If you’ve ever had a passing acquaintance with direct mail, you’ve probably heard that a 1% response rate is pretty good. In many cases that’s correct.
1% response rate is great if you’re selling a high-ticket item like a mortgage or expensive machinery. Then getting one person out of a hundred to call you is great—that’s all you really need or in some cases, all you can handle. Some industries traditionally expect and have higher response rates depending on a variety of factors.
Your first step to determining what your response rate is figuring out the cost of sending the mailing is. This includes everything—design, printing, handling, postage, everything. Depending on how many you’re sending, this might be a hefty number. This is your breakeven point. You must sell at least this many goods or you’ve wasted time (and money!) on the whole project.
Next, you need to determine your closing rate. Chances are that not everyone who contacts you will immediately buy. Some will need more information. Depending on your product, your industry and your selling skills, this might range from 70% all the way down to the single digits. Look at past interactions to determine what a reasonable average closing rate is.
Finally, determine how many sales you want to make and how much profit (not cost, profit) each new customer brings in. Be realistic—sure, you want to double your customer base, but is that really realistic? Could you handle it even if it was?
How do we put all these numbers together? First, determine how many prospects you need to make the sales you want. Do this by taking your number of desired customers divided by your closing rate. For instance, if you want 100 new customers and typically close 50% of sales. You’ll need 200 customers to make the sales you want. Simple, right? Next, multiply your desired number of customers by your average profit to make sure you can break even.
Still with me? Let’s break that down with a real example. Let’s say, hypothetically, it costs $10,000 to send one direct mailing. You typically close about 50% of sales. Each new customer brings in $500. You’ll need to make 20 sales to just break even, which means you need at least 40 prospects. So a reasonable goal might be 60 prospects so there’s money left over.
Still need help figuring out how to make smart direct mail goals? Contact Premier Advantage Marketing, a direct marketing agency. We can help you make sense of it all—and most importantly, make money.