It is difficult to estimate direct mail response rates without any background on your specific mailing campaign, however, there are some time-tested facts that can help you get a ballpark idea of what to expect.
Always be weary of a direct mail service provider that guarantees a particular response rate. It’s just not possible to be 100% sure that you will get a 3% response rate. There are dozens of variables that will either negatively or positively affect your response rates Instead of wishful thinking, does your own research, create a great offer, and leverage all of the information and resources you have available before mailing.
For example, a postcard selling luxury automobiles will have a much lower response rate than a postcard offering pizza specials because of the cost of the two items. Obviously, selling one luxury automobile will pay for the direct mail campaign whereas it takes numerous pizza sales to justify a direct mail campaign. Without knowing your product quality, pricing, local competition, and target audience – it is nearly impossible to predict what your response rate will be. That being said, there are some statistics that can be used to forecast sales for any industry.
For many industries a 1-3% response rate when mailing to prospects is normal and a 2%-5% response rate when mailing to current customers is normal (although some industries such as takeout restaurants generate far higher response rates).
Recently the DMA analyzed more than 1,000 industry-specific campaigns and determined that the average response rate for direct mail was approximately 2.5%.
However, if you assume 1%, 2% or 2.5% response rates, you may be disappointed when the results come in. Some response rates have been as low as 0.2% depending on the industry, offer, and pricing (all variables).
For some industries, that’s acceptable – it may just take one sale to justify your investment in the direct mail campaign.
If you are selling luxury automobiles and 1,000 postcards nets you two sales (a 0.2% response rate), you won’t be complaining, you’d more likely be thrilled. However, if you are selling a $9.99 large pizza and get a similar response – you may be very upset.
Always forecast sales with a grain of salt and review the mail you receive at home to “get an idea” of what industries are finding success with direct mail in your area. A good approach is to figure out your break even response rate – how many sales must I convert in order to justify the cost of the mailing?
If the break even response rate percentage is high, you may need to reconsider the campaign. Ask yourself a question: Are there more cost-effective ways to develop new customers for your business?
One smart way to go is to start with small campaigns to test the response rates. This prevents you from overinvesting in a poor-performing campaign. If response rates are acceptable, increase the number you send out and the revenue will rush in. If response rates are too low, you may need to revisit your offer and make it more attractive.
There is one undeniable trend currently taking place with direct mail – it is much more effective to mail to a targeted list repeatedly instead of mailing to a large list only once. Don’t forget this tip because response rates usually skyrocket in subsequent mailings to the same audience.
Lastly, always keep your ROI expectations at a reasonable level. Be conservative and hope to exceed your expectations rather than “predict a home run” and be disappointed.