What's A Good Response Rate?
When I talk to new clients about writing an e-mail or letter for them, they often say something like this: "Ivan, what kind of response rate do you think we might get? One percent? Three percent? All we need is a ballpark guess. And don't worry. We won't hold you to it."
I certainly don't blame them for asking. They're spending their money, not just on me, but on the cost of list rental, production, postage, etc.
I sure wish I could give them a number, but I can't. There are so many variables involved, guesstimates just aren't very helpful.
Let me list just three of the many important factors that affect response rates, and I think you'll understand my reluctance to whip out my crystal ball and make predictions!
1. THE LIST. Is it a house list that's been well cleaned? A compiled list? A brokered list you've never tried before? Without having experience with a specific list, you're in the dark.
2. THE OFFER. Let me offer your prospects a free Rolls Royce and I'll guarantee you a 100 percent response rate. What's that? No Rolls Royce? You want to offer a whitepaper on the history of Zero Bias Schottky Diodes? I think it will be a bit harder to estimate the response rate a priori!
3. THE CREATIVE FORMAT. OK. The assignment is to mail prospects a piece that drives them to your Web site. We can go with a post ard, a multi-fold self-mailer, a letter, etc. It can be four-color, two-color, or straight black-and-white. We can use photography, illustration, cartooning, or go all type. It's hard to make a guess about response rates until you know exactly what format you're using!
And that's just for starters. Other variables include your product price, the "positioning" of your product, the competitive situation, the time of year that you're mailing, etc.
So now that I've thoroughly discouraged you, let me suggest an alternative to guessing response rates: Do a break-even analysis.
In other words, figure out what your total costs will be. This is not a number you have to guess at. You can compute it very accurately. If you want to mail to 50,000 prospects, add up all your costs including printing, creative, postage, list rental, etc.
Next, compute how many leads/sales you'll need in order to break-even based on your product's selling price. When you have the response rate required to break even in front of you, you should have a good feel for whether this rate seems achievable. This makes a lot more sense than just guessing at response rates in the dark.
Also, let me reiterate how important testing is. If you want to get a handle on response rates, you have to be able to test lists, offers, creative, etc. Where should you start your testing efforts?
Edward Nast, the great direct response expert, said: "The greatest differences in results can be expected from changes that affect the way the product is positioned. Offer changes run a close second, with very dramatic changes resulting from changes in price, premium, commitment, etc. ... The big differences200 and 300 percent lift factorsalmost always come from product positioning, offer changes, or the selection of different lists."
The take-away message this month? It's better to test than guess. Rigorous testing requires resources and commitment but, believe me, it's the way to make money!
Ivan Levison is a freelance direct response copywriter who works for companies like Bank of America, Fireman's Fund, Intel, Microsoft and many others. Levison writes direct mail sales letters, e-mail letters and ads. For a free subscription to his monthly e-mail newsletter for marketers, visit his Web site at http://www.levison.com. He can be reached at (415) 461-0672 or at firstname.lastname@example.org.