How to Calculate Direct Mail Response Rates and Profits

So, you’re getting ready to send out a direct mail campaign. What response rate do you need to have a profitable mailing?

A response rate is a critical marketing metric to help establish if you’re campaign is successful or not.  In the past, marketers would have to spend much time figuring out elaborate calculations that covers cost, quantity, and other mailing variables.  This often left room for mathematical error which in turn, could affect the overall perceived result of a direct mail campaign.  But now you can easily find out your direct mail ROI by using my convenient online direct mail ROI calculator at: www.dmresponsecalculator.com.

This way, you’ll know in seconds if you’re forecasted mailing goal is easy to achieve.

When you click on the site, you can access a program that calculates how many responses your direct mail package must generate to break-even. By break even, we mean that the mailing generates net revenues exactly equal to its costs. In other words, to cover the cost of the mailing itself.

You simply enter the mailing costs, which are postage, list rental, printing, and “letter shop” – the fee your letter shop charges to assemble the elements, insert them in the envelope, affix postage, and take the mailing to the post office.

You also enter the cost of the goods you are selling. The online calculator determines net revenue per order by subtracting the cost of goods from the purchase price of the product, which you also enter.

The mailing cost is calculated by adding up postage, mailing list rental fees, printing, and “letter shop” fees – what it costs to have a direct mail service assemble the components of the mailing and send it out. Copywriting, graphic design, illustration, and other one-time costs to create the mailing are not factored into the break-even calculation. Break-even calculations are made based solely on the recurring cost per thousand to mail the piece, not creative costs.

Let’s say the ROI Calculator determines that your mailing would break even with a one percent response rate. That means if you can get a 2 percent response rate, you’d double your money, making in sales twice as much money as you spent on the mailing.

When is a direct mail package considered a success? That depends on the marketer. Some marketers want to break even on the initial mailing, while others want to make money – say $1.50 or $2 in sales for every $1 spent in the mail. A few are even willing to lose money on the front-end.

The “front end” is the revenue from the initial sale to a customer; the back end is revenue from additional sales made to that same customer. Almost all direct response companies make the bulk of their profit on the back end.

You can do these calculations manually or for faster results, use my convenient online ROI calculator to determine the response rate your direct mail campaign needs to break even.

To access my direct mail response tool online, go to: www.dmresponsecalculator.com