We all know that direct mail works, but exactly how well are your campaigns working? For many marketers, seeing their efforts give them a bump in sales is proof enough that they are doing something right. But could they do better? How would they know what to do?
This is where direct mail metrics come in. By incorporating metrics into your direct mail campaigns, you can implement a data-driven strategy that gives you valuable insights that you cannot get any other way.
Six Types of Direct Mail Metrics
There are many different types of metrics, and they are used in different ways. It’s important to understand what these metrics are so you can choose the right ones to gain the most valuable insights for your goals.
Here are five direct mail metrics that are commonly used by direct mail marketers:
Response Rate
Response rate measures the percentage of recipients who respond to your direct mail campaign in some way. This can be by making a purchase or taking a pre- purchase action such as visiting a website or requesting more information. Response rates are great for evaluating the success of your initial design. Were those elements successful in moving the recipient to take some type of action?
Conversion Rate
Conversion rate measures the percentage of respondents who not only responded to your direct mail piece but completed the desired action. Conversion rate can be affected by a wide variety of factors that include your direct mail piece and those that don’t. The latter includes the copy on the landing page (if you are driving people to your website), pricing, helpfulness of your customer service people, and even the ease of the checkout process. The relationship between the response rate and the conversion rate can be a very helpful tool in identifying any barriers to improving sales. If recipients responded initially but didn’t complete the sale, where might the barriers be?
Per-Order Value
Per order value measures the amount of money spent by customers, on average, as a result of your campaign. If you had a similar response rate between two campaigns, and your customers spent significantly more last time than they did this time, why the difference? This gives you important and useful questions to ask.
Cost Per Acquisition (CPA)
CPA calculates the cost required to acquire a new customer through your direct mail campaign. If you spend $10,000 on the campaign and acquire 1,000 new customers, that’s an acquisition cost of $10 per customer. You can use this information in a variety of ways, including comparing the CPAs of different marketing channels and even different audiences. This allows you to allocate your resources to the audiences and channels that are most profitable for you.
ROI (Return on Investment)
ROI calculates the profitability of a direct mail campaign by comparing the campaign’s revenue generated against the costs incurred. If you spend $10,000 on a direct mail campaign and generate $30,000 in revenue, that’s an ROI of 3:1. If you spend $10,000 on the campaign and bring in only $8,000, however , you might want to make some changes!
Lifetime Customer Value (LCV)
LCV measures the total revenue generated from a customer over the entire duration of their relationship with you. If it costs you $10 to acquire a customer and they spend $30, that’s an ROI of 3:1. If that customer spends another $20 next month, and $50 the month after that, now your ROI is 10:1. LCV is a critical metric in markets that use a subscription-based model, but it is used in markets with non-subscription-based models, as well.
As you can see, different metrics all play different roles in a direct mail campaign, and they are often most useful when used together. Think of each metric as being like a piece of a puzzle.
By looking at all of the relevant pieces together, you begin to piece unravel the mystery and see the entire picture—and be able to adjust your strategy based on data-driven insights that help you increase your marketing effectiveness over time.
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