| Predicting response in direct mail is tricky business and | | | | This explains how many mail-order and catalog |
| not usually a good idea. | | | | companies make their money. They might generate |
| First, it's too easy to be wrong. Second, it doesn't | | | | less than 1% response on the first sale - losing money |
| mean very much. Getting a high response is only good | | | | initially - but will make it up later when they re-mail to |
| if it comes along with a decent conversion rate. (Topic | | | | these new customers. |
| for another day.) | | | | Non-profits understand this too. Initial mailings to a new |
| Yet many new direct mail clients and prospective | | | | list will often raise money at a loss or breakeven, but |
| clients are more than a little curious about potential | | | | this cost to acquire the new donor will be made up in |
| response rates. Understandably, they want some type | | | | future mailings to current donors. |
| of benchmark. They're not looking for anything specific | | | | So yes, mailing to your House List can explain some of |
| or any guarantees. They just want a ballpark estimate | | | | these claims. |
| to assist in their planning. | | | | Beware of the cumulative response rate |
| Unfortunately, the honest answer doesn't make many | | | | But mailing to the House List isn't the only explanation |
| people - especially newcomers - jump with excitement. | | | | for some of these outlandish response rate claims. |
| Here's what I mean: | | | | Another is the so-called "cumulative response rate." |
| If you're mailing a soft offer (e.g., informational white | | | | The cumulative response rate is actually a combination |
| paper) to a rented list, a routine response rate would | | | | of rates that add up to one rate - which becomes the |
| be in the 1-3% range. A hard offer (e.g., an actual | | | | advertising claim. |
| purchase or a request for an appointment) mailed to a | | | | It may be a mailing followed up by a phone call or it |
| rented list typically runs below the 1% mark - often well | | | | may be multiple mailings. |
| below. | | | | For example, let's say you do a mailing to a target |
| I realize we all have our homeruns - even an | | | | group that generates a response rate of 3%. Then |
| occasional grand slam - in which we are somehow | | | | you mail a second time to the same audience that |
| able to produce higher-than-usual response. But these | | | | generates another 2%. Then you do a third mailing that |
| "break-throughs" are not typical - and not something | | | | generates a 1% response. |
| you can promise to new clients. | | | | The cumulative response rate is a combination of the |
| (Don't be discouraged by these modest rates. These | | | | three rates - 3%+2%+1%=6%. |
| numbers can work very nicely into your overall ROI | | | | The strategy of mailing multiple times to the same |
| calculation. Another topic for another day.) | | | | audience isn't the problem. In certain situations, this is a |
| Clearly the response rate is a central concern for | | | | very reasonable strategy. |
| many clients - and, as a result, an important selling point | | | | The problem is in using these numbers this way as an |
| for many companies in our industry. | | | | advertising claim. |
| Direct mail companies, lead generation firms, agencies | | | | I could accept this if they used an average response |
| and consultants - we all talk about our results. And | | | | rate. After all, if the target audience had 10,000 names |
| we're always careful to put our best stories forward. | | | | and addresses, their total mailing quantity was 30,000 |
| But what about marketing companies that talk about | | | | pieces which should be factored into the analysis. The |
| 10%, 20% and 30% response rates as if they were | | | | average response would be 2%. |
| routine... as if they were something future clients can | | | | I could also accept it as a cost-per-response analysis. |
| expect? Is this possible? Is it an exaggeration? Or are | | | | This would take into account the increased costs of |
| they just making it up? | | | | the second and third mailing. |
| The power of the House List | | | | But sorry, the cumulative response rate is just |
| For many of these claims, the response rate is the | | | | misleading. |
| result of a mailing to a House List. The House List is | | | | Marketers are always going to find creative ways to |
| made up of customers and prospects who have | | | | put their message in the best light. But buyers have a |
| responded previously - and are much more likely to | | | | responsibility to ask questions and find out which |
| respond again. | | | | response rate claims are verifiable - and which are |
| Most direct marketers know that response rates to a | | | | exaggerations, deceptions or half-truths. |
| house file can be five to 10 times higher than when | | | | Buyer beware. |
| mailing to an outside rented list. | | | | |