A “Good” Response Rate in Membership Marketing

Many times I am asked what a good response rate in direct mail is. So I found it interesting when a client shared some data from the DMA Response Rate Trend Report. The report found that “Response rates for Direct Mail have held steady over the past four years. Letter-sized envelopes, for instance, had a response rate this year of 3.42 percent for a house list and 1.38 percent for a prospect list.”

Benchmarking data from other organizations is a good starting point for any analysis. However, real data collected from actual market tests is always the best. That’s because response rates are a comparative measuring tool, not an actual definition of value.

For example, is 72 degrees Fahrenheit a good temperature? It is great if you want to go for a walk, but bad if you are cooking a steak.

Before you determine if a response rate is good or bad, you need to understand the costs and the revenue associated with your membership (what cooking temperature is required). Then you can employ the response rate to define which list, offer, or package meets you minimum response requirements.

In the example below, the response rate varied on 16 different lists from 3.46% to 0.33%. If the revenue associated with the response is very high, then even the lowest responding list might be economically productive. But if the allowable marketing cost is $30, then responses below a 1.79% response rate on list “D” would be unacceptable.

What’s the bottom line on response rates? Do the economic analysis first to understand the costs and revenue associated with your marketing effort. This will tell you what the minimum response rate you need to achieve your outcomes. Then use your response rate as a decision tool to define what is good and what is bad from your marketing efforts.

4 comments:

Wes Trochlil said...

Great post, Tony! One of my least favorite questions is "How does my membership retention compare to other associations?" Asking what a "good" response rate is for direct mail is the same. 72 degrees may good or it may be bad. It's all a matter of context.

Wes Trochlil
Effective Database Management, LLC

Tony Rossell said...

Hi Wes -- As always, I appreciate your comments. Clearly there is a place for benchmarking and industry norms, but I agree there are so many variables from business rules, to price, to specific industry conditions that setting any single number as the correct response rate or renewal rate is not helpful. However, if someone tells me that they have a membership renewal rate of 20% it probably means that they have some serious math issues or there is something wrong going on with the membership. Tony

Scott Oser said...

"Good" response depends on your goal. If your goal is to get as many members to join as possible at a low price so that you have power on the Hill or have lots of prospects that can buy other things from you then you may be willing to accept a lower CPNO. Some times you may even be willing to lose money on a first order if it helps you accomplish a goal or make more money once they are in the fold.

I agree with you both that benchmarking has a role but ultimately an association, or any organization doing any marketing, needs to have goals and objectives for every campaign and judge the campaign performance against those goals. To use the example above if your goal is simply to grow membership and your campaign does that then it really doesn't matter how that compares to the performance of other organizations.

Scott

Tony Rossell said...

Scott -- Good points. I think you hit the nail on the head. Tony