I got a survey from UPS this week (apparently to celebrate National Small Business Week) and I was surprised to see that over a third of small businesses still use direct marketing as a primary marketing strategy. I have never understood how business owners can be satisfied with such low response rates. Deliver Magazine claims that your response rate target should be your “break even” point. Their argument begins with ” let’s say that each response will bring you $100 in net revenue” and I’ve heard this before. NO. A response is does not automagically bring in revenue. A response is just that…a response. Here’s what I mean;
I would venture a guess that many small businesses don’t really know the ROI of their direct mail pieces but they keep doing it because they’re afraid not to. And the marketers make a frickin’ FORTUNE off of direct mail so they push it like crazy. I worked with a grizzled old direct marketer on a franchise project a couple years ago. The franchise owner was spending probably 80% of his budget on direct mail. The direct marketer was raving about his “fantastic 2% response rate.” The goal of marketing was to get students into a free workshop. So instead of measuring response rates, I suggested we measure the cost per new student. Obviously, the cost of a student who came in through direct mail was quite high compared to one that came in through a Facebook ad or a calendar listing. Granted, they were getting the bulk of their students from direct mail but as we slowly shifted budget and time toward less expensive methods, the cost per new student dropped dramatically, which of course brought in more new students for the same budget.
I’m not saying direct mail can’t be effective…it can be highly effective with the right message and the right goals. But make sure you are using it and more importantly, measuring it effectively. Don’t go with response rates unless the response is a direct sale. Figure out your true cost of conversion and determine your ROI that way. (By the way…I LOVE direct mail that draws attention to your website. Try it sometime during a test if you have a landing page campaign and see how it bumps your traffic.)
