Mastering Direct Mail: The Essential Metrics You Need to Track
Joe McAtee| Oct 26, 2023 |
8 min read
Direct mail may seem old-fashioned against the backdrop of increasingly sophisticated digital marketing techniques, but surprisingly, that may be why this particular marketing channel is so effective! Customers are overwhelmed and inundated with emails and online ads every day; a direct mail marketing campaign offers a tangible, personal touch that captures their attention.
Just like digital campaigns, tracking and analyzing metrics for direct mail are essential. The need for data-driven decision-making applies to all aspects of marketing, and direct mail marketing is no exception. Metrics provide insights into what works and what doesn't, allowing businesses to refine their strategies, optimize their efforts, and allocate resources more wisely.
Let's take a look at the most important direct mail metrics your business needs to know.
Key Metrics To Measure Direct Mail Success
Direct mail marketing campaigns should be measured and evaluated carefully, just like any other marketing campaign. There are several key performance indicators that businesses use to measure direct mail performance, although the metrics may differ depending on the goal of your unique direct mail campaign.
Response Rate Metrics
Response rate is a marketing metric that measures the number of people who respond to a marketing campaign. It is calculated by dividing the number of responses by the total number of people who were exposed to the campaign. If you send out a direct mail campaign to 1,000 people and receive 50 responses, your response rate would be 5%. You should aim for a response rate of around 9%, according to the Association of National Advertisers, depending on your industry.
Response rates and the general direct mail effectiveness are influenced by a number of factors, like the quality of your mailing list, your offer, your call-to-action, and your design. Successful direct mail campaigns often hinge on your chosen vendor and the quality of their work, so choose carefully!
Remember that analyzing response rate data will help you gauge direct mail marketing performance so you make adjustments if needed. Higher response rates suggest strong engagement, while lower rates indicate that you may need to make a few changes. Don't give up after your first try!
Conversion Rate Metrics
Conversion rate measures the percentage of people who take a desired action after receiving a direct mail piece, like visiting your website, buying something, or signing up for your email list. You can calculate conversion rates by dividing the number of conversions by the total number of responses and multiplying by 100, just like the response rate. If you send out 1,000 direct mail pieces and receive 100 responses, and 5 of those responses resulted in a purchase, your conversion rate is 5%.
Tracking conversion rates from direct mail campaigns can be done by using unique codes or identifiers for each respondent. This way, you can track which respondents took the desired action, even if they didn't respond directly to the direct mail piece. You could include a unique code on each direct mail piece that people can enter on your website to redeem a discount, or other direct mail tracking methods.
Whether it's driving sales, sign-ups, or inquiries, conversion data provides insights into how well your direct mail campaign has performed.
ROI (Return on Investment) Metrics
Your return on investment (ROI) measures how profitable a direct mail marketing campaign really is. It's simple to calculate because you only need to compare the money you spent on the campaign with the profit you made. The formula for ROI is (Net Profit/Campaign cost) * 100.
When you're calculating ROI, it is important to factor in all of the costs associated with the campaign, including design, printing, mailing, and labor. You should also compare this against the revenue generated from conversions attributable to the campaign. In other words, if your direct mail campaign generates $10,000 in revenue and costs $5,000, your ROI would be 100%.
It is also important to compare the ROI of direct mail with other marketing channels. This will help you to allocate your resources effectively and identify the channels that work best for you. If your direct mail campaign has a higher ROI than your email marketing campaign, you may want to focus more of your budget on direct mail.
ROI can also be used to make informed budget decisions for future direct mail campaigns. By tracking the ROI of your past campaigns, you can see which campaigns were most successful and allocate more budget to those campaigns in the future.
If you want to achieve a higher ROI, you have to follow a few best practices:
- Set clear goals and objectives for your campaign: This will help you to track the ROI more effectively.
- Use a tracking system: This will help you to track the number of responses, conversions, and revenue generated from your campaign.
- A/B test different versions of your campaign: This will help you to identify the elements (like the specific design or call-to-action) that are most effective in generating ROI.
- Make adjustments to your campaign based on the results: If your campaign is not performing as well as you expected, make adjustments to improve the ROI.
It's always a good idea to identify a benchmark for your industry.
Tracking and Analyzing Engagement Metrics
Once you've decided which metrics you'd like to track, and launched your first campaign, you need to measure direct mail engagement metrics. In marketing, engagement is the level of interaction between a brand and its customers. It is usually measured by the number of people who interact with a brand's content, products, or services, e.g. by booking an appointment, redeeming coupon codes, or visiting a store or church.
Here are a few ways you can track and analyze your direct mail marketing campaign engagement metrics:
Open Rate Metrics
Open rates reveal the percentage of recipients who actually open your mail. Engaging envelope or package design can significantly boost open rates, as recipients are more enticed to explore what's inside. Cactus Mailing has tested a number of different mail formats, and we found that postcards work best because you can draw attention directly to your marketing message.
To really boost engagement, you should try A/B testing your postcard designs. A/B testing involves sending variations of your mail to different segments and analyzing which performs better. Experiment with different elements, like the design, copy, or images, to find what resonates best.
Click-Through Rate (CTR) Metrics
Click-through-rates are associated with emails, but you can apply this metric to your direct mail marketing campaigns by including interactive elements like QR codes or personalized URLs. These can encourage them to take the desired action more effectively.
CTR measures the percentage of recipients who perform a desired action, such as visiting a website, after engaging with your mail. Divide the number of respondents who took the action by the total delivered and multiply by 100.
Post-Campaign Metrics for Continuous Improvement
Once you've sent your mailers and business has started coming in, what's next? Once a campaign has been completed, you can use the data you've gathered to launch your next campaign (with improvements) for even better results. (At Cactus Mailing, we recommend doing a few mailers to drive the message home with your target audience).
Conversion Tracking Metrics
Try connecting the dots between responses and actual conversions, e.g. tracking which respondents eventually became customers and which mail pieces they initially engaged with. You could include a section on your intake form asking customers where they heard about you, for example.
Study the elements of your mail that lead to higher conversion rates. Is it a specific offer, a particular design, or a certain message? For example, if you are a dentist, did a free cleaning offer appeal more than a free check-up? A/B testing will reveal this information, so always make sure to test different messages.
You should also break down your conversion data by demographics, behavior, or other relevant categories. This segmentation helps uncover patterns and preferences among different groups.
Once you've done your analysis, use your conversion data as a roadmap for refining subsequent campaigns. Make adjustments based on what worked and what didn't in terms of driving conversions.
Customer Acquisition Cost (CAC)
It goes without saying, but if you are spending more money on acquiring a customer than they are willing to spend with you, you'll go out of business pretty quickly. That's where calculating your cost per acquisition comes in handy.
CAC is determined by dividing the total campaign costs by the number of new customers acquired and helps assess the cost-effectiveness of your acquisition efforts.Always gauge how direct mail stacks up against other methods in terms of customer acquisition cost and evaluate whether the cost of acquiring new customers through direct mail aligns with your budget and business goals.
Having said that, a high CAC isn't always a reason to give up on direct mail marketing after one attempt. You need to optimize your campaign to become more effective and reduce your CAC, e.g. refining targeting or improving conversion rates with a more powerful message or design.
The Lifetime Value Perspective
Many marketers focus on measuring the success of their direct mail campaigns solely by tracking immediate responses. They look at metrics like response rates, conversion rates, and the number of initial sales or appointments. While these metrics are important, they only provide a partial view of your campaign's performance.
To truly master direct mail, you should shift your perspective and consider the lifetime value of your clients or patients. The lifetime value (LTV) takes into account the total revenue a customer or patient generated throughout their engagement with your business. This includes not only the first sale or appointment but also all subsequent transactions, repeat purchases, and referrals.
Focusing on LTV allows you to assess the long-term profitability of your direct mail campaigns. Customers or patients who continue to engage with your business over time are often more valuable than one-time buyers.
Remember, direct mail can be a powerful tool for customer or patient retention. By nurturing your existing relationships through follow-up mailings, you can increase the LTV significantly.
Calculating the ROI of a direct mail campaign based on LTV will also provide a more accurate picture of its effectiveness. It helps justify the initial investment, even if the immediate response and sales seem modest.
Tracking LTV Metrics
To track LTV effectively, consider the following metrics:
- Average Transaction Value: Calculate the average amount a client or patient spends with your business over time.
- Purchase Frequency: Determine how often clients or patients make transactions with your business.
- Customer Retention Rate: Measure the percentage of clients or patients who continue to engage with your business.
- Referral Rate: Track the number of new clients or patients acquired through referrals.
- Churn Rate: Identify the rate at which clients or patients disengage from your business.
Mastering direct mail involves more than just tracking immediate responses and initial sales or appointments. To maximize the impact of your campaigns, shift your focus to the lifetime value of your clients or patients. By understanding and optimizing the metrics associated with LTV, you can not only measure the true success of your direct mail efforts but also build a foundation for sustainable growth and profitability in your business.
Now that we've offered the different key performance indicators and metrics you can use to assess how well your mail campaign has performed, it's time to put your knowledge to the test! Get in touch with Cactus Mailing. We have literal decades of experience helping businesses like yours create, execute, and analyze their direct mail campaigns from start to finish.
Joe brings over 22 years of experience as a Sales Executive in the direct mail and postcard marketing industry. He focuses on practical strategies that generate sales and enhance business growth for Cactus Mailing's clients.