What does it mean to say, ‘we achieved a 5% response’ in a direct mail campaign?
The straight meaning is that 5 out of every hundred mail pieces that were sent out, attracted a response.
That’s the literal meaning.
In reality, when I am told that someone has gained a 5% response, I am really being told very little at all. Sometimes practitioners can be very happy with a 5% response. Sometimes it is a major disappointment.
Before deciding what the response rate really means you have to look at:
- the campaign objectives,
- the breakeven point, and
- the Return On Investment.
I may be doing a list cleaning exercise among my ‘A class’ clients and offering a juicy incentive. My expectation based on precedent may be for a 50% response. My breakeven may be 4%. With that information, suddenly, the 5% response takes on real significance. (I would not be very happy about it).
On the other end of the scale, a fundraiser may be doing a campaign aimed at new client acquisition. To reach breakeven for the campaign the fundraiser may require 3% of recipients to give an average donation of $30. However, when a 1.5% response is achieved, the fundraiser may be happy. And why would this be?
Well, the fundraiser has a new donor acquisition objective. She wants new donors. She does not mind incurring a cost to acquire them for she knows that, on average, she will keep her donors as regular givers for at least five years. Based on lifetime value, the 1.5% response is quite acceptable.
Why do direct marketers always test?
Testing is a “pillar” of direct marketing essentially because:
- it can provide an accurate gauge of how a campaign will perform,
- it can save marketers a heap of money, and
- it can protect the bulk of your most valuable asset – your customers – from receiving offers that they don’t want.
There are three critically important rules of testing:
- Test only one thing at a time
You can do multiple grid testing, but to keep things simple in the first instance and to ensure you know what causes any subsequent change in response, change only one thing at a time and then carefully analyse the results. If you are launching a mail promotion in a new geographical area, the new audience is the test, so begin by trailing the pack that has performed best in other markets (your ‘control’ pack).
- Test elements that have the potential to make a major difference
Testing takes time and resources and few marketing people have an abundance of these, therefore it is best to focus on testing the big things (see below) that can make a major impact.
- Test elements that are relatively easy to change
If your offer involves a large sales force and free giveaways that have been distributed all over the country, changing the offer may be quite a performance. In such a case, testing a different target market or different media may well be a more efficient option.
The components that always have the most potential for making a significant difference are:
- the target market,
- the offer,
- the channel, and
- the timing of the promotion.
What’s the most neglected part of DM?
Defining the target audience. It is almost impossible to spend too much time getting to understand your target.
When we go to a store to buy a new computer, we want the salesperson to consider our needs and respond with a suitable product.
And so it is with distance selling. If it is a direct response print ad that appears in the magazine ‘Golf for Women’, it needs to offer something of relevance to the segment of the population who reads that publication – women golfers.
There are numerous things we can do to get to know that target. If we have a browse through the magazine and see how other advertisers present themselves and we study the editorial, that’s a start.
If we gather together a bunch of ‘Golf for Women’ readers in a Focus Group, that’s much better.
If we have depth interviews and use professional qualitative research methods, that’s better again. We could ask the potential recipients of our promotion about their needs. What motivates them to respond to advertisements? We could try to learn about what sort of offers they are likely to appreciate and how they like to be approached.
The more we learn about the target market, the better placed we are to ensure that our promotion is relevant, appropriately weighted and designed for maximum impact.
Customers have grown savvy to offers and innovative marketing concepts over the years. Today, they can cherry-pick and they have no hesitation in switching loyalties as soon as an offer is not quite connecting with them.
And if you are not in touch, it’s certain that your offers won’t connect.
It’s best to have as many relationship hooks as possible. But you can only do this effectively if your segmentation is right and if you are speaking in a tone that your target audience relates to.