Cost and profit of 1to1 Direct Marketing

If you mail 100,000 letters at $0.32, you would spend $32,000. With a typical response rate of 2-2.5%, the cost per lead would be around $12.80. Now if you added personalized information to the mix, and mailed half as many, you would end up paying about $37,500 to get the job done. Again that’s not the whole story. If you figure that our response rate for the personalized mailing is a conservative 15%, the cost per lead would drop to just $5.00, less than half that of traditional methods.

In marketing, that’s what it’s all about… getting a response, or generating leads. This all translates into bigger profits, because a higher response rate typically will generate a higher purchase rate.

Here’s another way to look at it. If you sell a product for $500 and your profit margin is $250… and then you multiply that by your response rate (2-2.5%) you get $625,000 in profit. Using the same example but again accounting for the variable information factor (a 15% response rate) our profit would be approximately $1.8 million.

So you can see that the cost per response is much lower, and the opportunity for profit is much higher by paying more per page to get more effective, personalized document. These are very important ratios to bear in mind when doing the marketing math.

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  1. Ben Waugh says:

    Great Blog post. I am going to bookmark and read more often. I love the Blog template

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