Commercial and nonprofit marketers collectively will spend about $168.5 billion on direct marketing efforts in 2012. That’s slightly more than half of all ad expenditures in the United States.
However, the average response rate for direct mail, the most popular direct marketing channel, is down almost one full percentage point from 10 years ago, according to the Direct Marketing Association’s (DMA) Response Rate 2012 Report.
The report compiled data from 481 respondents. The study analyzed 2 billion display ad impressions and 29 billion emails, though the study’s authors caution that the direct mail sample was much smaller; only about 170 respondents contributed direct mail campaign information.
Some 79 percent of overall respondents and 95 percent of nonprofit respondents use direct mail. The survey found that letter-sized direct mail packages had a response rate of 3.4 percent for a house list and 1.28 percent for a prospect list. When the New York City-based DMA put out the first Response Rate Report in 2003, those numbers were 4.37 percent for a house list and 2.14 percent for a prospect list.
Nonprofits had a slightly greater response rate for mail going to the house file than average at 3.61 percent, but saw a lower than average response rate for prospect files at 0.88 percent. Nonprofits’ cost per thousand was also slightly higher than average, at $700 compared to $657.
Email offers the greatest return on investment (ROI) at an average of $28.50 for cost per order or lead, but also has a lower response rate; only about one customer in a thousand will end in a new sale or donation. The open rate was 21.3 percent overall and 21.6 percent for nonprofits. Click-through rates were lower for nonprofits than on average, at 4.2 percent versus 5.3 percent for house files.
The relative response rates for direct mail and email surprised DMA’s Director of Marketing and Media Insights Yoram Wurmser, Ph.D. “It makes sense that direct mail would have a higher response rate, since the cost of direct mail makes marketers more judicious on how many mail pieces they send, and to whom,” he said. “Still, the ratio was higher than I expected.
Click through rates for online display ads were about the same in total and for nonprofits, at 0.024 percent and 0.026 percent, respectively. However, direct actions per click were lower for nonprofits at 1.82 percent, compared with an overall average of 2.51 percent.
“Only 6 percent of actions occurred immediately after a click,” said Wurmser. “This means that display advertising is as much an awareness tool as it is a direct response tool.”
Other findings showed that telemarketing had the highest response rate of all media surveyed, with 12.85 percent for cross- or up-selling and 8.21 percent for prospect calling. It also carries a very high average cost per order/lead, at $77.91 for cross/up-selling and $190.49 for prospects. In comparison, direct mail was just $19.35 for up-selling and $51.40 for prospect mailings.