There are a lot of misconceptions about Direct Response Marketing: mainly how it works and why it works. I will try to dispel some of these misconceptions, so you will have a better chance of fixing up your marketing.
The Good News
Direct mail response rates outperform digital channels by a long shot. Direct mail achieves a 3.7% response rate with a house list, and a 1.0% response rate with a prospect list. All digital channels combined only achieve a 0.62% response rate (Mobile 0.2%; Email 0.1% for a Prospect list and 0.1% for House/Total list; Social Media 0.1%; Paid Search 0.1%; Display Advertising 0.02%). Telephone had the highest response rate at 9-10%.
Cost-per-acquisition for direct mail is very competitive. Direct mail stands at $19, which fares favorably with Mobile and Social Media (both at $16-18), Paid Search ($21-30), Internet Display ($41-50) and even email ($11-15).
82% of respondents expect to use the same amount of direct mail, or more, in the coming year.
Formats are playing a role. According to the study, oversized envelopes have the best response rate at 5.0%, followed by postcards at 4.25%, dimensional 4.0%, catalogs 3.9% and letter-sized envelopes 3.5%.
Marketers continue to embrace multi-channel marketing, with 44% of the respondents using three or more channels for their marketing efforts. In these instances, the most popular channels tend to be email, direct mail and magazines.
Direct mail offers strong return on marketing investment. It returns the same ROI as social media (15-17%).
The Not So Good News
Here are two things you often don’t hear in general but are important facts of DR Marketing. The “Open Rate” and the “Take Rate.” The “Open Rate” is where someone gets your Direct Mail Piece and actually “Opens” it up. Most people stand over the garbage can when going through their mail.
A basic rule of thumb when it comes to Direct Mail is the average open rate across the board is 1% to 3%. Don’t believe anyone who tells you that they can get you more! It’s just not possible. You’re lucky if you get a 1% Open Rate. Then there is the “Take Rate.” This is when someone actually responds to your offer. The percentage from the “Take Rate” is about the same as the “Open Rate”. So for example, if you mail 20,000 pieces, 200 people will open it up, and maybe 2 to 6 people will respond to your offer. That’s good if your average price point is $5,000, but if it’s not, you’re wasting your time and money.
Even coupon mailers that proliferate your mailbox fall into this category. They claim a very high response rate, but the reality is, is that less than 1% of these mailers are actually opened.
Finding the right vehicle to advertise in is key to your success. You need to know and understand which marketing & advertising vehicles can get you the “Best Response.”
Having an integrated marketing campaign, which means a mix of Direct Mail, Magazine Advertising and/or Radio will garner a larger market share for you. Another Rule of Thumb is budget. 1 to 5% of your gross sales maintains your “Market Share”, 5 to 10% of your gross profit grows your “Market Share”.
One other thing to mention is that you should always be testing your direct mail every month. Testing gives you the opportunity to see if your DM piece or ad can be pulling any better. Testing is key to your long term growth and gaining market share. You will also get a better ROI (return on your investment).
Dan Meyer owns Meyer Direct, Inc. located in Greeley and has over 30 years of experience in Advertising, Design and Direct Response Marketing. Dan is a graduate of the prestigious Parsons School of Design in NYC and has won numerous awards.