How to measure direct mail ROI

Direct mail marketing can be an essential piece of any marketing and advertising campaign strategy. However, two of the most critical and frequently asked questions about direct mail marketing are what is the return on investment (ROI)? How can direct mail ROI best be measured?

The data-driven marketing specialists at Deluxe offer their expert advice to help you understand how to measure direct mail response rates and improve the ROI of direct mail marketing campaigns.

What is the ROI on direct mail?

In order to understand direct mail return on investment, you must first determine the goals and metrics by which you’ll measure each campaign.

Goals of direct mail marketing campaigns are often similar to digital or overall marketing campaigns and commonly include:

• Establishing a customer touchpoint
• New customer acquisition
• Increasing response rates
• Adding warm prospects to a sales pipeline
• Increasing sales
• Increasing brand awareness
• Increasing value to current and potential customers
• Increasing brand engagement

Carefully evaluating and choosing goals will be a vital piece of determining direct mail marketing ROI.

Once your team has determined goals and learned how to create a direct mail marketing campaign, the next step is to select the measurement metrics that are the best fit for evaluating if the campaign has met those goals.

Key performance indicators (KPIs) to measure ROI

• Response rates: The number or percentage or people responding to the call to action (CTA) can simply be determined by calculating responses divided by number mailed.  

• Close rates: Similarly, the rate at which warm leads become customers (the “close rate”) can be determined by comparing how many potential leads were in the pipeline who converted to paying customers after being contacted by direct mail.

• Customers retained: Customer retention rate can be a bit trickier to calculate when it comes to direct mail. But with a high-level view of the total number of customers at the beginning of a given measurement period (Q1, for example), the number of new customers acquired during that defined period and a total number of customers at the close of the defined period, you’ll be able to more accurately determine the percentage of customers you were able to retain who were targeted by direct mail and those who were not.

Use a return-on-investment formula to calculate average direct mail ROI

When it comes to direct mail and calculating ROI, there are investments that come into play not only in the physical costs of printing, postage and mailing, but also in the overall, indirect costs of strategy, design, tracking and analysis. So, to accurately track the cost per send, divide the number of mail pieces sent by the total costs of the direct mail campaign.

The United States Postal Service (USPS) has a useful calculator to help organizations track average direct mail ROI. Simply select the mail type (postcard, for example), the total number of mail pieces sent, the budget of the campaign, the price of the product or service being promoted, your organization’s profit margin on the product or service being promoted and your estimated response rate. The calculator comes back with an estimated average direct mail ROI.

More simplistically, you can take the total investment in the direct mail campaign, divide it by your net profit and multiply by 100 to determine direct mail return on investment.

Direct mail ROI statistics

Direct mail can be highly effective and there is plenty of data to back up that claim.

• What is a good response rate for direct mail? The average direct mail response rate is between 2.7 percent and 4.4 percent. In comparison, the average response rate of email is approximately 0.6 percent.
• For in-house lists, the average direct mail response rate is up to 9 percent.
• When customers receive communications via multiple channels, such as email and direct mail catalogs, there is a 49 percent increase in sales and a 125 percent increase in customer inquiries.
• More than 70 percent of Gen X consumers (ages 42 to 57) are likely to read a direct mail piece instead of email as they think it is a more personal medium. Overall, what percentage of direct mail is opened? At least 42 percent.

Average direct mail ROI by mail type

When it comes to the return on investment for specific mail types, what you get out of it is best measured by response rate.

Postcard ROI

The average response rate for direct mail postcards is four percent.

Letter ROI

The average response rate for standard-sized envelopes is about 3 percent. Oversized envelopes, however, can elicit a response rate of up to 19 percent.  

Other mail type

Catalogs are increasingly a welcome sight in people’s mailboxes, with evidence showing that catalog mailings along with email communication can result in a sales lift of 15 percent or higher.

The higher your response rate and the more an accompanying sales lift can be tracked, the better the ROI achieved.

How to measure success of direct mail response rates

Depending on the type of mail list and audience targeting chosen for the campaign, direct mail response rates and direct mail marketing ROI will vary.

Common audience targeting strategies include:

Every Door Direct Mail (EDDM)

Every Door Direct Mail is a registered trademark of the U.S. Postal Service. EDDM services utilize U.S. Census data to help businesses target audiences within a mailing route to receive direct mail promotions. EDDM does not require you to have an in-house mailing list nor does it require the purchase of a third-party mailing list, but it is also not a highly targeted method as audiences are largely chosen by ZIP codes and basic demographics. EDDM mail pieces are typically addressed to “Resident” and cannot be personalized.

Every Door Direct Mail (EDDM) ROI

Because EDDM is, essentially, just blanketing a chosen local area with a direct mail marketing piece its ROI can be deceiving. The cost of EDDM can be budget-friendly, but companies pay for printing and mailing to every address – including empty properties, incorrect addresses and more.

Saturation Mailing

Saturation mailing requires use of an in-house mailing list or purchase of third-party mailing lists to obtain a narrower set of audiences to send direct mail to. While EDDM requires you to send a direct mail piece to every household in a chosen neighborhood or ZIP code, saturation mailing allows you to select only the households or individuals who may be more likely to purchase your product or services based on demographic information.

Saturation mailing ROI

Because saturation mailing allows you to eliminate recipients based on basic demographic information such as age, income level, marital status and children in the home, ultimately printing and postage costs can be lower and your response rate higher as you’re not including households in which your offer would be irrelevant.

Targeted mailing

Targeted mailing requires high-quality data and the ability to analyze it as you’ll utilize a tailored mailing list to determine exactly who should (and should not) receive your direct mail pieces. Partnering with a third-party direct mail vendor provides access to a virtually limitless amount of data so you can be highly selective about making sure your mail list is as targeted as possible and your mail pieces get into the hands of just the right people at just the right time they’re making purchase decisions.

In addition to printing and mailing your direct mail marketing pieces, Deluxe can even track life event triggers that present the perfect opportunities to get your direct mail piece to a motivated audience. Major life events such as getting married, purchasing a home, moving to a new home, having a baby and becoming “empty nesters” are all moments in our lives that often trigger purchasing decisions, offering key timeframes to connect with potential purchasers. Getting your direct mail piece to these people at just the right time increases your response and conversion rates.

Targeted mailing ROI

Based on Deluxe campaign data, there are more than 2 million consumers with lifestyle, household and/or enterprise “triggers” ready to make purchase decisions every week. Deluxe aggregates dozens of specialty trigger databases weekly, generating more than four times more targets than other leading data providers. Beneficially, this life event data provides a 200 percent lift over the average response of traditional campaigns.

How to maximize ROI on direct mail campaigns

The ROI on direct mail campaigns can actually be much higher than digital marketing campaigns, by combining these tactics. Together, direct mail and digital marketing offer an even greater reach and more effectiveness. One of the top tactics to ensure a high ROI for direct mail campaigns is to ensure they aren’t a one-off campaign and don’t stand alone. Direct mail delivers more when it’s part of an overall omnichannel strategy of multiple customer touchpoints.

Other best practices include:

1. Improve the quality of your mailing list

Working with a third-party data provider helps ensure you have the highest quality, most updated mailing list available. When you eliminate incorrect data and narrow down your mailing list to those most likely to respond and convert, you increase the ROI of your direct mail campaign.

2. Provide enticing offers

If you motivate potential customers to take action, they’re more likely to do so. For example, a new restaurant in your area can send a direct mail piece letting neighbors know they have opened and where they’re located. Or, that same restaurant can send a direct mail piece offering an exclusive “grand opening buy-one-get-one half-off” deal available for a limited time. Which offer do you think will result in customers taking action? The one with the enticing offer, to be sure.

3. Personalization

Utilizing accurate mailing lists along with printing and mailing technology allows a variety of personalization options for direct mail. In fact, a variety of studies conducted over the past 50 years have shown that personalization results in higher open and response rates than mail without personalization.

4. Tracking

When you understand how to track direct mail, you’ll be better able to understand its effectiveness, track ROI and how to measure direct mail success. Tracking from QR codes that go directly to a unique URL to personalized landing pages and distinct coupon codes, and even tracking phone numbers, the more data you have about who is responding to your campaign, the better you’ll be able to measure engagement and purchases. That data is valuable for future campaign planning as well.     

Maximize direct mail ROI with the right partner

Is direct mail still effective? Not only is it still effective, but it can also often be more effective than the “newer” digital and email marketing methods and these tactics are even more powerful when all used together. However, in order to maximize your direct mail ROI and ensure your budget is used efficiently and effectively, work with the right partner.

Deluxe provides the direct mail strategy behind powerful campaigns that drive results and we are fully invested in direct mail effectiveness. Discover our full range of campaign solutions and how we can make direct mail work for your business.