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How to Calculate ROI in Direct Mail Marketing

With many forms of marketing, trying to quantify your success can be seriously frustrating. Direct mail marketing, however, is a notable exception. It’s easy to measure, in a variety of ways that help evaluate both short-term and long-term results. Calculating overall return on investment (ROI) gives you the best insight into the success of your marketing campaigns.

Sometimes small business owners mistakenly assume response rate is “the” metric to use in assessing direct mail. But that’s nothing more than the sheer number of responses so it’s just the beginning. For marketers that sell very high-ticket items such as automobiles or homes, it doesn’t take more than a few sales to realize a nice ROI. But if you’re selling sandwiches, you’ll need many more.

A carefully targeted mailing list and an irresistible offer are your best insurance when it comes to inspiring maximum response.

ROI tells the true story.

The point is to compare what you spent (your investment) to what you earned. This ratio is extremely important because simply toting up your sales can be very misleading. Suppose, for instance, you run a campaign that brings in $10,000. Nice, yes? But what if your costs were $9000? Ouch. You only made $1000. On the other hand, if your costs were just $1000, you would have made a profit of $9000. (Aren’t you glad direct mail is both effective and affordable?)

Now consider this: how long did it take you to see that return? One month? The whole year? When you send monthly mail campaigns that bring in a steady flow of new customers all year long, you’re continuously generating new revenue.

For ongoing campaigns, you can calculate early results to get a snapshot of your progress, but you’ll get a more accurate picture if you calculate ROI over time, after you’ve sent out multiple repeat mailings.

What kind of ROI should you expect?

The exact return will always differ a bit different for every business, depending on your campaign details, but these examples come from actual small businesses using postcard marketing:

  • Restaurant: 1000 new customers and $60,000 in new business in six months monthly net sales increase of 15%.
  • Dentist: $150,000 in new revenue.
  • Children’s learning center: 700% ROI, with increasingly greater response to repeat mailings.

What is a loyal customer worth to your business?

It’s a fact of marketing life that it costs more to attract new customers and retain the ones you already have. Targeting is essential because you want to attract customers who will stick with you for the long haul. That’s where maximum profitability comes from. It’s called customer lifetime value, and it’s also a number you can calculate.

Multiply a customer’s typical sales transaction amount by the number of times they buy from you in one year, then multiply that by the number of years you expect to retain them as a customer. Impressive!

Direct mail’s versatility boosts ROI.

You can use postcards to acquire new customers, upsell existing customers and strengthen loyalty or even re-acquire lapsed patients or customers. You can ask recipients to respond in any number of ways – call for an appointment, visit our website, redeem a coupon in-store, attend an event. All those options give you more opportunities to present relevant, timely offers sure to inspire maximum response.

Targeting puts those irresistible messages and offers directly into the hands of the people you want to reach. You don’t pay to print or mail postcards you don’t need, ensuring more of your return goes to your bottom line.

By tracking ROI over time, you can also compare specific marketing campaigns to see which ones perform best for you. That way you can continuously improve your direct mail marketing, choosing the offers, mailing list and timing you know will grow your business the fastest.

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