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The great thing about direct marketing is that results are easily
measured, and this leads to predictability in your campaigns, and the
ability to improve results from campaign to campaign.
There are Goals - and then there are Goals
It's natural to start by counting how many responses you get - this is the
direct result of your campaign. It's also very easy to count, providing
you set things up to capture the data (see below). Then you can calculate
your response rate:
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Response rate |
= |
Responses / Number sent |
Knowing your actual response rate will help you evaluate lists and offers,
and plan future campaigns, but it isn't your real goal: you want sales.
You can (and should) qualify the leads your campaign delivers (through a
questionnaire, or questions asked by in-bound telemarketing, etc.) - but
you still need to track the success of your campaign all the way through
to actual sales.
If you are selling product online, you can do this with affiliate
software, or with specialized software like ConversionRuler™. If you sell
with "feet on the street," you need to tie your campaign management into
your Sales Force Automation or CRM system. Most systems can track the
source of each prospect, which will be your campaign. But you'll have to
handle the link between campaigns and finer detail (like list or offer)
yourself.
ROI
Ultimately, you want to measure the return on investment of your campaign.
There are lots of ways to calculate ROI; I like to keep it simple. Once
you know how much revenue a campaign has generated, you can calculate ROI
as:
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ROI |
= |
Benefit / Costs |
|
where Benefit |
= |
Revenue - Costs |
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so ROI |
= |
(Revenue - Costs) / Costs |
I like to give a "quasi" ROI for marketing campaigns with
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ROI |
= |
(Revenue - Total Cost of Sale) / Campaign Cost |
This gives a good feel for the value of a campaign, even though a
true ROI would include costs for the sales team, product development,
manufacturing, etc. Another good measure, and very simple, is to calculate
lead generation costs as a percentage of revenue generated:
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L/R |
= |
Campaign Costs / Revenue |
This gives a true measure of the value of your campaigns, and will help
you determine how much you can afford to spend on future campaigns (and
justify the budget, too!)
Test, test and test again
So far, we've kept things pretty simple - looking at a campaign as a
single, global unit. But you really need to track much more detail -
specifically, you need to know the effectiveness of every list, offer and
creative you use in your campaign. So, if you're using three lists and two
offers, you need to track your results for a 2x3 matrix:
This means you need to track responses for each cell in the matrix. This
can mean a separate landing page (or tracking code), or different
inbound
telemarketing numbers, or offer codes, for each cell. You also need to
track your costs for each cell.
Classical direct marketers like to run tests against a few tens of
thousands of prospects, before rolling out their campaign (to millions of
recipients). In B2B marketing, that's not often practical - but you do
need to test every aspect of your campaign. Even with the most
sophisticated statistical routines, designed for small sample sizes, you
need a minimum of 5 to 10 responses in each cell before you can make
meaningful predictions, and that means a sizeable test campaign. For our
simple 3 list X 2 offer test, you need at least 60 responses - which means
you need to send your test to about 3000 names.
Control Yourself
You'll often hear direct marketers talk about their "control". This is the
best-performing campaign, which they always test against any new
campaigns. If the new campaign outperforms the control, it becomes the new
control.
In practice, you'll usually find yourself testing a successful combination
of Offer + Creative (your control) against a new proposal, across the same
set of Lists, to determine which combination to put your efforts behind.
And, you'll test your control Offer + Creative against (samples of) a
number of lists, including your historically best-performing list (your
List control), to see which lists to roll out in a full campaign.
By continuously testing your lists, your offers and your
creative - and
keeping your control! - you'll improve results with every campaign you
execute.
Next issue: Wrap up.
(Review the
MarCom Acumen Guidebook for more detailed information on
Direct Marketing.)
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