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Direct Mail Suffers From Lack of Measurement, Not Lack of Effectiveness

Jul 17, 2018

By Matt Fusco, Co-Founder and COO, Barometric

“In the digital age, direct mail is still a very powerful tool. But just as important as reaching the customer is accurately measuring direct mail’s effectiveness. In today’s business climate, finding the right metrics holds the key to a powerful, efficient and successful campaign” says Matt Fusco, Co-Founder and COO, Barometric.

In the ever-growing and powerful digital consumer age, direct mail still matters. As a matter of fact, it matters a lot.

While increasing 11.6 percent in 2017, the U.S. Commerce Department reports that e-commerce still accounts for only 13 percent of total retail sales in the U.S. That leaves 87 percent of the retail marketplace to be served by direct mail. In other words, the “where” and “why” remain critical to businesses who rely on these campaigns to reach their target audience and achieve a positive return on investment.

Turns out, direct mail is still used not only to reach the 87% of the “in-person” consumers but the online market as well. Tracking those purchases is something that is of critical importance to those businesses using marketing campaigns.

History has shown that when incorporating direct mail measurement, search marketing was getting too much credit for an action that was driven initially by a direct mail piece. If a consumer gets a direct mail piece and then walks into a store or visits a website as a result, direct mail didn’t get much – or sometimes any – of the credit for the engagement. Marketers were missing out on seeing the true power of their campaigns.

Where do the targeted customers live and work, and why are they inclined to engage with a direct mail appeal? Once you know where to reach likely consumers, then you can do a better job of serving them. To know your customer is to know where and how they buy. And the only way to know this is to measure their tendencies and needs. Some marketing analytics fail to account for, or credit, direct mail that led to online purchases. In other words, without the right metrics for tracking both the marketing and the purchases, a direct mail campaign will never fully realize its potential.

Today’s most successful direct mail campaigns understand that properly targeting the consumer means using the right metrics to know how they shop. It’s not an option but a must. There are three consensus methods for measuring direct mail to achieve this goal.

The first is the Cost Per Acquisition, determined by taking the total cost of the mailing and dividing it by the number of responses. This is an important tool to find out if the cost to obtain a new customer is in line with the profits that you will receive.

Next is the Cost Per Piece. In this method, take the total cost of the mailing and divide it by the total number of pieces sent. If a company spends $4,500 on mailings and they send 2000 direct mail pieces, the CPP would be $2.25. This number is crucial to keep in mind since by lowering the CPP, the cost per acquisition can be lowered.

The third of the most common direct mail measurements is the Response Rate. This is calculated by taking the number of people that responded and dividing it by the number of people that were sent the direct mail package. This is critical for projecting the success of future direct mail campaigns as well as setting realistic goals for consumer reach.

Income from direct advertising mail represents a significant and growing portion of some postal services’ budgets, and it is a service actively marketed by them. While ad mail dollars decreased from $96.6 billion in 2004, to $80.9 billion in 2013 in the United States, a study by Boston Consulting Group predicts that overall share of ad-spend in the USA will increase from 11% in 2009 to 12% by 2020.

Advertisers often refine direct mail practices into targeted mailing, in which mail is sent following database analysis to select recipients considered most likely to respond positively to the outreach. This reduces costs for mailers by narrowing the mailing universe to only the most likely audience. This use of database analysis is a type of database marketing.

Unaddressed direct mail, on the other hand, may be sent to select neighborhoods or communities, based on demographics. Whether at the individual or neighborhood level, direct mail marketing allows recipients to be targeted, attempting to match the demographic profile of the recipients to one most closely matching that of likely customers. Individually targeted direct mail may be tailored based on previous transactions and gathered data.

As online retail continues to grow, direct mail marketing campaigns also can act as a catalyst that boosts the production of every media channel involved. Until now, direct mail response rate measurement has always suffered from multiple blind spots that, in effect, have reduced the perceived value of the medium. At a glance direct mail may have seemed wasteful in the past – yet when now measured accurately, the medium often proves to be one of the most cost-effective and productive marketing tools available today and will continue to be in the future as well.