What’s Your Marketing ROI?

Last Updated on Tuesday, 14 July 2009 08:02 Written by Kevin Sunday, 5 July 2009 01:35

Businesses are always looking for value and good returns on their marketing dollars. Yet in spite of all the new choices, getting a good ROI remains elusive. Newspaper, magazine, street, TV, radio and online promotions all struggle, with response rates typically under 0.1%, being one per thousand (see photo). Lotto payouts do better. Even email marketers have declining response rates, along with nasty legal and delivery issues.

What Works?

Well, we know that good copywriting, design and a superb offer can make a huge difference. A well crafted direct mail letter to a targeted house mailing list typically gets a 2.6% response, being significantly better than mass market advertising. But in any promotion, only a percentage of responses will turn into sales. To see what it means to your bottom line, use one of our ROI Calculators.

Clearly this is why business owners spend time shopping around to get the best design, printing and mailing rates. They know that getting a good ROI is still hard work and cost cutting appears the only option.

But this approach seldom helps sales leads or results. It just minimises the loss.

Poor response rates occur because our advertising and mailing campaigns (print and online), treats everyone the same. These campaigns are only relevant to a few… Todays methods reflect a wasteful, highly inefficient process.

Better Targeting

One answer? Studies tell us that 93% of your sales will come from just 40% of your mailings (click graph). So, why waste time and money continuing to send stuff to that huge 60% chunk of people on your list who don’t buy?

The secret to efficient, high response marketing is
in your customer database.

An expertly maintained database can tell you:

• WHO you should communicate with,
• HOW you should communicate,
• WHEN you should communicate,
• And with WHAT offer.

Sort out Your Data – Weed out unlikely prospects and find a subset of your customers that are most likely to respond to your marketing campaigns.  By targeting ONLY those most likely to respond, you’ll achieve about the same response, for a lower cost.

Then if you want to boost sales results, start introducing more relevancy into your messages. Yes, it does increase the per-piece cost, but you’ll find that by sending out fewer pieces (top 40% only), together with 2-5x higher response rates (i.e. 5-15% response) will more than cover everything, giving far more qualified sales leads.

A 50-100% ROI is now very achievable as seen in the example graphs (click to expand), showing a typical ROI before and after segmentation down to the top 40% or the ‘gold’ customers, plus the relevancy factors added in.

Where to Start?

It starts by working on your database. Some work you can do immediately, like having us check your address list against the latest NZ Post Change of Address Database. It’s known that 23% of households change in some way each year. At just 60c per entry, it will quickly pay for itself in the first mailing.

Follow this up with some old fashioned telemarketing and mailers, to gauge their interest and collect their email address. You’ll certainly need a better ‘system’ to enter this new data and to then manage it all – To help with segmenting, data mining, campaign management etc. Excel or the Outlook address book simply doesn’t cut it for this task.

For ideas read our recent article on Building a Marketing Database.