How To Analyze Direct Mail Response Rates Like A Pro

direct mail response rates

“What is a good direct mail response rate?” “What’s the average response rate?”

These are two questions I’m almost always asked by marketers who are considering direct mail. That’s not surprising.

But my answer does surprise some. “Average response rates don’t really tell you anything.

Why? Because the variables that control direct mail response rates are entirely under your control, and a high response rate might not generate a great ROI.

If you want a really high response rate, I can show you exactly how to make that happen – if you don’t care about your return on investment. That’s ridiculous, of course, because you do care about your marketing ROI. So what may be even more surprising is that in some cases targeting a lower response rate can actually improve your ROI.

Direct mail response rate: Quality counts more than quantity

quality is more important than quantity in direct mail response rate analysis

Sure, it seems natural to conclude that a higher response rate always turns out better than getting a lower rate. In many cases it is.

But successful direct marketers know that other metrics are far more relevant to what matters most – how to make your marketing budget work harder so you earn more for every dollar you spend on direct mail.

So I’m show you how to:

  • calculate and understand direct mail response rates
  • evaluate direct mail response rates, and
  • explain why quality of response matters more

How do you calculate your direct mail response rate?

We often get asked “what’s the best way to calculate direct mail response rate”? Here’s a quick and easy method:

  1. Add up all of your responses

    Gather data from your online response tracking tools and/or offline response tracking

  2. Add up the quantity of mail you sent

    Your direct mail service provider should provide you with a real time dashboard to make this information easy to access

  3. Divide the total responses by the total mailpieces sent. Be sure to use the total responses, not sales, because that’s a different calculation

    300 Responses/10,000 mailpieces sent = 3% Response Rate

That’s it. The calculation method is pretty straightforward. The magic comes from understanding the levers that drive response rate, and how to use them to maximize your direct mail ROI.

Average Response Rates – According To The Numbers

The DMA (Data Marketing & Analytics) publishes an annual survey of marketing response rates that many marketers use for benchmarking. The respondents are typically marketers at large organizations that send a lot of direct mail. As you can see, they break down their responses by list type.

A “House List” is a list of current customers or leads that have expressed interest in your products or services. As you can see, they’ll respond at high rates. The DMA survey had the average at a bit under 9% in 2018.

A “Prospect List” is a cold list, with no association or stated desire to hear from you or your brand. These cold campaigns are a common use of direct mail, as it is an efficient way to drum up new leads. You can see that the 2018 survey had the average response rate at 4.9%.

What’s interesting is that direct mail response rates appear to be rising. Both House and Prospect List figures represent dramatic jumps from the 2010 survey results.

Why? We think there are a variety of factors, including lower overall mail volume (each piece stands out more), better mail tech & personalization techniques. Here’s why we built Postalytics to help accelerate this trend.

Getting a high response rate is easy… Seriously.

via GIPHY

It’s certainly true that higher response rates tend to correlate with better performing campaigns, but response is only the first step along the way to making a sale or generating repeat business that makes using direct mail so effective.

As we saw above, direct mail response rates are easy to calculate. Unfortunately, that one number alone doesn’t provide enough context to determine whether it’s “good” or not.

Do you want a 95% response rate? It depends.

Consider this… I can pretty much guarantee that you’ll get a 95%+ response rate if you offer to send someone a $100 bill for doing absolutely nothing. Who wouldn’t want a free $100?

Or I can pretty much guarantee you a 0% response rate if you’re sending a mailing with no offer, no compelling message, and no reason to respond.

Response rates differ between campaigns, with many factors at play.

Having a complete understanding of your campaign and the variables that impact the response rate will help you to set expectations and better estimate the types of returns you can expect from your campaign.


The top 5 factors that impact direct mail response rates

top 3 factors that determine response rate

1. Audience: How targeted is your list?

If you sent an offer for beauty supplies to a bunch of teenage boys, what kind of response rate would you expect to receive? Probably not very high. The makeup of your list is the most important factor when it comes to determining expected response rates.

Direct mail response rates are always higher when you send to a list of customers who’ve already expressed interest in your brand or product. That’s why the “house list” response rates described earlier are so much higher.

“Cold mailing” or “Prospect Lists” will always generate lower response rates. Just like cold calling or cold emailing.

But, does that make them less valuable? Of course not! Every organization relies on fresh, new leads at the top of their funnel. Just because these campaigns will have a lower response rate doesn’t mean you should avoid them.

Want to learn more about how direct mailing lists are compiled and sold? Check out the Postalytics ultimate guide to direct mailing list selection and testing.

2. Your offer makes a huge difference

Whether you are trying to make a sale or prospecting for leads, your offer makes a big difference. The sweeter the offer, the more likely it is you’ll get a response.

But be careful. If you make your offer too good, you’ll get responses from people who aren’t great prospects at all. That can be distracting and negatively impact overall results as I’ll show you below.

Your offer must be clear. It must be easily found when your mailpiece is scanned. Your audience will first scan your mailpiece, THEN read it if they’re interested.

The easier and less commitment involved in acting on your offer, the higher the direct mail response rate will be.

Free. Money back guarantee. No-Risk. All of these phrases remove fear from taking action.

3.) Messaging Matters

Your messaging strategy, copy, and creative execution will certainly make a difference. The more you can customize and personalize your message, the more likely it is that you’ll generate more responses of a higher quality. And at Postalytics, we make it easy to quickly set up templates for sending more targeted mail.

4.) Format selection

DMA


Whether you’re sending postcards or letters, mailpieces that are well designed, with visual appeal make it more likely prospects will take a second look at your mailer, increasing response rates.

Of course, a higher quality piece will cost more to send, so there is a tradeoff there. If you’d like to learn more about the cost of direct mail, please refer to our recent blog post.

A study from DMA tested response rates for several different types of collateral:

5.) Multiple touches and/or channels

campaign touches - direct mail response rates

Multi-touch campaigns get better response than single touch campaigns. Multi-channel marketing works better than single channel marketing.

Evaluating the success at each touchpoint is important for optimization, but multiple touch direct mail campaigns are typically more successful for a reason — because sometimes you need a second or third mailer to convince some prospects to respond.

Think about it. What would you think of a sales rep that makes a single call, leaves a message, and never calls back? That’s what sending a single mailer out, especially to a cold audience (or Prospect List), is like.

So if you control your response rate, how should you adjust those controls? Let’s take a look at a couple of scenarios that show how to review response rates in context with other data to evaluate profitability.

Beyond the response rate: Key metrics carry even more importance

key metrics for analyzing direct mail response rate

When you send direct mail, initial response is only the first step to a sale – marking the beginning of what may be a very profitable customer relationship. Yet savvy direct mail marketers pay close attention to other metrics which impact bottom-line results.

To see how this works, let’s assume you’re in charge of marketing an online subscription service – for example, a personal finance tool that helps consumers review their investment assets, track tax-related expenses, etc. Perhaps your standard fee is $25 per month.

You likely already use a variety of online advertising tactics to get prospects to a landing page that offers an introductory free trial. But you could also send direct mail to lists of people who you think are likely prospects and include a trackable link with an offer for that free trial and set a deadline date for responding.

That’s a reasonable offer because it relates to what you’re selling.

You might make that offer more appealing by adding a coupon of some kind for an unrelated product as a bonus, but that could attract those who only want the coupon and would not consider renewing your service for the usual fee. On the other hand, merely offering the service itself in your mailing at full price wouldn’t be very compelling because there’s no reason to “act now.”

Here’s a hypothetical example of how a mailing might perform under these kinds of assumptions:

OfferFree trialFree trial and a giftSign up now
Quantity mailed1,0001,0001,000
Mailing cost
(at 80 cents per piece)
$800$800$800
Responses16325
Response rate1.6%3.2%0.5%
Cost per response$50.00$25.00$160.00

Note that you calculate the direct mail response rate by dividing the number of responses by the quantity of mail you send and that the cost per response is the total cost of the mailing divided by the number of people who respond.

Yes, you did sign up 5 subscribers using the “buy now” offer, but they cost you $160 each. The free gift offer got responses that only cost you $25 each, but you did not yet earn any revenue and you actually have to pay a gift. The free trial offer is kind of in the middle — no additional expense but no revenue either.

To really compare the performance of these mailings you’d have to track how each one generates revenue – or how many who respond actually convert to paying subscribers. That third offer already did convert five people, but how might those other two offers work?

To determine that, we need to calculate the “conversion rate.” This is the rate at which you turn responses into customers. Simply divide the number of those who sign up by the number of people who initially responded. Here’s how the mailing above might look after evaluating performance on that basis:

OfferFree trialFree trial and a giftSign up now
Quantity mailed1,0001,0001,000
Mailing cost
(at 80 cents per piece)
$800$800$800
Responses16325
Response rate1.6%3.2%0.5%
Cost per response$50.00$25.00$160.00
Conversions to sales1285 (from above)
Conversion rate75%    25%    100%
Cost per sale  $66.68$100.00          $160.00

Here we see a cost per sale where you actually earned revenue. Only 25 percent of those you offered a gift decided to continue to become paying customers, but 75 percent of those who you didn’t “bribe” with such an offer did continue. Even though you got fewer initial responses, the cost per sale was a lot lower. Also note that even though 100 percent of the respondents to your simple “buy now” are paying customers, those sales cost a lot more.

We could certainly continue this analysis to see which mailings and which offers not only converted from a response to a sale, but how long that customer relationships last. This “lifetime value of a customer” concept is important to an analysis like this because if you get $25 per month from someone for a few years, that’s a lot more profitable than if the relationship lasts just a few months.

The point here is that high direct mail response is only better if it’s a good response. Paying more for a high-quality response is a lot better than paying less for poor-quality response. And you’re in control based on the offers and lists you use.

You don’t have to be a genius to figure all this out because continuing to test offers, lists, and other strategies is a lot easier with direct mail than other media. And when you use Postalytics, these metrics are automatically tracked so you can review up-to-date performance at any time.

Business-to-business lead generation: Following up with the best leads

direct mail response rates - response

Now let’s look at a second example – one based on lead generation for complex sales that require interacting with a salesperson.

If you’re a salesperson, you know full well that following up with poor leads is a frustrating way to spend the day. But when you have plenty of high-quality leads, you make a lot more sales a lot more easily. Generating sales leads through direct mail is an excellent way to get better leads because you can easily choose specific lists and target offers to specific groups.

Direct mail also offers scheduling flexibility because sales leads that come in at a steady rate is more efficient than when they come in big batches. If quick follow up generates more sales, then a steady flow of leads helps you adapt marketing programs to sales department needs.

If, for example, you sell business insurance, you might send out a direct mailer with an offer for an online insurance evaluation tool or other resource related to what you are selling. Making a more enticing offer that has little to do with insurance can get a much higher response but that’s not good if you can’t follow up as quickly. Even worse, that sweeter offer could generate response from prospects not likely to buy at all.

If we consider both direct mail response rate and conversion rate for this scenario, you can see that a lower response rate could indeed be better when you carry your analysis through to determine your true return on investment. Let’s compare two offers:

OfferOnline insurance resourceOnline insurance resource and free gift
Quantity mailed1,0001,000
Mailing cost
(at 80 cents per piece)
$800$800
Responses1020
Response rate1.0%2.0%
Cost per response$80.00$40.00
Conversions to sales54
Conversion rate50%    20%    
Cost per sale  $160.00$200.00          

That mailing that generated the lower response rate actually resulted in a lower cost per sale. Not only that, sales time is spent far more efficiently because keeping track of fewer higher quality leads is more manageable than tracking too many low-quality leads.

Sales lead generation gets a lot easier when you can control both the quality of the leads you get and generate the right number of leads. In the old days, you might have to send thousands of mailings to keep printing and mailing costs reasonable, but with Postalytics you can design a program to send as many mailings out on whatever schedule you like. You pay about the same cost per piece sending out a one or two a day as if you sent thousands at once.

Tracking is Key

direct mail response - tracking

Like any marketing activity, lifting direct mail response rates requires that you learn from previous campaigns.

To do that, you’ll need built-in tracking to evaluate true response rates and optimize future campaigns.

Postalytics can help. Our solution integrates with popular marketing and sales platforms like HubSpot, Salesforce, ActiveCampaign, and InfusionSoft, allowing you to keep a close eye on multi-channel campaigns while optimizing your direct mail offers.

Watch A Direct Mail Automation Video Demo

More response — or more profitable response? It’s your choice

As I’ve pointed out, while it’s natural to think that high direct mail response rates are better than lower rates, your real focus should be on the quality of the response you get. After all, an initial response is only a first step to acquiring a customer and nurturing that customer relationship. Those follow-up activities can get expensive, so make sure you follow up with the best leads and prospects at all times.

To do that, you can control your response rate to open up a sales funnel and narrow it when it seems fitting. That’s what makes direct mail such an exceptional form of communication – because you have all the flexibility you need to use response to achieve your goal – a higher ROI on your marketing investment.