Direct Mail ROI: What to Expect for Your Investment
| 9 min read
Many people think that “snail mail” marketing is dead. But that is not the case at all! While it is true that direct mail advertising is one of the oldest methods of marketing and that digital marketing is growing by the day, direct mail isn’t a relic of the past.
The facts show that direct mail has a very healthy response rate and rate of return — one of the highest, most reliable returns of any advertising method.
Shockingly, the ROI for direct mail is on par with social media marketing and greater than paid search ads or online display ads, in general for most organizations.
According to Direct Marketing Medium, the median ROI for a study they did in 2017, showed the following results:
Email (n = 149) = 124%
Social media (n = 33) = 30%
Direct mail (n = 113) = 29%
Paid search (n = 57) = 23%
Online display (n=27) = 16%
What is ROI in marketing?
Your return on investment (ROI) is the amount of money you receive in sales (or donations) for the investment you made in a marketing campaign.
The ROI formula
The ROI equation is simple. Take the benefit you get (your total sales from your campaign) and divide it by what it costs to produce the campaign.
ROI = Sales from a campaign / Cost of the campaign
So imagine that you send 1000 postcards that cost you $500 to send. You only get 5 responses. This response rate is only 0.5%. But if two of those people bought services or products from you totaling $2000, your return on investment is $1500 — even though your response rate was low.
That is a 300% return!
Your industry niche has a particular response rate and ROI that is unique to it. Some industries can survive on a low response rate. Especially industries that sell very high-priced commodities like real estate, luxury cars, or other expensive items.
Businesses that sell inexpensive products will generally need a higher response rate to get a good return on investment.
General mailing ROI
A general, blanket mailing, like EDDM, has an average response rate of 0.25-0.75%. Your conversion rate will, of course, be a lower percentage of those who respond. That rate will depend on your offer.
Every Door Direct Mailings (EDDM) may seem like the best route to go. You don't have to pay for a mail list. But there is also a lot more waste with wrong addresses, often up to 10% of the addresses are wrong addresses, vacancies, or do-not-mail addresses.
This means you pay more for printing and postage than you should. And the postage costs a little more than for a saturation mailing.
This means you end up spending a bit more for EDDM than for a saturation mailing and you will likely get a lower response.
So this route is best for something that would appeal to everyone in an area like an announcement that a new restaurant is opening nearby.
The response rates and ROI tend to be the lowest of any type of mail marketing because this mailing isn't targeted to people who are most likely to want your products or services.
Smart saturation mailing ROI
A smart saturation mailing, that is not targeted but sent to 75% of addresses in a CRRT (or 90% of residential addresses) can cost less in the long run than EDDM, which improves response rate and ROI.
A smart saturation mailing saves you on postage costs and eliminates most wasted addresses and piece delivery. It combines some household data with carrier route information.
You can also do a bit of targeting by choosing to eliminate households (to a degree) by:
Age range of recipients
Gender Output Priority
Presence of children in the home
You can also choose from options like:
Businesses, residential addresses or both
Multi-family residences, single-family residences, or both
This lets you remove people you know won’t be good candidates for your offer and only target the best routes for your organization.
You do have to buy a mailing list for this type of mailing. But it is not as expensive as a direct mail/or targeted list.
A smart saturation mailing will generally have a better ROI than an EDDM. But probably less ROI than a highly targeted mailing or in-house mail list.
Of course, the more targeted your mailing list is and the better it is, the better your ROI is likely to be, as well. Especially if your products or services are for a specific audience.
Direct mail marketing ROI/Targeted audience ROI
Direct mailings pack a powerful punch with a strong 29% ROI according to MarketingCharts.com.
On the higher end of the return scale, a 2013 study found that for every $167 that businesses spend on direct mail, they sell $2095 worth of products and services. - Postalyticsc.
Direct mail, done correctly, can be a very profitable investment. It costs more than a blanket mailing (EDDM) or saturation mailing. But your lists are so much more personalized that you tend to get a better ROI.
Direct mail statistics (Marketing Sherpa)
Direct mail offers a 73% of consumers say they prefer direct mail over any other form of marketing.
76% of consumers trust direct mail while only 43% trust ads embedded in social media and a mere 25% of people trust online pop-up ads.
ROI for specific types of mailings
ROI for postcards
Postcards get the best ROI of all the types of mail pieces out there. People don’t have to open them. Most recipients at least scan the offer and look at your piece. If you follow our best practices for maximizing your mailing ROI, postcards are often your best bet.
ROI for letters
If you are a non-profit organization, using a letter format for your mailing with a return-addressed and stamped envelope inside for donations is a great way to go.
ROI for packages
Packages pique consumers’ curiosity much more than a letter or flat piece. Expect a higher response rate if you send an interesting package with a great offer to potential clients. And the higher response rate should lead to a greater ROI in most cases.
Email marketing ROI
ROI in digital marketing is often higher than with mailings because the expense is lower. So there is a place for digital marketing. Every organization today needs a website to be found online. Email marketing, SEO (search engine optimization), social media marketing, and pay-per-click marketing are all important types of marketing that can help your bottom line grow.
Email marketing vs direct mailing
Direct mailings tend to have a higher response rate than emails do by a hefty margin. According to some studies we have found, only about 0.12% of emails receive a response. It can be higher if it is your house email list, of course. Direct mail response rates range from about 0.5-5% or even higher with the right targeted list.
According to a study by JWM Business Services, the response rate is expected to be about 0.5-2% on a direct mail campaign and half of those people will make some type of purchase (depending on the offer).
But emails often win the ROI battle. Sending bulk emails is inexpensive. Sending mail costs a lot more money per piece which is why we only recommend sending mailings to very targeted audiences that are likely to be interested in your offer.
ROI for combination digital marketing + mailing
Any smart marketing campaign uses multiple channels to reach its target audience. As the proverbial wisdom goes: don’t put all your eggs in one basket.
For the greatest ROI with marketing, combine the two channels. Do email marketing/digital marketing and targeted mailing. Consider investing in SEO, search ads, online display ads, and a corresponding direct mailing that is very personalized to people who are interested in your product/services.
That is what huge companies like Google do — combine online marketing and direct mailings — because they get results.
Send your direct mail audience to your website with a QR code or to sign up for a contest online.
This combination of direct mail and digital marketing strategy dramatically increases most response rates and, even more importantly, your ROI.
Need some help with your next direct mailing?
We'd be happy to assist you.