How To Calculate Direct Mail ROI For Marketing

Direct mail marketing can become expensive if you do not track direct mail ROI costs and results completely.

Direct mail is a form of advertising that communicates straight to the consumer.

Marketers use a database of names with relevant information such as contact numbers and addresses, demographics, and purchase history.

Direct mail marketing targets a particular niche and uses brochures, flyers, postcard marketing, promotional letters, every door direct mail {eddm} and targeted advertising.

The definition of direct mail marketing emphasizes measurable responses, results, and costs. Expenses and profits are trackable.

This type of marketing is a call to action.

Consumers are asked to call toll-free phone numbers, fill out surveys, landing pages or mail-in responses {Business Reply Mail or BRM}.

ROI is the Life Blood of Direct Mail Marketing

You need to know how much revenue the campaign brought in to determine if it was worth the investment and if should you run your campaign once more.

To calculate ROI and get your direct mail ROI for your marketing campaigns, set up a system to track responses.

Determine the number of mailing pieces you sent out, use a unique phone number or landing page for this campaign.

Count how many people called the toll-free number.

Direct your targets to an online landing page that is specific to your marketing campaign.

Apply promo codes that only appear on a specific direct mail piece.

Be exclusive and ensure consumers can only access your advertised goods and services through your mailing piece.

Decide your tracking method, send out your direct marketing campaign, and pay attention to Cost Per Response or CPR and Cost Per Sale or CPS.

Employ a simple formula: Total cost of the campaign divided by the number of sales that resulted from your direct marketing efforts.

As an example, if your marketing campaign costs $500 and you received two sales, your CPS or cost per sale is $250.

Next, determine the cost-effectiveness.

Two sales might be all you wanted; then you are successful.

However, falling short of the goal equals failure.

Using the Cost Per Response in conjunction with the Cost Per Sale will give you a very good idea of how you might change your campaign.

If you find that your CPR is $20, and the CPS is $500 you can reduce that if there are people clicking on your offer or calling the hotline, but not many are buying.

There might be a problem with the online landing page, the sales pitch on the flyer, or customer service when potential clients call the toll-free number.

Calculate your ROI by entering your total number of sent-out pieces, the response rate (percentage of people who received your mailing and clicked or called through), and the average amount of the sales.

Minus the costs of the marketing campaign and divide that number by the same marketing campaign costs.

This formula is your return on investment.

Finding out if you had a return on investment (ROI) will present a better idea of what to do with your next campaign.

If your results are negative, you may want to optimize your campaign with different calls to action, graphics, or coupons.

Try a test for your first direct mail marketing campaign.

Then if all works out send the rest of the campaign if not optimize tweak your message and test again.

How Can I Calculate The ROI For My Campaigns?

Calculating the ROI (return on investment) for your direct mail campaign is a crucial step in evaluating its success. Here’s a basic formula to help you calculate the ROI of your campaign:

ROI = (Revenue Generated – Cost of Campaign) / Cost of Campaign

To calculate your ROI, you’ll need to determine the revenue generated by the campaign and the cost of the campaign. Here are the steps to follow:

1. Determine the total revenue generated by the campaign: This can include sales, leads, or any other desired action that you aimed to achieve with your campaign.
2. Calculate the cost of the campaign: This includes all the expenses incurred to create and execute the campaign, such as printing, mailing, list rental, and other related costs.
3. Subtract the cost of the campaign from the revenue generated by the campaign.
4. Divide the result from step 3 by the cost of the campaign.

For example, suppose you spent $10,000 on a direct mail campaign, and it generated $20,000 in revenue. Using the formula above, your ROI would be:

ROI = ($20,000 – $10,000) / $10,000 ROI = 1 or 100%

In this example, your ROI is 100%, meaning that for every dollar spent on the campaign, you earned one dollar in revenue. This is an excellent ROI, indicating that your campaign was successful.

Remember that ROI is just one metric, and it should be considered alongside other metrics, such as response rate and conversion rate, to get a complete picture of your campaign’s success.

What Is The Average ROI On a Direct Mail Campaign?

The average ROI (return on investment) for a direct mail campaign can vary widely depending on several factors such as the industry, the quality of the mailing list, the design and messaging of the mail piece, and the offer being promoted.

According to the Data & Marketing Association’s (DMA) 2020 Response Rate Report, the average response rate for direct mail to prospects was 4.9%, while the response rate for house lists (mailing to existing customers) was higher at 9%. However, it’s important to note that response rates don’t directly translate to ROI.

Overall, the DMA reported that the median ROI for direct mail campaigns was 29%, meaning that for every dollar spent on the campaign, there was a return of 29 cents in profit. However, this number can also vary depending on the factors mentioned above. Some campaigns may have a much higher ROI, while others may have a negative ROI if the cost of the campaign outweighs the revenue generated.

It’s important to track and analyze the results of each direct mail campaign to determine its success and make adjustments for future campaigns.

What Is a Good ROI For Direct Mail?

A good ROI (return on investment) for direct mail is a critical metric for evaluating the effectiveness of a direct mail campaign. It is an essential indicator of the value of the campaign and whether it has achieved its objectives.

The acceptable ROI for direct mail can vary depending on several factors, including the industry, the cost of the campaign, and the goals of the campaign. Typically, a good ROI for direct mail is considered to be higher than the average ROI for the industry in question.

According to the Data & Marketing Association‘s (DMA) 2020 Response Rate Report, the median ROI for direct mail campaigns across all industries was 29%. Therefore, a good ROI for a direct mail campaign would be above 29%. However, this can vary widely depending on the specifics of the campaign.

Several factors influence the ROI of a direct mail campaign, such as the quality of the mailing list, the design and messaging of the mail piece, and the offer being promoted. Therefore, it is essential to set clear campaign objectives and track and analyze the results of each campaign to determine its success and make improvements for future campaigns.

In conclusion, a good ROI for a direct mail campaign is relative and depends on the industry, the cost of the campaign, and the campaign’s objectives. However, exceeding the industry’s average ROI is a good benchmark for evaluating the success of the campaign.