In this guide, you’ll discover the significance of direct mail ROI, highlighting how it serves as a compass for gauging campaign success and fine-tuning your direct mail marketing strategies for maximum impact. We’ll discuss the components contributing to direct mail ROI and how automation enhances scalability, reduces manual effort, and ensures consistency in your direct mail campaigns.
Direct mail ROI is the quantitative measurement of the value generated from your direct mail marketing efforts in relation to the costs incurred. It goes beyond mere financial figures, providing insights into the overall impact of your campaigns, the responsiveness of your audience, and the success of your messaging. As a critical metric, Direct mail ROI empowers you to assess the value of your direct mail marketing efforts, enabling informed decision-making and resource allocation.
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[SOURCE: 2023 State of Direct Mail]
Harnessing technology to streamline processes and enhance efficiency has become paramount in scaling marketing operations. Direct mail automation has transformed the landscape of traditional manual-intensive direct mail campaigns. By seamlessly integrating data-driven insights and personalized content, automation empowers you to connect with your audience in a more targeted and relevant manner, increasing response, conversion, and ROI.
Learn more about optimizing your direct mail for results: Direct mail Optimization Guide and webinar
The cost of direct mail can vary greatly depending on the size and scope of the campaign. However, some general costs can be expected.
It's important to consider these costs when selecting a direct mail platform or agency. Many offer flat-rate pricing, including all the costs mentioned above. Budgets for direct mail run the gamut from 5-50%, with smaller companies spending larger portions of their budgets on direct mail than larger organizations. In the 2023 State of Direct Mail, 58% of marketers reported having more marketing budget allocated to direct mail than in 2022.
The average response rate for direct mail marketing is typically around 3% to 5% for existing customers and 1% to 1.5% for new prospects, according to the Data & Marketing Association. Your conversion rate will, of course, be a lower percentage of those who respond. That rate will depend on your offer.
Remember that direct mail response rates can vary based on industry and type of direct mail. Consider how response rate averages differ across types of direct mail:
Compare these results with your response rates to gauge the health of your direct marketing.
Helpful content: The Best Metrics to Measure Direct Mail Effectiveness
For every direct mail campaign you send, you want to measure the impact by looking at the return on investment (ROI). Similar to the revenue generated per mail piece, 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 your direct mail 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 you can use to compare your ROI with other marketing initiatives.
Calculate your direct mail ROI now.
Direct mail comes with plenty of complexities, and without an effective strategy, and streamlined workflow, the process can become immensely time and resource-intensive.
Does it take you months to execute a direct mail campaign? Do you struggle with long lead times when sending postcards, letters, checks, or other direct mail formats? If so, you can modernize your direct mail process for a more effective and efficient omnichannel customer experience. Cutting out manual processes to transition to direct mail automation can be a game-changer as it saves time, increases ROI, and enables you to automate and trigger direct mail based on customer behavior.
Direct mail campaigns can seamlessly complement digital activities, especially when leveraging modern tools and cloud software. Best of all, when you transition to automation, you can use direct mail in new ways. For example, you can add more precise timing and enhance personalization, garnering increase response and ROI.
The first step to any successful direct mail program is the ability to piece together an audience list for effective targeting. This is because reaching customers with direct mail that is relevant and contextual to their needs can maximize your responses and lead to better ROI. The days of sending mail indiscriminately to every household within a given area using the "spray and pray" method are long over.
However, good audience segmentation and targeting depend heavily on having quality data, which can impact how your mail is planned, produced, mailed, and ultimately, how consumers take action on it. Many automated direct mail platforms, like Lob, provide various ways to improve your address data hygiene and deliverability and augment your first-party data with additional datasets to increase reach.
In addition, marketers are proactively using Address Verification before sending their campaigns to ensure address accuracy and validity and decrease wastage. Postal address verification allows senders to ensure their mail will be deliverable and that location is valid (addresses are valid if they are CASS-certified). This process ensures the highest possible ROI while helping mailers maintain their database's integrity over time. Lob's software provides address verification APIs, which verify each recipient's address and ensure proper formatting. Any address can be verified in seconds, and a Lob confidence score is given (e.g., 100% likelihood of being deliverable).
The magic of direct mail automation is that it transforms manual, repetitive processes to accelerate time to value, reduce costs, and supercharge ROI. The result is intelligent direct mail that is connected, personalized, and scalable.
We automated all of it—from making sure members were providing deliverable addresses to programmatically sending postcards on-demand. - Denise Remhof, Product Manager, Couchsurfing
A direct mail automation platform enables you to automate the process end-to-end, from creation to printing to fulfillment.
Instead of campaigns taking months, you can set up and execute direct mail campaigns in minutes. You can schedule ahead, send last-minute, or trigger campaigns based on customer behaviors or events. Direct mail automation platforms often have Print Delivery Networks that replace traditional print vendor relationships with an integrated, on-demand network of distributed commercial printers, streamlining and simplifying the process so your mail is always a priority. At any scale and frequency.
Must read: The Modern Marketer’s Guide to Crush ROI & Budget Goals with Direct Mail
Brands that are doing personalization well not only stand out from the competition but deliver the results they need to grow and position themselves as leaders in their categories. They deliver ROI and revenue and create the kind of memorable customer experiences that consumers crave.
68% of consumers are more likely to engage with a brand’s message when personalized, but many brands simply use a consumer’s first name and think that’s good enough. 52% of consumers expect their direct mail to be personalized, so give them what they want and go beyond Dear {First_Name} to drive the best response and ROI.
Consumer data is the key to personalization. The more you know about a consumer, the more you can customize your marketing and direct mail to meet their tastes, needs, and challenges. Your company likely already has the personalization information you need in your sales and marketing tech stack, such as:
Your goal is to form as complete a picture as possible of your customers. Demographics, previous purchases, interests, contact history, and other data you have will enable you to personalize your direct mail campaigns.
thredUP, a managed online clothing marketplace, uses Lob to automate its direct mail retention campaigns. Using Lob’s HTML templates, thredUP began sending postcards to existing customers that had the potential to churn. The postcards featured images and recommendations based on customers' previous purchases and discounts.
All the content was dynamically populated, from the brand suggestions and images to the discounts' expiration dates. That meant thredUP could customize each postcard to the customer’s purchase history automatically, without redesigning, requirements gathering, or other time-consuming tasks.
We’ve seen a 25% increase in order rate from the customers we target with Lob campaigns. - Anthony Marino, President, thredUP
That doesn’t mean every campaign needs to involve deep customer insights. You can get excellent results by targeting customers based on their most recent purchases. But having extensive customer data enables you to better segment, target, and personalize your mailers. You can also personalize your campaigns using personalized maps from the consumer’s home to the nearest physical location or use personalized tracking tactics like 1:1 QR codes or PURLs (personalized URLs) to give each campaign a bespoke touch.
Actionable resource: The Modern Marketer’s Guide to Personalization
Many businesses find that managing and optimizing their direct mail campaigns can be disjointed, with little or no data available to track performance. And if you can’t track it, you can’t improve it.
Just like you can’t personalize your campaigns without data, you can’t analyze their efficacy without data. Automation platforms provide real-time visibility into campaign performance metrics so you can see what’s working and what isn’t and make adjustments.
You can also integrate your direct mail automation platform with other parts of your marketing tech stack to get the necessary data to fully attribute your campaigns, measure and report direct mail ROI, show revenue and conversion lift, and execute multivariate tests.
iExit is a free travel and map app for road trippers and provides information about highway exits for travelers. Its business model operates on advertising revenue through business sponsorships for exits, but it was proving impossible for iExit to find the business owners’ digital contact information to sell sponsorships.
iExit tested several direct mail formats and discovered that letters outperformed postcards for its target audience. Through conversations with prospective customers, the iExit sales team learned the most commonly asked questions and included the answers in its direct mail campaigns.
“We needed more space for information which is how we ended up with a two-page letter, and the second page, the FAQ page, was a big turning point in boosting conversion rates.” - Evan Metrock, Founder & CEO
The boost in conversion rates equated to a 40% increase in users claiming their business listing on the app and a 60% increase in purchased sponsorships. iExit’s direct mail acquisition campaigns are essentially self-running, thanks to automation which continues to drive predictable and profitable results.
We tested a campaign and got immediate results with an ROI of 155%. Not only could it scale, but direct mail was profitable right off the bat. - Evan Metrock, iExit Founder and CEO
Learn more about iExit’s road to success
Direct mail for the real estate investing market hasn’t changed much in the last decade resulting in many firms using very similar-looking boilerplate mail.
Because of the limiting templates, VentureStack struggled to stand out from the competition in acquiring new home-selling clients with its direct mail campaigns. VentureStack was also getting hamstrung by the manual, time-consuming nature of executing its direct mail campaigns.
VentureStack began using Lob in its new customer acquisition campaigns. It found near immediate success with a two-page letter. VentureStack has also had success using direct mail postcards. Its postcard includes a QR code to drive traffic to its website leading prospects to fill out a form. It then uses a Facebook pixel and pixels on its website to retarget and capture leads.
"Direct mail has been a nice complement to our online initiatives. We’ve found that many people who receive direct mail will never pick up the phone and call us, but they'll check us out online. It's a highly effective way to drive traffic to our online presence. And then, we have the protocol set up with retargeting and recapturing that information to be able to monetize that later on down the line." - Tim McGarvey, Co-Founder, VentureStack
The most important metric VentureStack uses to measure the efficacy of its direct mail campaigns is return on ad spend (ROAS), essentially return on investment. It tracks each campaign with an individual phone number.
In our industry, companies normally target a 4 to 5 times return to be a viable, sustainable marketing channel. We have an 8.3 return on ad spend from direct mail, so we're blowing that out of the water.
McGarvey and his team only realized how successful their direct mail campaigns were once they met with other companies and started benchmarking results. They quickly realized they had very successful campaigns and decided to double down on direct mail marketing and optimize what worked.
VentureStack plans to continue scaling up its direct mail marketing and has shifted 90% of its marketing budget to the channel.
Learn more about VentureStack’s success
Direct mail can be a highly effective marketing channel when done right. However, maximizing your ROI is important to get the most out of your investment. Here are four actionable best practices for maximizing direct mail ROI:
The first step to maximizing your ROI is to build a responsive and accurate mailing list. This means targeting your direct mail to people likely to be interested in what you offer. You can segment your list by demographics, interests, and past purchase behavior. You can also use data from your website and other channels to build a more accurate picture of your target audience.
Once you have a responsive mailing list, you must craft compelling copy and visuals to grab your audience's attention. Your copy should be clear, concise, and persuasive. It should also be tailored to your target audience. Your visuals should be high-quality and eye-catching. They should also be relevant to your message.
Read now: Best Practices for Direct Mail Creative
Once you have a good starting point, you can start to A/B test different elements of your direct mail campaign to see what works best. This includes things like the headline, the offer, the visuals, and the call to action. You can also test different mailing lists to see which ones have the best response rate. By continuously optimizing your campaign, you can improve your ROI over time.
Get the guide to testing: The Modern Marketer’s Guide to Direct Mail Analytics & Testing
It's important to monitor and analyze the performance of your direct mail campaign so that you can see what's working and what's not, as discussed in the analytics section of this guide. This will help you make necessary adjustments to your campaign and improve your ROI.
Direct mail is a powerful marketing channel that can be used to achieve various business goals. However, to maximize your ROI, it is essential to understand the critical components of direct mail ROI and how to measure and improve it.
In this guide, we've discussed the significance of direct mail ROI and how to gauge campaign success and fine-tune your marketing strategies. We also covered the components contributing to direct mail ROI and how to maximize response and conversion including some real life success stories, and finally we shared how automation can enhance scalability, reduce manual effort, and ensure consistency in direct mail campaigns.
Now it's time to put what you've learned in action and maximize your direct mail ROI.
To learn more, book a meeting with a Lob expert.