# Calculating Direct Mail ROI

Coming from Procter & Gamble, I’m a firm believer in measuring results. Too often for small to medium-sized financial institutions, little tracking is done. We measure success or failure at the campaign level, instead of looking at the pieces of the puzzle.

Direct mail is a strong driver of any financial marketing campaign. We all know it works, but how do we quantify the effectiveness? It’s surprisingly easy.

## Save the List

Keep a record of who receives each mailer. Keeping a record of the account number or member number of each recipient is key to evaluating the campaign.

Three to six months post-mailing, check your core data to see if the member acted. I had our data ops team put together a query to check each product by contract date. I export the core data for the product, then compare the member numbers from the mailing to the list of new product accounts.

## Evaluation

According to the DMA, the average response rate for B2C direct mail is between 3.5% to 5% depending on the type of mailing. That said, a well targeted direct mail campaign to current members should see significantly higher results. I see a 7% or higher response rate for loan-based mailing to members 50 years of age and older. While response rate is a great measurement, Return on Investment (ROI) is better.

For ROI, I go with a back-of-the-envelope-style calculation. It’s not accurate, but it’s close enough to illustrate the point and ensure you stay on track.

Put together an Excel sheet with the following data for a loan mailing:

 A B C 1 Total # Mailed 150 From your list 2 Total Cost \$350.00 Invoice from your mailing/printing service 3 Cost per Individual Mailed \$2.33 =B2/B1 4 Converted 17 From comparing your list to core data 5 Conversion Rate 11% =B4/B1 6 Average Loan Amount \$17,450.00 From core data, average the loan amount for all the converted 7 Average APR 1.27% From core data, average the APR amount for all the converted 8 Average Term in Years 5 From core data, average the term for all the converted 9 Revenue \$3,390.71 =(B6-B6/B8/2)*(B7)*B4 10 Revenue minus marketing cost \$3,040.71 =B9-B2 11 ROI 969% =B9/B2

Column A is the description and Column B is your data. Column C has the equation or source of the data. If you have access to a financial calculator you can calculate the actual revenue instead of taking the (APR) times (loan amount minus half a year’s worth of payments). In the example, our ROI is 969%. If you have the overhead costs for the loans, you could subtract that from the revenue as well for a more accurate ROI. Keep in mind, the more accurate you make this model, the more time it takes to evaluate each mailing.

## What About Using a Landing Page to Track Conversion?

Using a landing page with each mailing makes tracking engagement much easier. By directing members to visit a specific page on your website that will only be advertised via the mailer seems like a simple way to track whether your mailer is working, ex: www.yoursite.com/bonus50. However, if your membership is like mine, it skews 60+. While there are many tech-savvy seniors, many still prefer to engage with your staff through phone calls or in person — meaning you’ll miss out on tracking these conversions.

Do you have a suggestion to make this post better? Send me an email at brent@dbrentarnold.com.