If you own a business, you’re probably constantly on the lookout for ways to promote your products or services. With the proliferation of email marketing and social media advertising in recent years, many business owners mistakenly believe that direct mail is no longer a meaningful way to communicate with clients and prospects. However, direct mail remains a critical component of a strategic, integrated marketing plan despite the rise of email and social media marketing techniques.
Research shows that direct mail provides a deeper connection with consumers, and this deeper emotional connection yields a higher response rate compared to many other forms of marketing. In addition to a higher response rate, direct mail often generates leads at a more affordable rate than digital marketing.
The Importance of Direct Mail Testing
It may be easy for you to recognize the overall effectiveness of direct mail from the information provided above, but industry details won’t necessarily help you determine the effectiveness of your own direct mail campaign. To figure out how well your campaign is doing, you have to conduct direct mail testing. From those tests you can change and determine the best approach and audience for your direct mailer.
You may think you know why one mailing did well with generating sales leads and bankable sales, but only testing will prove why the direct mailer was successful. If something was effective in the past, it doesn’t mean it will be successful in future mailings, according to Eugene Schwartz, author of “Breakthrough Advertising.” Schwartz maintains that the only reliable answers as to why a given mailing worked can only be derived from direct mail testing.
Many industry experts such as Schwartz view testing as necessary, but determining how to measure direct mail success is an intuitive science that many business owners aren’t familiar with. At Mail Shark, our direct mail and print marketing experts can help you gauge the effectiveness of your mailer and advise you on how to get better responses.
In this post, we’ll walk you through some of our tips on how to test, track and measure your direct mail campaign.
Methods and Tips When Testing Your Direct Mailer
When you’re attempting to measure the effectiveness of your direct mail, you should approach the process in a scientific way. Understand that testing will be an ongoing activity, not a one-time event. You should maintain objectivity in your testing and let the numbers provide information you can use to improve your individual mailings and overall direct mail campaign. Even if your test results clash with your better judgement and intuition, you can improve your direct mail results by acting on the information your tests reveal.
To perform tests that will provide meaningful, actionable results, you typically should send your direct mailer to a sample of your target audience instead of sending it to your entire mailing list. This will allow you to perfect the mailer before the majority of your target audience sees it.
Alternatively, you can create two mailings that have one variable that’s different from the other. For instance, one mailing can be sent out in colored envelopes while the other will be mailed in white envelopes. Based on how your test and control groups respond, you can determine how much a colored envelope influences consumer behavior.
As a rule, companies often use one of the following testing methods to measure their direct mail success:
A/B Split Tests: A/B split tests are a commonly used testing method. You conduct an A/B split test by creating the exact same mailing, except for one component that will be sent to two separate groups of consumers — such as colored envelopes instead of white envelopes. You can determine the effectiveness of the two different versions of your mailer. You don’t have to limit A/B tests to only two groups. You can test three or more versions of the same mailer by adding more groups to your test. If you want to test three versions of your direct mail, you’ll perform an A/B/C split test, for example. It’s important not to make the three mailers too different because then you won’t know what about the mailer actually worked. So focus on one simple area that could have a profound difference—like the wording on the call to action or the coupon.
Multi-Variable Tests: Also known as “multi-variate tests,” multi-variable tests involve testing multiple components of your direct mail at the same time. You can test three lists along with two different promotional offers with this method, for example. This kind of testing is typically used to evaluate direct mail programs in the infancy stage, when a company may have no idea what components are successful. As a direct mail program ages, you become increasingly familiar with what resonates with consumers. You’ll still need to test your direct mail campaign regularly, but you’ll normally be able to conduct tests that are more focused as your program matures.
Although you can test almost any part of a direct mail campaign, you can gain more meaningful insights by testing certain components. The most vital elements you can test are your mailing list and your offer. Testing your list is the more affordable option because it’s going to cost the same amount to send a mailer to everyone on your list regardless of whether you send one big batch or break your list into smaller groups of recipients and send your mailer out in smaller batches.
Testing your offer is inherently more expensive because you have to create a separate mailer for each offer you want to test. If you want to test three offers, for instance, you’d have to pay to design, print and ship three different mailers instead of one.
There is no exact formula for determining how much you should test. As a general guideline, you should consider testing whatever quantity is necessary to generate 100 responses. If you use this guideline, you’ll need to send 5,000 test mailers if you ordinarily have a response rate of two percent.
Under normal circumstances, you can put more confidence in your test results the larger the quantity you test. However, sending tens of thousands of test mailers isn’t affordable for every business owner. If you’re on a budget, you can perform tests in smaller batches and use them to confirm your results and build your confidence in your findings over time.
Testing is a necessary part of any effective direct mail program, but it can take a while to see the results of your tests. This is especially true if your promotion doesn’t have a set deadline or your deadline is several months away. Waiting for results can be costly if you’ve scheduled mailings close together, because you won’t be able to incorporate what you’ve learned from your current promotion into your next mailing. To speed up your testing, you can perform a half-life analysis that will help you to accurately estimate what your final test results will be.
In direct marketing, half-life analysis is based on the premise that you’ll receive half of your direct mail responses by a certain day during a promotion’s lifecycle, and that day is pretty much the same for each of your mailings. With this in mind, you’ll need to examine your previous direct mail promotions to identify your company’s half-life. Then, you can predict the results of your tests — simply multiply the responses you’ve received and the sales you’ve recorded by a factor of two.
A big part of testing your direct mail campaign is choosing the tracking method you’re going to use to monitor your results. Some common tracking methods include setting up a dedicated toll-free phone number that consumers can use to contact your business. Even if you don’t set up an exclusive phone number, your call center representatives should ask what motivated callers to contact your company, and they should record their answers.
Another tracking method is to include a coupon code in your mailer, which recipients can redeem on your website. You can also create a dedicated landing page for your direct mail campaign on your company’s website. Another popular alternative is to provide a physical coupon that’s only available in your mailer. No matter what tracking method you decide to use, exclusivity is a must. Only the people who receive your mailer should be able to access whatever information you’re using to measure the effectiveness of your direct mail. If anyone can find your exclusive bonus code or navigate to your dedicated landing page, your test results will be skewed.
How to Measure Direct Mail Success
One of the best ways to measure your direct mailer’s success is through coupons unique to that mailer. Regardless of whether they spend the coupon online or in store, you can track the exact amounts they paid that can now be contributed to a direct mail campaign.
When testing your direct mailer, include unique coupon codes or different offers in each of your test groups so you have a clear indication which one performed the best.
Coupons also act as a physical reminder of your brand and to the receiver that they want to buy the product or service.
Before you attempt to track the success of your mailer, you must identify the goals you want your direct mail campaign to achieve. To track your success, your goals have to be specific and measurable. Once those goals are defined, you can begin to monitor the success of your mailer.
One common way to measure the success of a mailer is to set up a campaign specific URL and include it in your mailer. This URL would lead consumers to a specific landing page on your website that only people who received your mailer are able to access. By creating a URL that is unique to your campaign, you’ll be able to use your website’s analytic tools to determine the number of individuals who use the URL to visit your campaign’s landing page.
The key to this is exclusivity, however. For your analytics to provide meaningful data, your campaign specific URL should only be available in your mailer, meaning it should not be published in any other media, and other people who visit your website should not be able to access the landing page the URL leads to.
Another way to measure the success of your direct mail is to use call tracking. After you set up call tracking software, which gives you a unique number that forwards to your usual sales number, you can add that tracked phone number to mailers. When someone calls using that unique phone number, your company will be able to track their sale. Using the response rate, you can then measure the success of the direct mailer.
A response rate is the percentage of the people on your mailing list who responded to your mailer. In general, the response rate to direct mail is 3.7%, according to the Data & Marketing Association’s 2015 report. If your direct mail discusses an expensive or complex product, a response rate that is less than one percent is not unusual.
Your response rate is a meaningful number when you’re looking at two mailings that are the same, but it can be misleading in other instances. If you’re doing a side-by-side comparison of two different mailers that have varying costs, simply looking at the response rate of each mailing won’t provide an accurate comparison. In this instance, you’d be better off looking at your overall response in the context of how much each individual response costs. If you’re comparing two mailers that have the same format and cost but different offers, you should look at your qualified response rate, because one offer may produce a higher overall response rate while the other offer may generate a response that’s of better quality.
In addition to your response rate, you may want to evaluate your direct mail using the following metrics:
Qualified Response Rate: Your qualified response rate is the percentage of people who responded to your mailer and intend to buy something from your company now or at some point in the future. If you sent out 10,000 mailers and 200 individuals respond to your mailing, your response rate would be two percent. If you contact everyone who responded and find that half intend to purchase a product or service from your business, your qualified response rate would be one percent.
Cost per Response: Your cost per response tells you how many people took the action that you prescribed in your mailer, whether that was to call your business, visit a dedicated landing page, redeem a coupon code or something else. To calculate your cost per response, simply divide the total cost of your mailing by the number of responses you recorded. If, for example, your mailings cost $5,000 and you received 200 responses, your cost per response would equal $25. If you’re more interested in your cost per qualified response, you can calculate your cost per qualified lead — simply divide the cost of your mailing by the number of qualified responses you received.
Cost per Sale: While knowing how much you spent per response if helpful, knowing your cost per sale is also valuable. To determine your cost per sale, divide the cost of your mailing by the number of sales that took place as a direct result of your mailer. If your mailings cost $5,000 and they generated 50 sales, your cost per sale is $100.
Your cost per sale and cost per response are useful pieces of information on their own, but you may learn more about your direct mail campaign by examining them together. If your cost per response is significantly lower than your cost per sale, for instance, it tells you that many people are responding to your mailer, but very few interested parties are converting into sales. This may indicate a problem with your dedicated landing page or the sales script your inbound call representatives are using.
Order Rate: Your order or number of purchases provides the percentage of consumers who actually bought what you offered in your mailer. Because of this, many people consider your order rate to be a better measure of your direct mail campaign’s effectiveness than your response rate or even your qualified response rate. If you have a prolonged sales cycle, using your order rate to measure the success of your direct mail campaign isn’t always practical.
Revenue per Order: This figure shows you the average amount of revenue you earned for each sale that your mailing generated. To determine your revenue per order, divide the amount of revenue attributed to your direct mail campaign by the number of orders your campaign generated. It’s always good to know your revenue per order, but the figure can be particularly telling when consumers buy different amounts of your products or services or they spend varying amounts of money.
Customer Acquisition Cost: Your customer acquisition cost is the amount of money required for you to acquire a new customer. This cost includes money spent on your direct mail campaign, order fulfillment and follow-up such as sales support.
Lifetime Value: While some mailings may result in a net loss, it doesn’t mean they were a bad investment of your resources because they may have established relationships with consumers who will do business with your company multiple times. These relationships can have lasting value, and they can help you recoup your investment in what may have seemed like an unprofitable direct mail campaign as time progresses. You can determine your lifetime value by tracking which customers shop with you once, as well as which individuals return to your business repeatedly.
Incremental Sales: If you want to see how much a mailing increased your sales volume, you should examine your historical sales figures for the period in which your promotion will run. At the end of the promotional period, you can calculate your incremental sales by subtracting your historical sales from the total revenue collected during your campaign’s lifecycle.
Revenue per Customer: Calculating your revenue per customer is similar to figuring out your revenue per order. Instead of using the number of orders your direct mail campaign generated, you use the number of people you sent your mailer to when you divide the amount of revenue your campaign produced, however. If you sent your mailer to 200 people who then bought $3,000 worth of goods or services from your business, your revenue per customer would equal $15.
Coupon Count: Including a coupon in your mailer gives you a way to physically track the effectiveness of your mailing. You can simply count the number of coupons consumers redeem in your store to determine your response rate, as well as your order rate.
Coupon Code Usage: If your mailer directs people to your company’s website, you can provide an exclusive coupon code in your mailer that people can use to receive a discount on your products or services. Consumers will have to enter the coupon code to get the discount, so you can track your response and order rates electronically.
The use of coupon codes isn’t limited to your website. You can provide coupon codes that people can use when they place orders over the phone in addition to, or instead of, coupon codes that can be used online.
Phone Call Volume: If your mailer encouraged people to contact your business by phone, one of the best ways to measure your response rate is to count the number of calls your company receives during the promotional period. If you created a custom phone number and your mailer instructed people to dial it, tracking your call volume is easy. Only the individuals who received your mailer will have access to your dedicated phone number, meaning everyone who dials it will be responding to your direct mail campaign.
If your mailer directed people to call your normal business number, you can track your call volume in two ways. First, you can instruct your staff to ask the individuals who call your company how they heard about your business. Your staff members can be even more direct and ask callers if they received your mailer and if that motivated them to contact your business. You can also determine how well your mailer motivated people to call you company. Look at the number of calls you received during the promotional period in previous years. You can compare that figure to the number of calls your staff fields during the promotional period. The surplus of calls would equal your campaign’s response rate.
Foot Traffic: The number of individuals who visit your brick-and-mortar retail space can also be an indicator of your direct mail campaign’s response rate, particularly if your mailer invited people to stop by your location. If you’re going to use foot traffic to gauge your response rate, you’ll need to refer to your historical data to determine how many people visit your store during the promotional period in a typical year. You can then compare that figure to the number of people who actually visited your store before the end of your promotion to get an idea of your response rate.
Emails: If your mailer asked people to send your company an email as a response, you’ve given yourself another easy way to determine your campaign’s response rate. Simply count the number of emails your business receives and compare the total to the amount of emails you’d normally get during the same period. To make this even easier, you can set up a dedicated email account and request that people send an email to that email address when they’re responding. You can look at the total number of emails in your in your inbox to determine the number of people who responded to your direct mail campaign. Make an allowance for spam, especially if your offer will run for an extended period.
If your mailer instructed individuals to complete a contact form on your website instead of sending an email, you can track your response rate in a manner similar to how you’d track your email responses. Simply count the number of contact form submissions you receive during the promotional period and compare that figure to the average number of submissions you would have received during the same period in previous years. The difference between those two numbers will equal your response rate.
Return on Investment: For most business owners, the best measure of the success of their direct mail campaigns is to look at their return on investment, or ROI. To calculate your ROI, you must accurately track the sales that are the direct result of your mailing. Once your sales figures are in, you add all of the sales that were generated by your direct mail campaign. Then you’ll add all of the costs that went into your campaign, such as the money you spent to design, print and send your mailer to your customers and prospects. Remember to factor labor costs into this equation, as well. If it took a manager who makes $30 per hour 10 hours to coordinate all of the activities that went into your direct mail campaign, you’d add $300 to your total costs, for instance.
The final step to determining your ROI is to subtract your total cost from the revenue that was generated from your direct mail campaign. If the net figure is positive, you made a profit on your campaign. If the number is negative, your ROI is a loss. Even if you lose money on a given mailing, it doesn’t mean you won’t benefit from the results the mailing generated over time. In instances when a mailing produces a net loss, it’s important to remember that the lifetime value of the relationships you established with customers in that campaign may exceed your initial loss over the long-term.
You can use the metrics described above to evaluate the effectiveness of your direct mail campaign. Once you’ve identified your control and test groups, for instance, you can compare your revenue per customer for the control group to the revenue per customer of your test group to determine your incremental revenue per customer. For example, if your control group’s revenue per customer is $100, while your test group’s revenue per customer is $170, your incremental revenue per customer is $70.
How Mail Shark Can Help Your Direct Mail Campaign
Reading, PA entrepreneur Brian Johnson founded Mail Shark in 2008 as a marketing company that focused on developing direct mail programs for businesses competing in the pizza industry. Four years later, Mail Shark bought a 30,000-square-foot facility that enables our team to complete our design, printing and mailing services right on our own campus. We’re proud to offer the best direct mail products available!
In the past three years, our business has grown 171 percent. We firmly believe that we’re successful because our clients are our top priority at all times. We take the time to get to know our clients, so we can provide them with the best service possible. Our goal isn’t to increase our bottom line. Instead, our mission is to serve our clients and help them grow their businesses.
We treat our clients with the respect they deserve at all times, and we operate with complete transparency. Our talented team can help you create, test and measure your mailers so you can enjoy the highest ROI on your direct mail campaign!
Whether you’re interested in one mailer or you want us to create a strategic, comprehensive direct mail program, we have numerous mailing services for you to choose from, including the following:
- Saturation Mailers: These mailers carry the lowest postage rate provided by the United States Postal Service. With saturation mailers, specific mail carrier routes are covered within a zip code. You can send your mailer to homes located on specific carrier routes instead of sending your mailer to everyone within an entire zip code.
- Every Door Direct Mailings (EDDM): This type of mailing enables you to target and saturate specific mail carrier routes with your mailer.
- Targeted Mailers: When you use our targeted mailers, you can create a precise customer profile that’s based on the demographics of your target market.
- New Mover Postcard Mailings: Our new mover postcard mailings are designed to attract new residents to your business and convert them to regular customers before they visit a competing location.
- Personalized Birthday Postcard Mailers: This mailing solution is a great way to attract consumers to your business on their birthdays. You can choose who will receive your personalized birthday postcard mailers by mail carrier route or radius.
One of the many benefits you’ll enjoy when you choose to use our mailing services is that we don’t take any money up front. That’s right! We don’t collect money from our clients up front. In addition to not charging any upfront fees, we allow our clients to pay for our services on a weekly basis throughout the course of a mailing instead of requiring payment in full in a single transaction. We know what it’s like to be on a budget, which is why we think it’s important to give our clients the flexibility to spread their payments out over time.
When you work with Mail Shark, you work with a partner who is truly invested in your success.
If you would like to learn more about the services we provide or what it’s like to partner with Mail Shark in more detail, we invite you to complete our online contact form. It only takes a few seconds to complete the form, and the information you provide will be a great starting point for when we talk to you directly. Once we receive your completed contact form, one of our account executives will contact you and answer any questions you may have.