what is the average response rate?
You often hear that 2% is the average response rate. this is true for certain applications and situations, but not for all.
It is important to understand the applications and situations before trying to predict your response rate.
2% response rate is a good approximation if:
1. you are sending mail to an external mailing list (i.e. any list other than your own)
People on external mailing lists have no relationship with you. you’re a stranger to them, so you have an uphill battle when it comes to generating a response.
2. you are using a free offer that requires little commitment from your audience.
Free offers are essential to all lead generation campaigns. the concept is simple. you create a free report or white paper on a topic closely related to what you sell. then offer the report to your target audience, and those people who are interested in the topic will respond. these leads are considered leads.
Because these offers are free, you can expect more people to respond.
Of course, even if these two factors are present, remember that 2% is just average. you could see a response rate of 1% or less, which is very likely. or you could see a 3-5% response, which is highly unlikely.
when 2% doesn’t work
When trying to project response rates for a business plan, 2% could be considered an average response rate (although 1% is safer and more realistic).
However, there are applications and situations where the 2% (or 1%) should not be part of your projections. here are two scenarios:
1. If instead of mailing to an external list, you mail to your home list of previous responders, you can expect a higher response rate, possibly several times higher than 2%. the logic should be obvious. the people on your home list already know you and have already shown (from your previous response) some interest in your topic.
In direct marketing, they say “the profit is in the list”, and this is what they mean. This is how the catalog and other mail order companies make money: through repeat mailings to your home list.
2. If instead of using a free offer, you use a price offer, you can expect to see a lower response rate, often fractions of 1 percent. This is the difference between order generation and lead generation. in order generation, expect an actual order in the form of a payment or payment agreement.
Even if the price is low (or discounted or spread out over time), price is a barrier to high response rates. it is not uncommon to see response rates as low as 1/10 of 1% (0.001).
don’t overlook the quality of the response
response rate tells you how many people responded to your email, but doesn’t tell you anything about the quality of the response.
For example, in lead generation, you can generate leads with a free offer, but how many of those leads will convert to customers?
That should be another part of the equation. you should think about both the quantity and the quality of the response.
Consider, for example, these two emails: one produces a 2% response rate, but only 5% of responses can convert to customers. the other produces a 1% response rate, but 30% convert to customers. the numbers should speak for themselves.
campaign 1: 10,000 email response rate: 2% (200 leads) conversion rate: 5% (10 leads) net order rate: 0.1% (0.001)
campaign 2: 10,000 email response rate: 1% (100 leads) conversion rate: 30% (30 leads) net order rate: 0.3% (0.003)
Although Campaign 2 produced half the initial response rate, the quality of the lead was significantly higher, resulting in a much higher conversion rate.
and don’t forget shipping costs
Shipping costs are an important consideration when measuring the results of your direct mail.
Consider, for example, a mailing package that includes multiple components, all printed in four colors, fully personalized, and shipped by first-class mail. this package could cost you $1.50 per piece. then consider a mailing of postcards that when added up would cost you 50 cents a piece.
a pack costs $1.50. the other mail is a third of the cost at 50 cents. based on a shipment of 10,000 pieces each, the largest shipment would cost $15,000; postage would cost $5,000.
now what if they produced the same 1% response rate?
campaign 1: 10,000 cost per piece: $1.50 total cost: $15,000 response rate: 1% (100 responses) cost per response: $150
campaign 2: 10,000 cost per piece: $0.50 total cost: $5,000 response rate: 1% (100 responses) cost per response: $50
This analysis only focuses on the cost per response. For a more meaningful analysis, you’ll want to drill down even further to also explore cost per qualified lead and cost per order.
comparing direct mail with advertising
Comparing one direct mail campaign to another direct mail campaign is a fairly simple and straightforward process.
But what if you’re running an ad campaign at the same time? how do you compare the results of your direct mail with those of your advertising?
compares them on a “cost per response” basis. that’s the common denominator between direct mail and advertising (and all marketing).
Consider this hypothetical example:
advertising campaigncost: $20,000responses: 400cost per response: $50
direct mail campaign cost: $10,000responses: 300cost per response: $33
more information
Download our free report: Making Postal Work: 13 Direct Mail Strategy Lessons