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What Are the Key Direct Mail KPIs to Track?
postalytics.com
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Offer First delivery free First delivery free plus $10 discount Total Mailing quantity 5,000 5,000 10,000 Responses 100 200 300 Response rate 2.00% (100/5,000) 4.00% (200/5,000) 3.00% (300/10,000) Cost per response $40 ($4,000/100) $20 ($4,000/200) $26.67 ($8,000/300) Conversions 80 70 150 Conversion rate 80% (80/100) 35% (70/200) 50% (150/300) Cost per conversion $50.00 ($4,000/80) $57.14 ($4,000/70) $53.33 ($8,000/150) Mailing cost (at 80 cents per mailing) $4,000 $4,000 $8,000 Offer fulfillment cost ($10 per delivery and $10 per discount given) $1,000 ($10 x 100) $4,000 ($20 x 200) $5,000 Total cost $5,000 $8,000 $13,000 Cost per acquisition $62.50 ($5,000/80) $114.29 ($8,000/70) $86.67 ($13,000 / 150) “Ultimately that depends on your profit margin and additional repeat business you might expect from customers acquired through direct mail (i.e. total revenue generated).” Lifetime value
Ultimately, allocating your budget most effectively depends on your revenues (and profit, of course) – and what it actually costs you to deliver those direct mail results. “To calculate cost per response, divide that cost by the number of responses.” $8,000 mailing cost / 300 responses = $ 26.67
As you can see, the more appealing offer generated responses at half the cost as the other offer. “You’ll see that when you calculate the cost per conversion, which is the cost of the mailing divided by the number of conversions.” $8,000 mailing cost / 150 conversions = $ 53.33
For the entire direct mail marketing campaign, accounting for mailing and fulfillment expenses, the cost per acquisition was about $87 each, but of course, each offer performed differently. Here’s a summary view of all of these key performance indicators – with the cost per acquisition in the last row of the table: “Offer First delivery free First delivery free plus $10 discount Total Mailing quantity 5,000 5,000 10,000 Responses 100 200 300 Response rate 2.00% (100/5,000) 4.00% (200/5,000) 3.00% (300/10,000) Cost per response $40 ($4,000/100) $20 ($4,000/200) $26.67 ($8,000/300) Conversions 80 70 150 Conversion rate 80% (80/100) 35% (70/200) 50% (150/300) Cost per conversion $50.00 ($4,000/80) $57.14 ($4,000/70) $53.33 ($8,000/150) Mailing cost (at 80 cents per mailing) $4,000 $4,000 $8,000 Offer fulfillment cost ($10 per delivery and $10 per discount given) $1,000 ($10 x 100) $4,000 ($20 x 200) $5,000 Total cost $5,000 $8,000 $13,000 Cost per acquisition $62.50 ($5,000/80) $114.29 ($8,000/70) $86.67 ($13,000 / 150)” Now the analysis can really begin: Is $114 or so worth acquiring a new customer? Is $62.50 too much? Ultimately that depends on your profit margin and additional repeat business you might expect from customers acquired through direct mail (i.e. total revenue generated).
Direct marketers use a variety of key performance indicators (KPIs) to track results, typically with the use of some trackable code in their mailings. For example, this postcard for an organic makeup online retailer includes a unique code for responding to a special offer — buy two get one free. “The incentive for using the code is that it’s required to take advantage of the offer, an essential component of any direct mail package in part because it helps you capture key data.” Once you gather your results, you can use a variety of metrics to help you analyze direct mail results.
Measuring the right KPIs is what separates struggling from best-in-class marketers. “With that detailed level of data, you have access to information that can help you focus your marketing budget on your most likely prospects.” Let’s understand the different direct mail KPIs associated with direct mail campaigns and the ones you should track regularly. With this insight, you’re sure to experience direct mail success.