Studying the ROI in Direct Mail Marketing Campaigns
Advertising by directly sending marketing materials to the homes of target consumers is a trick that has been used by all types of businesses, be it superstores delivering periodical circulars or pay per click marketers distributing vouchers to customers. Using direct mail marketing is also helpful when announcing the inauguration of a retail store or an imminent sale or to offer price cuts for some service to a hand-picked collection of customers. A direct-mail or a letterbox distribution campaign can focus on a target audience, regardless of the size of the target audience. Numerous marketing issues control the rate of return on investment, which differs for various campaigns.
Rate of Return on Investment
The average expected ROI on direct mail or letterbox distribution campaigns is usually one to two percent, as per leading market analysts. For instance, in a campaign of brochure distribution in Sydney, if 1000 pieces of brochures are sent out, twenty to forty people can be anticipated to reply and half of those responders can be expected to conduct business with the sender. These figures increase when the target consumer is more exposed to that particular brand. Chances of securing the lead improve further when the marketer is able to narrow down the market with detailed goals.
Creating goals with a solid call-to-action, for instance a voucher, or instead of marketing an average sale, focussing on a particular buyer group that buys frequently, offering them a 5-10 percent discount on select products- goals like these pay off considerably.
Estimating Financial Return
The average return on investment on a standard letterbox distribution or a direct mail campaign can be assessed by considering four important factors:
- The price of the sale
- The number of items being circulated or mailed
- Rate of response (the number of receivers who respond to the advertisement)
- Conversion rate (the number of receivers who go on to buy something from the sending company)
Deducting the campaign expenses and dividing the whole sum by the expense of the campaign gives us the precise rate of return on investment.
- Say a company spends $1,000 on a campaign of brochure distribution in Sydney sending out 100 brochures marketing a merchandise for $50
- 10 people respond to the advertisement
- Only five people actually buy the good
- In this instance, the calculation is – 50x100x10x5; deduct a thousand from that product and then divide the remainder by a thousand which gives 249, or roughly 25%.
Planning an Efficient Marketing Operation
Calculate the efficiency of a marketing campaign by evaluating the financial return of the direct mail advertisements. The outlay comprises the printing and dispatching expenses and the man-power spent in advancing the operation. For example, if a company spend $100,000 to plan and $50,000 on printing, mailing out 40,000 marketing materials, the overall expense of the operation is $150,000. If the product sells for $2000, to roughly 75 people – a ROI of roughly 2% has to reply to the ads and purchase the product for the company to break-even.
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