A question that often comes up is, what’s a good response? Is it 1%? 2%? 3%?
It’s a trick question. Successful direct response marketing isn’t defined in percentages. A good response is one that achieves break-even or better, regardless of percentages. A good response leaves you in the black after you’ve paid for your list, printing, mailing, and postage.
When you’re promoting a product or service, calculate the expected lifetime value of a new customer. Suppose that, on average, you earn about $500 over the life a customer relationship. If you target 75,000 prospects and spend $50,000 on printing, mailing, and postage, you’ll need to win at least 100 new customers to break even. Expressed as a percentage, that’s about 0.14%. But if a customer is worth only $25 in profits over a lifetime, you’ll need about a 2.7% response to break even.
So, in the former scenario, a “good” response is 0.14% or higher. In the latter scenario, a “good” response is 2.7%.
The question that usually follows is, what response should we expect? This is not a trick question, but it’s still a tricky one. If you have a product or service that is often sold via direct mail, response rate data should exist, which you can use to guide expectations. If you want to sell credit cards, for instance, it will be helpful to know that direct mail credit card offers historically pull between a 0.4% and a 0.6% response. But always remember that no two products, creative approaches, and sets of market circumstances are alike. Your own credit card offer may fall outside the norm. The only way to know what to expect from your mailing is to complete valid test mailings.
It’s important to agree with management on what constitutes a good or successful mailing before you begin. Otherwise, returning to the above example, you may find that management is disappointed because “...response was only 0.28%”—even when that represents a two-to-one ROI.
No matter how skillfully you execute your direct mail, it’s unlikely that the vast majority of your target market will respond. The trick is in winning a response that generates a profit.