Direct mail marketing campaigns can become expensive if not executed correctly, and especially during times of economic hardship, it is particularly important to back up marketing decisions with solid numbers. The most commonly accepted method of quantifying the success of a direct mail campaign is to calculate its Return on Investment (ROI). It’s not enough to simply know how much a campaign costs up-front; you also need to know how much revenue that campaign brought in, to determine whether or not it was financially worth the investment. Let’s walk through the process of calculating your direct mail ROI.
The first and most important step in calculating your direct mail ROI is to set up some method of tracking responses to your campaign. Unlike email marketing, direct mail marketing does not inherently offer tracking metrics like open rates and click-throughs, so it can be more difficult to find out exactly what kinds of responses your campaign is eliciting.
Luckily, there are a few tried-and-true solutions to this dilemma. One is to employ a unique phone number for your direct mail campaign and track how many people call the line. You can also direct people to an online landing page that is specific to this campaign. Finally, you can advertise a promotional code that only appears on your direct mail piece. The key to all of these methods is exclusivity; whether you choose a unique phone number, a landing page, or a promo code, people should only be able to access them through your direct mail piece. If anyone can stumble onto your campaign’s landing page by accident, then the tracking process will be ineffective.
Once you’ve set up your tracking method and deployed your direct mail campaign, there are really two numbers to pay attention to. One is the Cost Per Response (CPR) and the other is Cost Per Sale (CPS). Your Cost Per Response simply tells you how many people actually took an action because of your offer, either by calling you, visiting your landing page, or using a promo code, depending on which tracking method you chose. Calculate your CPR by dividing the total cost of the campaign by the number of responses you received. So, for instance, if your campaign cost $1,000 and 50 people responded, then your CPR was $20.
However, CPR alone isn’t enough to determine the success of your direct mail campaign; you also need to know how many actual sales resulted from your campaign by calculating Cost Per Sale. You can do this by dividing the total cost of the campaign by the number of sales that occurred as a result of the campaign. So if the campaign cost $1,000 and it resulted in 2 sales, then your CPS is $500.
Using CPR and CPS in conjunction with each other can tell you quite a bit about the campaign. For instance, in this example, if the CPR is $20 and the CPS is $500, that indicates that plenty of people are responding to the offer, but not many are converting. This could point to a problem with the landing page that you are directing people to, or to the sales pitch that people are receiving once they call in. So not only can these calculations help you determine whether or not your last direct mail campaign was successful, but they can also help you execute a more successful campaign in the future.
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