This is the 2nd post in a 2-part series on the factors that go into response rate.
Timing: Very few Americans purchase an automobile more than once every few years. On the other hand, very few Americans do not purchase milk on a weekly basis. In some respect, this is another form of demand. An important purchase that happens infrequently impacts performance because of the timing…the perfect offer to the perfect consumer may fail if the timing is off. There is a reason why jewelry offers are timed around specific seasons – jewelry just sells better before Valentine’s Day. But it’s not always easy to sell something around a timed need…think of the dentist or optician who is trying to market regular dental / eye exams. How strong does the offer have to be to get you to go to the dentist if your teeth don’t hurt?
Competition: It’s difficult to compete these days, when the average consumer is being bombarded with offers in every portion of their life. Competition is no longer just a direct competitor…it’s everything else that is delivered in the mailbox the same day your mail piece arrives, it’s how many emails ended up in the consumer’s inbox, it’s how many ads were on TV, on the radio, in the magazines, how many texts arrived on their cellular phone, how many pop-ups showed up as they were surfing the web…even messages being delivered now at the gas pump while filling up the tank demand consumer attention. And whether or not your message gets through all that “noise” makes a big difference in terms of response / redemption rates.
Targeting: Getting your message to the “right” consumer is just as important as any of the above criteria. If you are selling cosmetics that are at the highest price tier in the market, it doesn’t make sense to advertise in teen magazines, any more than the hottest electronic game in town wants to advertise in Ladies Home Journal. Whether it is choice of print, television, radio, inserts, shared mail, direct mail or email…it’s important to target the most desirable consumer as much as possible. The tighter the targeting, the higher the redemption rates. The broader the reach, the lower response rates will be.
By now it should be clear – there are a lot of factors that impact what the outcome of a mailing (or any other kind of promotion) is going to be. Until a promotion is executed, it’s impossible to realistically forecast the results. The more important consideration is to make sure that the following points go into any new promotional concept:
• Test the offer first – don’t go national in large volume without having tested the concept in small quantity first
• Make sure to structure the test so that the result can be measured – if not on a specific individual response rate, at least on sales lift at targeted locations / areas vs. control locations / areas not exposed to the promotion
• Make sure that the test is large enough to yield statistically valid results – use the following rule of thumb:
o 50 net paid responses per cell = 85% degree of confidence the test can be repeated under comparable conditions
o 100 net paid responses per cell = 90% degree of confidence the test can be repeated under comparable conditions
• Make sure that the next effort after the test goes out to a maximum of 5 times the initial test’s reach (5X rule):
o If initial test was 50,000 households, next effort should not exceed 250,000 households
o If initial test was 100,000 households, next effort should not exceed 500,000 households
• If testing prospects for the first time in direct mail, understand that they will have a significantly lower response rate than the same offer made to pre-existing customers
• If testing prospects for the first time in email, understand that they will have a significantly lower response rate than the same offer made to prospects in direct mail
• If testing offers, understand that a deeper discount is needed to attract new customers than to motivate existing buyers
• Consider that how you acquire a new customer is indicative of how you keep them – similar offers, similar vehicle, etc.
When all is said and done, there really is no such thing as an average response / redemption rate. But if a campaign is executed properly, yielding directly measurable results, it gets much easier to improve results by using the response data to improve all the variables that went into the initial test. And in the end, that’s what it’s all about…making the next campaign better than the last.