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How To Prove Direct Mail Return On Investment

One of the great things about digital advertising is the fact that everything can be tracked.  From a unique click to a new customer.  This ensures that the ROI of the target can be analysed and that the marketing department can prove that the campaign was a profitable exercise.

Postal direct mail has been around for 50 years before digital advertising and in that time they have developed some tricks of their own.  Many of which with increased computing power can be as easy to use in terms of ROI tracking as the digital campaigns we mentioned before.  These include:

Voucher Code:  By adding on a voucher code unique to the mail piece when a customer redeems this by quoting it on the phone or inputs it into a web site they can be tracked.  The database will record the user has redeemed it and once the campaign has finished and the vouchers has expired then analysis can be conducted to see if the campaign was profitable or not.

Data Base Analysis Post Campaign:  If we are sending a campaign to customers who have not purchased for the last 6 months it can be assumed that they would not have come back to the company unless they have been enticed back via a promotion.  Thus as such if we send a campaign to this data and then look to see when the campaign has finished we can work out the number of customers we have reactivated and thus the success of the campaign.

Unique Telephone Number:  By asking people to call you on a unique telephone number to redeem the offer this can again be tracked and analysed post campaign to asses the effectiveness of the direct mail campaign.

Landing Pages: In the Direct Mail piece only promote a unique landing page and any customers which arrive at that landing page can be collated, a new customer value bounty can be attributed to those customers an a ROI calculation can be conducted.

The actual calculation of return on investment if fairly easy to work out.  A company should firstly look at the lifetime value of a customer and see how much profit on average a user generates.  Lets say on average a customer comes back 3 times and spends 100 dollars each time.  The profit per transaction is 35%.  Thus we calculate the lifetime value as:

$100 x 3 = $300 (total revenue)

100 x 35% = $35 (profit per transaction)

3 x $35 = $105 (Lifetime value of a customer)

Thus our marketing department needs to acquire customers under $105 and it will then deliver a return on investment and the marketing campaign was a profitable exercise.