Do you really know the effective Return On Investment of your Direct Marketing activity?
July 8, 2012
As in most situations where in-depth analysis is required to add clarity to a problem, “the devil is in the detail”, and for most marketers knowing where to look for the required detail, in a pre and post campaign analysis, is one of the most challenging aspects of the process.
You can’t manage what you can’t measure
As a start point, there’s a maxim in direct marketing, which applies regardless of the medium you use, “If you can’t measure it you can’t manage it, and you can’t manage what you’re not measuring.”
Obviously, if your objective at the outset is to generate a response rate of 5% (which is at best an unsubstantiated notional industry average), you can throw away your calculator because you really don’t want to know what your ROI is going to be on a 20:1 ratio of response versus non-response to any product or service proposition you might offer. (And let’s not forget that of those 5% who may have responded, we have yet to establish how many actually generated revenue, and how many were simply tyre kickers of no value to you).
In most instances, without making any attempt to determine the cause and the “cost of silence” experienced in the previous campaign, where 95% of the target audience did not respond, one of two scenarios is typically adopted:
Destined to repeat the same mistake?
The marketer repeats the entire process with a new selection of prospects, or with a different service / product, and perhaps with a different media mix, and they make all future decisions using the knowledge gained from 5% of respondents as a guide.
Still targeting a discretely selected audience through a “narrowcast” media such as direct mail or e-mail. This is where the damage to the overall corporate branding begins to occur.
Or mistakenly give up?
The process of strategic direct marketing is halted, due primarily to a poor ROI. As a result no customers or prospects are strategically targeted through personalised media again, as it is deemed to be too expensive, too complicated, too time consuming and too dependent upon data on individual customers or prospects, usually sourced via areas outside of the marketing department.
If these prospects are ever targeted again through personalised mediums it is likely to be only on an ad-hoc basis, and in a tactical rather than strategic manner, achieving similar outcomes to those described in the first point - at best.
The net result?
Both of these outcomes are unfortunate for the marketer, the enterprise and the customer. Neither option is going to improve the direct marketing communications effectiveness or contribute to moving any organisation to a more customer centric position.
Many organisations struggle with determining the true ROI, and with interpreting the “cost of silence” generated by their direct marketing communications, regardless of the mediums they are using, yet in an increasingly accountable world it is essential for marketers to get this right.
What is your juiciest ROI calculation that you are struggling with? Let us know here by leaving a comment and lets see if we can solve it for you.