Measuring the impact of direct mail is an important part of building your direct mail strategy. Many marketers use direct mail as part of an omnichannel marketing mix. Digital channels provide clear metrics to measure impressions, opens, conversions and return on investment. In comparison, direct mail can be perceived as hard to measure.
We make a point of helping you measure and demonstrate the effectiveness of your direct mail campaigns. We recommend a number of different metrics so that you can measure your results based on individual campaign goals and as part of your overall marketing efforts.
Those metrics include the response rate, revenue generated per mailpiece, ROI, and the cost of time spent orchestrating the campaign. Let's dive into how to calculate each of these metrics:
The first metric to consider is your direct mail campaign's response rate. This metric is helpful for comparing direct mail campaigns against each other and against other channels. That is because it distills your campaign goals into a quantitative metric.
Your direct mail campaigns likely run across a spectrum of objectives like building awareness, acquiring new customers, decreasing churn, or triggering purchases. When managing a mix of campaigns, it can be hard to say which campaigns are successful because some of them are tied to dollar values while others are tied to customer behavior. That is where the response rate comes in.
To measure direct mail response rates, begin by defining your call to action (CTA). This may be a coupon code or to call a specific phone number. Whatever your CTA, make sure it is clear and defined in your mail campaign plans.
Next, you'll measure how many audience members take the action you wanted. This is easiest to measure when you use a digital CTA like personalized URL, which allows you to track how many people and who exactly took specific online actions. However, even if your CTA drives offline behavior, you can measure key performance indicators such as store traffic.
Now, it is time to quantify your response rate (sometimes referred to as conversion rate). Divide the total number of people who took the action you desired by your total audience size. For example, if you had 5,000 landing page visitors out of an audience of 20,000, your response rate would be a very impressive 25 percent.
The power of using response rate as a key metric is that you can use that number to compare direct mail campaign performance across campaigns.
Revenue generated per mailpiece
For direct mail campaigns that are focused on driving sales, you may want to measure the performance by revenue generated per mailpiece. This metric is particularly helpful for direct mail campaigns designed around coupon codes, sign-ups or other customer behavior directly related to your brand's revenue.
The first step in measuring revenue generated per mailpiece is designing your campaign appropriately. From the start, define the campaign objective around revenue-related behavior. Then, make sure the CTA on your mailpiece drives this behavior.
To calculate the revenue generated per mailpiece, first calculate the total revenue generated by the mail campaign. Then, divide that by the total number of mailpieces you sent out that were delivered. For example, if you earned $20,000 in revenue by sending out 5,000 delivered mailpieces, then you earned $4 per mailpiece.
Revenue generated per mailpiece is an excellent metric to gut-check whether your direct mail campaign drove consumer behavior as designed and at what volume.
Return on Investment
One common metric you always want to measure is your campaign's return on investment (ROI). Similar to the revenue generated per mailpiece, this metric reflects how much money the campaign generates. However, unlike the previous calculation, ROI compares the revenue earned to the cost of the campaign.
To calculate ROI, you'll need the total revenue generated and the total cost of the campaign. Then, plug those into this formula:
Direct Mail ROI Formula
(Total Revenue-Total Cost)/(Total Cost)
The final number is a percentage that you can use to compare your ROI with other marketing initiatives.
The above direct mail metrics are effective ways to measure your direct mail campaigns based on how they drive consumer behavior. We also recommend measuring each campaign on how much effort they require of your team compared to the results they get.
Begin by tracking how much time it takes you to develop your campaign, including ideation, design, approvals, set-up, proofs, preparing the mailing list, executing the campaign and measuring it. Next, assign a value to each amount of time. For example, you may decide that each hour spent by your team is valued at $500.
Finally, add the total expense of your team's time into the total cost of the campaign. You can incorporate this into your ROI calculation for a more accurate picture of whether the mail campaign was worth the time it took.
The reason we recommend this calculation is that many marketers still use legacy direct mail workflows that are time and resource-intensive. In these traditional environments, direct mail campaigns can take months from ideation to execution. In addition, often these systems offer very few options for tracking the response rate of the campaigns.
Many marketers stay in this environment because they appear to be less expensive than automation-driven direct mail platforms. However, once you add the cost of time to your campaign expenses, you see quickly how upgrading systems saves you money in the long run.
Measuring your direct mail campaigns is crucial to building a successful marketing strategy. We recommend developing a matrix of measurements to measure each campaign based on its objectives and also to compare campaigns across your entire channel mix. If you are ready to explore automation-driven direct mail that makes it easier to create, execute and measure marketing campaigns, it's time to contact us.