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What is the normal response rate for my segment of the industry?

DirectTalk with Winnifred

This is the first and most frequently asked question in the direct response marketing industry. Everyone - whether they are involved or not involved - is interested. Most of those who ask the question believe that response rates are directly linked to the success of a campaign. That of course is not true - the conversion of responses to sales, which ultimately leads to profit, or at the least to break-even, is what is important.

And do we have any benchmarks on response rates is this country? Not many I'm afraid, and most of those in the know will not share their information. However, one of theMarketingSite.com's projects for 2003 is to do a full direct marketing research survey, including in its scope users of direct marketing as well as agencies and suppliers to the industry. And benchmarking will form part of this study. If you'd like to participate in the survey contact me at:  winn@themarketingsite.com for further information.

What you need to know about benchmarking response rates
We contacted the USA DMA and sourced this valuable information from Peter Johnson, Economist from The DMA's Strategic Information Unit.

Ed Koch, a former mayor of New York City, was famous for asking New Yorkers, 'How am I doing?' It's a question all of us can relate to, but can't always answer.

This is the charm of direct marketing: With all of the information we collect, we hope to have a clear idea of how we are doing, especially by comparing our response rates to the industry 'benchmark.'

So, here's the question our members ask The DMA more frequently than any other: What is the normal response rate for my segment of the industry? In other words, what is the benchmark that I should compare the performance of my next campaign to?

This is a much more complicated question than it seems at first.

First, response rates vary significantly by:

  • Channel or Medium (e.g., Direct Mail vs. DRTV or Magazine Insert vs.E-mail)
  • Product or Service (CDs vs. "Time share dream vacations," etc.)
  • Terms of the Offer (1-time sale vs. 1-year subscriptions, etc.)
  • Price Points (Single price vs. Packaged price, etc.)
  • Type of List (In-house list vs. Prospecting lists)
  • Your quantifiable objectives (Sales leads vs. Actual sales)
  • Your communication 'package' (Creativity - Concept, design of elements and action device)
  • Your corporate brand and positioning in the industry
  • Internal and External Factors (Timing of campaign, e.g. 9/11 - condition of the economy, etc.)
  • Internal and External Staff Involvement (Training on campaign, etc.)

Peter Johnson gives us examples to illustrate why benchmarking is so difficult
For some kinds of financial products or services using direct mail, a good response rate was traditionally thought to be 1% (and for certain financial products such as insurance using print media, a good response rate was thought to be 0.1%).

But even this "benchmark" is elusive. According to BAIGlobal Inc., consumer response rates for credit-card mailings have been trending downward, thanks to an 8-year surge in total mailings. Now, response rates have reached a record annual low of 0.6%. So, anyone aiming at the old benchmark of 1%, or even expecting this new benchmark to replace the old one, could be in for a big surprise. In the world of non-profits, response rates from prospects can be up to 2.5%. But with non-profits, the return in donated dollar amounts can be quite variable. Large numbers of small donations in one campaign can be outweighed by a campaign with fewer contributions of far larger amounts.

Then, a response rate for many catalogues in either B-to-C (such as apparel) or B-to-B (office products, for example) might range from 4-5% for an In-house list to 2% for a prospect list. Again, however, these 'benchmark' rates must be qualified by the type of product on offer.

The DMA has heard of a successful B2B cataloguer that was pleased when its response rate for a 750,000 piece mailing recently increased (during the 2001 recession!) to 0.09%, up from the 0.07% from the previous mailing.

Yet, at about the same time, another direct mailer with a very different B-to-B product increased its response rate on a 250,000-piece mailing to 10%, doubling their goal of 5%.

The moral of the story
If either one of these companies had used the other as a benchmark, they might well have made inappropriate business decisions.

Finally, The DMA knows of instances - not all of them Echo Award winners - in which the response rate has reached over 50% for certain direct mail campaigns aiming high-quality products at selected long-established customers.

And from our very own SA experience - with our Assegai Awards - we have seen unbelievable results (responses converted to sales) across a vast range of products, services and industries that are as impressive as the Americans - sometimes more so.

The future and where do you fit into this picture?
While neither The DMA USA or we can give you a precise answer about the appropriate benchmark response rates for your next campaign or in your specific industry, there are, as we have just seen, general trends that can be uncovered.

Firstly, The DMA's USA Research and Library Department, is undertaking a long-term study of response rates that began in early 2002. This study will focus on reporting annual trends by industry, product and media for their members.

Secondly, theMarketingSite.com, in collaboration with a well-known industry leader is seeking companies to participate in our very own 'Direct Marketing Monitor' Survey, that will provide participating companies with the most current information on industry performance, including trends in response rates for various media and industry segments. Companies interested in participating should contact me via e-mail at: winn@themarketingsite.com for further information.

Measured Marketing - what we have to remember about responses and conversions
People and countries may vary - but principles don't! At the outset, know that there are no real rights or wrongs.

Measure your results against your objectives and ensure that you follow the basic principles of direct marketing in the planning, execution and design of your communication packages.

Marketing is not thoroughly measured until you have evaluated it is 3 ways:

  1. Return on Investment (all costs)
  2. Benchmarking (it's efficiency against control and against the industry)
  3. Estimated value and use of information collected (database - enhancing and enriching)

And as one of our clients put it to us: "Your response reporting system is like the difference between a sales journal with only one column of analysis compared with one which has thirty two columns. The information provided is worth ten times the price."

Winnifred Knight
Director and Owner - TheMarketingSite.com
Mobile: 082 575 9922
Email: winn@themarketingsite.com
Web: www.theMarketingSite.com

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