told. The best way to explain the value of any campaign is how many dollars came in as a result of the campaign. I think you are right on target today and everyone needs to hear this message and be able to explain it to the customer. When the competition talks in a percentage of a percentage (which is never a good way to present statistics), they make themselves look better. The savvy marketing strategy is to teach the customer the difference. Thank you for following up on last weeks post, I thought this week was truly focused and is a valuable point for everyone to understand.

  3. Heidi Tolliver-Walker Post author

    Thanks, John.

    Printers absolutely need to do a better job of helping their customers understand what these metrics really mean. I don’t normally openly plug my work, but I have a brandable white paper on this topic that DN readers can give away to their clients and prospects to help in this effort. It’s called “Evaluating Marketing Campaign Success: Understanding Response Rates, Conversion Rates, ROI, and Other Metrics”

    http://bit.ly/HUe1q2

  4. Harvey

    Heidi, from every source I have and insider info the average response for b2b direct mail in America is around 1/10 of 1%. That means the rate has dropped significantly from the 70’s when a 2% response was considered good. It will continue to drop as more companies pump more crap out in the disguise of direct mail. As a DM expert with over 38 years in this field, most DM programs are poorly thought out and executed by creative teams that don’t understand the mechanics of how humans learn. You know the cutting edge I was developing in DM communications and every mailing was judged by how much business was brought in by the campaign. Any other way to judge the success of a mailing piece is superfluous. Don’t get caught in agency obfuscation when they pander numbers showing an increase over the last mail drop. It’s all BS to the company that dropped their budget into a mailing program that produces nothing.

  5. Joe Manos

    Way to go Heidi continuing the education on this important topic area.

    I stand by my comments last week relative to the two different levels of response and conversion areas as it relates to delivering true ROMI (Return on Marketing Investment) results.

    Level one: The marketing response results – how many real opportunities did we create for sales in the form of lead response.

    Level two: The Sales response/conversion results – based on the number of lead opportunities created – how many converted to actual new sales / revenue?

    The reason we need to drill down to two levels is because the marketing campaign may have created real opportunities based on the response and conversion levels of the marketing campaign. 3% response rate generated 300 lead opportunities

    Level two analysis: Sales only converted 6 total leads to a sale representing $x in revenue. Those results clearly suggest that we have a sales issue and marketing did their job creating opportunities now we need to address where the sales breakdown is taking place at.

    When we as marketing professionals solely look and response and conversion levels of a marketing engagement we are missing the second level where real conversion improvement leads to significant revenue gains.

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