Learning to calculate marketing ROI for your direct mail campaigns couldn’t be easier. You’re being a smart marketer to think in terms of ROI, because you’re looking at the whole picture, not just a single detail.
You may be bringing in more income, but that doesn’t necessarily mean you’re making a bigger profit. Your overall return on investment is the net revenue you derive — the dollars that create your profit. That’s the result every marketer and business owner wants to see.
You can calculate marketing ROI as a snapshot to check early progress of your marketing, but successful marketing is based on repetition so you should measure ROI over time to get the most accurate numbers. All you have to do is add up the number of responses or amount of sales generated by your mailing and subtract the costs associated with the campaign.
Customer lifetime value.
Along with ROI, this is your most telling number. Customer churn is very costly, whereas loyalty is priceless. Once you convert a prospect into a customer, every future sale increases that customer’s financial value to your business. What’s that worth? Simply multiply that customer’s average per-purchase spend by the number of times per year they buy from you, then multiply that by the number of years you expect to retain them as a customer.
Even without adding in the possibility of increasing their average spend over time, you’re looking at a substantial number. Happy customers, patients or clients can do much more to grow your business than one-time buyers.
Some other ways to measure marketing value.
Overall return on investment and customer lifetime value are the top two metrics for all businesses, but there are additional measurements you can use to calculate specific aspects of your marketing return. It’s valuable to learn as much as you can, so talk to your direct mail professional about which metrics they recommend for you, based on your type of business and marketing objectives.
People often assume this is the goal of direct mail marketing. While getting prospects to respond is essential, it’s only a start – the first step to engaging people and converting them into new customers, clients or patients so you can develop a long-term relationship. You want the highest response you can get, but you need well-qualified responders. That’s why a carefully-targeted, accurate mailing list is critical.
“Excellent” response differs for different types of businesses. Some businesses sell high-ticket products or services, so it doesn’t take many responses or conversions to generate a profit. If your price point is comparatively small, you’ll need more sales to break even and start boosting your ROI. Set your goals based on what is realistic for you.
If you use direct mail to drive traffic to a special event, you can measure your overall response and compare it to past results. Did you have more people show up at your big sale this year? More importantly, did you track them as they purchased, so you could calculate the revenue they generated? Now you’re talking ROI. You can even see if the average sale was larger than in the past.
Want some motivation to calculate marketing ROI?
Check out these examples, from real small businesses like yours:
- 700% return on investment, with more new students signing up from every mailing (children’s learning center)
- $150,000 in new revenue (dentist)
- 1000 new customers and $60,000 in new business in six months – a monthly net sales increase of 15% (restaurant)
In the end, the best return is the one that generates the most – customers, sales, however you choose to measure — for the least cost. When you calculate marketing ROI and use tracking and measuring to further study your campaigns, you’ll learn more about your customers. That’s information you can take to the bank when it comes to increasing sales.
Photo Credit: @lendingmemo via Flickr.