The Importance of Response Rate

Understanding the importance of your advertising response rate is nothing new to marketers, but it can be overlooked.

Let’s say this reflects your typical customer purchase behavior:

Your core product costs $40
Around 75% of customers buy your product again
Around 50% of those customers purchase a third time

And this is your direct mail campaign:

Mailing list of 5,000 prospects
Campaign cost is $2,000

Now, let’s apply the purchase behavior to your campaign. If your response rate is just 1%, here’s how it breaks down:

Your initial return is $2,000
Another 75% purchase again, so add $1,500
Of that group, 50% purchase again for another $750

From this one campaign, your lifetime value for new customers is $4,250. Yes, your first-time buyer ROI is 0%. However, your lifetime ROI is 112.5%. If your response rate is 2%, your lifetime value for those new customers jumps to $8,500. This yields you a 100% first-time buyer ROI and a lifetime ROI of 325%.

This type of example shows that you can focus less on the cost of an advertisement or even the follow-up, and turn your attention to what it’s going to take to drive the recipient respond. The other stuff is important, but you don’t have to worry about follow-up if you don’t have leads to begin with. And the cost of the ad only depends on the amount of customers generated.

Just 1% can make all the difference for your business. With this said, we need to take a look at making the response easy — and recordable.

Being recordable always takes precedence. If you’re not able to identify your response rate, it can be a fundamental and costly mistake. Many small businesses have websites that are easily built and essentially just informational hubs. If your site doesn’t have the capability to compile leads and there’s no way to track visits, it shouldn’t be where you drive people with your ads.

The better way to go would be a phone number or promotional code. You can easily count how many offers were redeemed or ask callers where they heard about your business and write it down. Whatever you decide to use, make sure it is recordable and nothing less.

Here are some quick ideas on how to better your response rates:

Test, Then Send: Test your advertisement with a small number of prospects and record the feedback. Once determine the better creative, send that to the larger body.

Take it Easy, Kid: Make the offer so easy to take advantage of that a 5 year old could do it. Not to be mean, but you would be surprised at how easily people get confused on the fulfillment of certain promotions. Buy now, save a certain percent on your next purchase? Don’t do it.

Few Options are Best: Don’t give your prospects too many options on where to go or what to do. One thing to do and one way to do it is the best way, and makes it easy on you on the end.

Remember, by focusing on driving a response to your advertisement and less about the initial cost to get the ball rolling, you’re setting yourself up for better results.

By Modern Postcard

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