Calculate direct mail campaign ROI ahead of time to maximize your returns. The direct mail ROI calculator can help you keep track of your campaign’s progress.
Using the Direct Mail ROI Calculator
Over the last few decades, direct mail marketing has been one of the most impactful offline marketing techniques.
Most marketers still involve it in their multiple marketing channels. This way, they get to increase their customer loyalty, brand awareness, and eventually their returns. It’s one of the most personalized ways to communicate with your customers and, yet, show off your products and introduce your services.
However, the returns mainly depend on the quality of your mailing list. The more targeted your audience is, the better response you’d get.
Targeting your prospects based on their demographic details and market research has been proved the most successful pattern of creating a quality mailing list. It increases the value of your offer – once reached to the right recipient – and your chances of sales.
For more success, marketers are usually advised to keep track of their direct mail campaigns. Track their speed and analyze their results. This way, you get to improve your future campaigns and get even better returns. Your ROI is mainly the ratio of your direct mail campaign and gross profit ratio. You can either do it manually or choose to use a direct mail ROI calculator to check your investment returns.
How to Calculate Direct Mail ROI?
Based on the tracking result of your sales and response rate, you can calculate your direct mail ROI and find out the estimated outcomes. However, manually doing it may take time. For a quick calculation, you should use an ROI calculator.
It computes and analyzes your direct mail campaigns and provides you results in financial terms. To get started, you’d need to enter the various direct mail advertising variables and calculate your returns with a few clicks.
The calculated results help you determine the performance of your direct mail campaigns. Plus, based on the results, you can also improve them with time. You can also use it in advance and get an idea of the expected returns.
For the best results, try changing the variables, it’ll help you determine what input will work the best and provide improvised returns.
If you’ve never tried calculating your ROI before, it may seem a puzzling process to you. However, when you get started with the procedure, it gets easier.
The ROI calculator simply calculates your campaigns’ net profit in terms of percentage by breaking down the numbers and subtracting the cost. And within minutes, you’d know how exactly the direct mail solutions and objectives are working.
If you want to determine your direct mail cost, then check it with a direct mail cost calculator.
How to Use the Direct Mail ROI Calculator?
You don’t necessarily need to launch a direct mail campaign instantly to use this calculator. You can use it to determine the estimated returns you’ll get with the different variables you put in the required fields. All you have to do is fill up the boxes with the estimated amount you’re willing to invest in your direct campaigns.
The calculator will automatically analyze the various possible returns based on your input.
The Inputs Required for a Direct Mail ROI Calculator
- Size of the Campaign
- The Budget of the Campaign
- Response Rate
- Conversion Ratio
- Revenue Generated per Piece
- Profit Margin per Piece
Size of the Campaign
The size of your campaign depends on two things – your marketing budget and your mailing list. The longer your mailing list is, the bigger pocket you’d need.
However, there’s one more factor that you should rely on often, and that’s the quality of your mailing list.
The possibility of a much better response rate and returns is when you launch a highly targeted direct mail campaign. You can try sending your mailpieces to a huge but non-targeted mailing list, and it’ll just add to your budget. Plus, your response rate will not be that great. The main reason behind this is that people may or may not be interested in your offer — you’ll never know.
The Budget of the Campaign
Your direct mail campaigns’ budget depends on various factors. If you’re launching a direct mail campaign with the help of your in-house team, you’d need to add the cost of printing supplies, teams of experts and printing staff, and shipping charges.
The experts will decide the designs and copy, and the printing staff will be responsible for printing, folding, labeling, and other odd jobs involved. Plus, it’ll be a hectic job. However, if you’re sending your mailpieces to print labs for printing, just replace the print stock cost with printing lab charges.
Besides these basic requirements, you’d need to add the type of direct mail marketing collateral you’d use in your campaign. It’ll reflect on the cost of your printing supplies. Also, the type of delivery option you’re choosing, speed delivery or standard – the rate will differ.
Once you’ve decided everything, you can enter the details in your ROI calculator, and it’ll help you determine your overall cost and estimated returns. Based on the results, you can choose to change the variable and decide what will work better.
There’s no right or wrong answer for the response rate. Your response rate may vary with several factors, for example, the type of your direct mail campaign, your offer, the design, the copy, and so on.
You can track your engagement and response rate by adding personalized URLs, contact numbers, coupon redeems, etc. The response rate is mainly dependent on the number of people taking action on your CTA.
Additionally, the ratio of the total number of mailpieces sent and the number of responses you received can tell you how much response rate you received on your launched campaign.
Your conversion ratio will be different from your response rate. It is, basically, the sales ratio. For your responses to convert into sales, you might want to have strong customer support, follow up with your prospects consistently, and involve trigger-based direct mail in your direct marketing campaigns, if possible.
This input can increase the accuracy of your ROI calculation considerably while using an ROI calculator. For a better conversion ratio, ensure that your mailing list is as much targeted as possible and your offer is compelling and matches your audience’s needs.
Revenue Generated per Piece
The amount you invested in the marketing of a single piece deducted from its cost to the customer is your per piece revenue.
Profit Margin per Piece
The net profit that the company earns after deducting the manufacturing cost per piece is called profit margin per piece. It may vary from company to company, even for the same kind of product, as it’s mostly based on the quality and features you’re providing to the customer.
Once you have all the values mentioned above, you can enter them in the calculator’s empty fields and get an estimate of your final ROI. The calculator will convert all the percentages into real numbers and give you an absolute profit rate.
Analyzing the results generated by
the direct mail ROI calculator
Campaign budget: The company decides the budget. You can adjust it by changing the variables while determining the estimated ROI. Finally, you keep the numbers that suggest the best returns on your investment.
The number of responses: To calculate the number of responses, you may need to add the tracking details on your direct mail pieces—for example, pURL, contact numbers, QR codes, or coupons. Later on, you can count how many people responded by measuring the given methods’ actions or counting the responses.
The number of conversions: Out of the total number of responders, only a few people will finally purchase your products or invest in your services. You can count them, and it’ll be the number of conversions.
Revenue generated per piece: The amount every customer spends on a single product will be your revenue generated per article. For example, if a customer pays a total amount of $1500 on three products of the exact cost, your per piece generated revenue will be $500.
Profit generated per piece: After deducting the amount of manufacturing per article, the number you get will be your profit generated per piece. For example, if your product’s manufacturing cost was $100, then assuming your MRP $500, $400 will be your per piece profit.
The total revenue earned from the campaign: Multiplying the total number of conversions with the per piece profit will be your overall earned revenue. For example, if your conversion rate was ten and the profit you made per piece was $400, your total income will be $4,000.
ROI: To calculate your ROI, you’d need to deduct the amount you invested in launching your direct mail campaign. For example, if you spent $1000 on your direct campaign, then assuming $4000 as your net profit, your ROI will be 400%. It’s considered a positive ROI.
Positive, Negative, and Break-Even ROI
When your ROI is more than 1 or 100%, then it’s considered a positive ROI. When it’s less than 1 or 100%, then you’ve generated a negative ROI. Naturally, the former one is good for your business, and the latter one is not.
However, there also exists another type of ROI, known as breaks even ROI. It happens when your ROI is equal to 1 or 100%, which means you neither got a profit nor loss.
The break-even ROI can bring good results in the long run. For example, if your direct campaign didn’t result in many conversions, but the response rate was good, you know what type of direct mail campaign to launch. Additionally, you now know what changes you should make in your offers, and you take this as an opportunity to strengthen your relations with your customers.
Tips to Maximize Response
Rates and ROI
Here are a few tips that you can use to enhance your returns
based on the 40/40/20 direct marketing rule.
40% of your direct mail campaign is dependent on the quality of your mailing list. The more targeted your audience is, the better and positive ROI you can expect. Your mailing list should contain the accurate, verified, and updated addresses of your prospects and customer, their names, and each of their demographic details.
The next 40% of your direct mail campaign’s performance is based on the value your offer is delivering. The customers should be able to relate to the offer you’re making, and it should be based on what they must have right now.
If you decide to market your valuable products, then it may encourage them to know more about them. For example, if your product is something they need in their daily lives, they’ll be curious to learn more about it. For this purpose, they’ll visit your website or your store. Hence, increase your response rate.
If you follow up just fine, then it may also get you a reasonable conversion rate.
Your design reflects the last 20% reason for your direct marketing success, including the layout, your copy, the collateral you choose, and the overall look.
To get your prospects to respond, you’d first need to catch their attention and engage them with your advertisement somehow. Once you have their attention, your copy should be able to engage and take them to the final call-to-action. To motivate your prospects to take instant action, you may try scarcity and other techniques.
However, everything will go in vain if your CTA is too complicated to follow. Hence, on PostGrid, we always advise our clients to keep their CTA crystal clear and easy-to-follow. This way, your chances of a higher response rate increases considerably.
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