|Direct Mail Response Rates Strong, But Digital Has Better ROI|
|Tuesday, July 03 2012|
Marketers are continuing to make a big push into digital channels with the promise of real-time measurement and optimization, more targeted messaging, and a closer path from click to conversion. Oftentimes, the push into digital is at the expense of traditional channels, including print advertising and direct mail. While a reduction of spending in these tangible channels is to be expected, a recent study shows that an all-out retreat from them may be shortsighted. Last month, the Direct Marketing Association released its latest report on response rates for different marketing methods. One of the key findings: direct mail outperforms all other marketing methods when it comes to response rates, but response rates don't tell the whole story.
According to the DMA's findings, which were based on a survey of over 450 marketers and transaction data from major email marketer Epsilon and digital advertiser Bizo, direct mail has a 3.4% response rate on average compared to 0.12% for email marketing and an even lower response rate for online display advertising and other forms of digital marketing. Note that even while direct mail response rates have dropped over the past decade, they still command a healthy response rate. The DMA states that it expects direct mail to be a stable channel in terms of effectiveness for the foreseeable future, and attributes its lead in response rates with better targeting and a reduction in mail clutter precisely due to the push toward digital.
It is important to remember that averaged response rates across different channels don't tell the full story, and we don't expect these findings to cause a renewed rush to direct mail anytime soon. While direct mail response rates are strong, the DMA's study also finds that the return on investment for email is much greater than that of direct mail. Specifically, every $1 spent on email marketing generates $28.50 in sales compared to $7 in sales generated from every $1 spent on direct mail. Digital (especially email) simply costs less to produce than a direct mail campaign, so even though response rates may be higher with direct mail, digital produces a better ROI.
These findings highlight how the roles of different channels continue to evolve. Email is being used much more frequently for customer communication and customer retention activities; once you acquire a customer, it is extremely cost-effective to leverage email to drive offers to that base. Conversely, while direct mail has traditionally been used for both acquisition and retention, its role is now shifting primarily to the top of the sales funnel: drive awareness and contribute to acquiring new customers.
Averaged response rate data only provides a high-level view of channel effectiveness in marketing. Ultimately, marketers need to utilize all of these different channels in an integrated fashion to meet their particular objectives, playing on the strengths of each one to maximize results. Direct mail is still important and has stable response rates, but digital is undeniably valuable for the ROI it can deliver to companies that use it effectively.