What Kind of Response Rate Can We Expect?
Wednesday, October 31, 2007 at 09:12AM If you have been in the direct marketing business for long, then it is certain that your manager, client or colleague has asked you this question. Most direct marketers consider this an unanswerable question without knowing the results from previous tests for a specific offer to a specific mailing list.
If truth be known, DM pros think this unanswerable question about response rates comes only from inexperienced direct marketers. But is this true?
You would think that after looking at the results from hundreds of multi-channel campaigns in dozens of industries. a direct marketing veteran should be able to answer this question by stipulating certain caveats.
And let’s be real here. How can you judge whether a test of a certain offer to a certain audience should be implemented without first determining that you have a good chance of achieving the required response rate?
So let me share some response rate guidelines to get the conversation going.
Here’s what I use as benchmarks to evaluate the feasibility of testing a product, price or offer in acquisition efforts.
For other channels such as broadcast, the feasibility is determined mostly by the allowable Cost Per Lead (CPL). Most broadcast CPLs range between $25 to $35 per lead. As the allowable CPL decreases, DRTV circulation drops dramatically eliminating the channel as a marketing opportunity. The resulting sales volume is no longer worth the effort.
Please provide some of your thoughts and experiences with response rates. What other industry benchmarks do you use? How far off am I based on your experience?
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Reader Comments (5)
Hi Ted, good post and great food for thought.
I'm with you--our clients ARE asked to project response rates, for each and every campaign (at least the ones I've been involved with). So, obviously, it's not just inexperienced direct marketers who ask this question. The beauty of DM is that it IS measurable. You have goals and the campaign either meets them or it doesn't. The campaign either makes you money or it loses you money.
And, if it's a new product/service never before tested by DM, the first goal that we start with in a dm campaign is typically response rate. From there we move to conversion rate, transaction value (how much will they spend) and eventually to lifetime value. But response rate is usually the starting point.
To contribute some examples of RRs--for a financial services lead generation campaign (i.e.: credit card solicitation or (in the old days) a mortgage REFI campaign), a decent response rate would be something under .5%.
Hi Suzanne,
Thanks for the input on the financial industry.
I'm surprised that the crowded credit card promotions field is still managing to pull at the .5% level. But I guess they would need at least that response level to justify remailing as much as they do.
Do you have any response rates for permission email in this industry?
Ted
Sorry, no input on permission e-mail rrs...
Suzanne
The danger with projecting or giving people "typical" response rates is that rates can vary dramatically from situation to situation. The so called typical rates are averages. And it's risky to apply averages to specific efforts or to set up certain expectations.
Now if you specialize in one market and have lots of data, and if you get a client who is similar to your others and will market to the same audience with much the same product and offer, then sure. You can take an educated guess on the response rate. And certainly you should calculate what sort of response you need to break even or make a profit.
But the response will be affected by the product or service, the list or audience, the price, the offer, and other factors.
When I have new clients who want to try a particular medium for the first time, I emphasize that you need to establish your own benchmark then test against it.
Also, when clients give me response data, I'll look at it, but I don't put much faith in it. Often tests aren't run correctly or what is tested (the creative and offer) are crap. Garbage in, garbage out is the rule for stats.
Excellent points Dean. And I agree with them. And the old response is often unreliable in my experience as well. But many of my clients are quite knowledgeable and the data is reliable in such situations.
The rates listed in my post are for acquisition only and not inquiry or customer names. So that fact, plus the industry selection narrows the projections considerably.
Even if a client must set their own benchmarks (and I concur with you on this), a projection is still unavoidable.
Let's say that break even requires a 5% response rate. For most acquisition mailings, testing such a program is a waste of money because such a high response rate is unheard of in almost any large scale mailing. Better to put your money elsewhere.
Thank you for your perceptive post. Ted