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Direct Mail Response Rates Mislead if You are Careless
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By Alan Sharpe
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I could tell you that the average temperature in the world is 60degrees Fahrenheit. But that fact wouldn¡¯t keep you from gettingsunstroke in Cairo. Or frostbite in Tuktoyaktuk. Averages tellyou only so much.
Direct mail results only tell you part of what you need to know.They tell you the percentage of people on your list whoresponded. That¡¯s it. They don¡¯t tell you if you broke even. Ifyou made a profit. Or if the sales people who followed up on theleads closed any sales.
Response rates are misleading if you read them incorrectly. Forexample, I recently wrote a fundraising package for a NorthAmerican nonprofit. The letter, mailed to a list of 6,850donors, generated 35 gifts (responses). Run the numbers andthat¡¯s a response rate of half of one percent, a dismal result.But this number is misleading because my client (against myrecommendation), mailed the letter to everyone donor in hisdatabase, including lapsed donors who had not made a donationfor years.
So I asked my client how many active donors he had in hisdatabase. Two hundred, he replied. That¡¯s 200 active donors outof a list of 6,850 total donors. Run the numbers again, andyou¡¯ll see that my letter generated a 17.5% response rate whenmailed to active donors, or, to put it another way, when mailedto a good list.
Another problem with response rates, valid as they are, is thatyou cannot use them for every industry. Take the Olympic Games.When a nation applies to the International Olympic Committee,requesting that the Olympic Games be held in their capital city,they need a 100% response rate to succeed. They need one¡°client¡± to buy their proposal or their mailing has failed.
Take a magazine publisher. It mails to 500,000 names, generatesonly a 1% response rate, yet considers the mailing a success.But a stock. broker who targets wealthy doctors in LowerManhattan has different expectations. His lead generation letterneeds to generate a response rate of at least 25% because heonly mails it to 100 doctors, and he only closes around one inevery 25 doctors who responds. A one percent response rate, evenif it is an average, is of no use to him.
Average response rates are useful when they are for your productor service and your target audience in particular. If you candiscover the response rates that your competitors are generatingby mailing sales letters to the same prospects that you aretargeting, then, by all means, use those response rates as ayardstick against which you compare your results. You aretalking specifics.
Some response rates for various industries. The Direct Marketing Association (www.the-dma.org) calculatedthe average response rates for a number of industries:
Fundraising: 5.35% Retail: 3.36% Businesses selling services tobusinesses 3.34% Manufacturing: 3.17% Personal and repairservices 3.07% Travel 2.98% Computer/electronics: 2% Packagedgoods: 2%
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