Use Return on Investment (ROI) to Get a Better Measure of Your List Results

The response rate to a direct marketing campaign—or the “upfront” response—is the initial indicator of results.  This is the number of responses divided by the quantity mailed. Our clients frequently ask us what – exactly – is a good response rate?

It’s tempting to jump to conclusions about the success of a campaign or test based on the response rate, but it is only the beginning when evaluating your mailing list results.

Some offers get a great percent response.  Offer something for free and you’re pretty much guaranteed to get great upfront results, but you may actually sell much less of your product or service. Your responders may just take the free gift and then disappear. If you offer a deep discount, you may still get a great response and be more likely to sell more of your product or service, but you need to consider the impact it might have on future sales. Will your customers begin to expect a low-price offer?

If your goal is to generate leads for a sales team, then a high upfront response may be just what you’re looking for if you’re confident your sales team can convert these leads to sales.

When evaluating your mailing list results, you need to consider your goals and the ROI of your complete sales cycle.

Looking beyond your percent response to profitability

Calculating your ROI is the ultimate measure of performance.  An ROI analysis looks at the “backend” results of your campaign and tells you how much money, or profit, you are actually making.  Businesses use ROI to measure overall company success, and you can use it in marketing to measure the results of a list, an offer, new creative and even the best time to mail.  ROI takes into account your percent response, your total revenue, and your costs—it is a mini profit and loss of campaign performance.

Using ROI analysis you can test lists, promotions, offers and creative to see which ones generate the highest sales or the highest profit margin.   You may need to make a choice.  One offer may have higher sales and a lower margin; another may have lower sales but a higher margin.

Making good decisions based on your test results is the roadmap to achieving your objectives.  In some cases the results will be clear, and you will know which offer is better. In other cases, you’ll need to decide which result will best meet your goals.

Do you want to minimize your financial risk?

Of course you do, especially when economic times are tough.  ROI can help you minimize financial risk and that is critical to making good business decisions.  Before finalizing your marketing plans, be sure to do a quick ROI projection of your expected or hoped-for results. The answer may surprise you and save you a costly mistake.

When evaluating new marketing campaign ideas, an ROI projection can help you determine the odds of success for a new offer or promotion idea. If you’re considering an expensive new direct mail package, the lift in response needed to “win” may be completely unrealistic. The low chance of success may not be worth the expense and time given the high risk.

Before raising your prices, use an ROI analysis to evaluate the potential impact on your bottom line based on best case/worse case scenarios for the impact on your response rate and back end results. Good pricing decisions are critical to your success.

Do you have the time for this?

Yes, you can do it over lunch. An ROI analysis can be as simple as a calculation on a napkin or a complex computer model.  Sophisticated marketers may factor in overhead costs, the cost of money and the lifetime value of a customer, but any direct marketer can use a basic ROI calculation to make better decisions. A simple analysis can be better than a sophisticated model if it means you take the time to do it.

Picking the winner

Below is comparison of three offers: a control, a free gift offer and a discount offer. Which offer would you say is the winner in this example?

If you were looking only at the percent response or total sales, you would probably pick the free gift offer.  However, the discount offer seems to provide the best combination of an increase in sales and margin as long as you are not worried about the long-term impact on your selling price.

You will need to decide the winner based on your overall business and marketing objectives. Everyone wants to increase sales and profits, but usually there is a trade-off. Higher sales may come at the price of a lower ROI, but that will help you grow your business. On the other hand, you may need to increase your profit percent so you will be more interested in increasing your profit margin. ROI can’t set your goals, but it can help you get there.

The Acxiom Team Helps You Grow Your Business

At Acxiom, we help companies increase their market share and create enduring customer loyalty.  Whether your order is $20 or $25,000 we will help you create the best marketing plan to generate new leads and grow your business.

Our knowledge of the direct marketing industry and the unparalleled quality of Acxiom data is the combination that leads to your success.  Our dedicated account team will work with you to make your job easier.   We know you’re busy enough doing your job.  Rely on us to do ours, and see the results.

Call us for a free consultation 866-977-6018
8:00 – 6:00 ET Monday through Friday

Email us any time with your questions:
IBLExpress@acxiom.com

To order Acxiom mailing lists online, go to:
www.mymailingleads.com

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