Wednesday, January 18, 2012

A “Good” Response Rate in Membership Marketing

Posted by Princess Eva Angelica at 2:07 PM
Many times I am asked what a good response rate in direct mail is. So I found it interesting when a client shared some data from the DMA Response Rate Trend Report. The report found that “Response rates for Direct Mail have held steady over the past four years. Letter-sized envelopes, for instance, had a response rate this year of 3.42 percent for a house list and 1.38 percent for a prospect list.”

Benchmarking data from other organizations is a good starting point for any analysis. However, real data collected from actual market tests is always the best. That’s because response rates are a comparative measuring tool, not an actual definition of value.

For example, is 72 degrees Fahrenheit a good temperature? It is great if you want to go for a walk, but bad if you are cooking a steak.

Before you determine if a response rate is good or bad, you need to understand the costs and the revenue associated with your membership (what cooking temperature is required). Then you can employ the response rate to define which list, offer, or package meets you minimum response requirements.

In the example below, the response rate varied on 16 different lists from 3.46% to 0.33%. If the revenue associated with the response is very high, then even the lowest responding list might be economically productive. But if the allowable marketing cost is $30, then responses below a 1.79% response rate on list “D” would be unacceptable.

What’s the bottom line on response rates? Do the economic analysis first to understand the costs and revenue associated with your marketing effort. This will tell you what the minimum response rate you need to achieve your outcomes. Then use your response rate as a decision tool to define what is good and what is bad from your marketing efforts.

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