Calculating The Real Cost of Direct Mail

Filed in Featured Posts, Marketing Ideas on October 18, 2017 by

Direct mail is a harpoon, not a net. It is most effective in a B2B campaign when it is used to reel in a leviathan, not a school of sardines.

According to the Data & Marketing Association, direct mail’s average response rate is 5.3%, in our research we’ve seen marketers that integrate offline and online channels report much higher levels of marketing effectiveness.

When most people want to see if direct mail is worth it, they calculate direct mail’s Cost Per Lead, then compare it with other channels. The math is about as simple as it gets:

Cost Spent to Acquire a Lead/ Number Leads = Cost Per Lead

This math also lies. Fake math!

If you run these numbers for a typical direct mail campaign you’ll usually get a dismal return. Direct mail is expensive, compared to digital marketing it appears crazy.

That’s because this formula ignores the real power of direct mail in a B2B campaign: it drives high-quality leads, faster. Another big miss with direct mail cost analysis is that direct mail’s real impact is on how well your digital channels perform. It is like adding nitro to digital marketing.

When you calculate the quality direct mail drives, it becomes an enormous ROI machine.

How to Calculate if Direct Mail Makes Sense

Direct mail makes sense when you need to reach a leviathan: a high-value lead that has authority to directly impact deal size but is difficult to engage. Here’s how you calculate if direct mail makes sense.

Math Nerd Alert: Direct mail influences other channels and averages a 450% (or 4.5) lift to the response rate of other channels (Data & Marketing Association Response Rate Report 2016). To calculate this properly you have to multiply the impact by 5.5 (550%) to account for the other channels’ baseline.

digital and direct mail


  1. Determine your current cost/lead.
  2. Find an estimated value of a high-value customer.
  3. Determine the number of high-value leads you get every quarter.
  4. Determine the number of high-value leads that respond every quarter.
  5. Determine the number of high-value leads you convert every quarter.
  6. Take your answer in #5 and divide it by your answer in #4. This is your conversion rate.
    • [Answer for #5]/[Answer for #4] = conversion rate
  7. Now we add the direct mail component: take your answer in #4 and multiply it by 550% (or 5.5). This is the new number of high-value leads that will respond every quarter with direct mail.
    • [Answer for #4] * 5.5 = responded leads
  8. Multiply your answer in #7 by your answer in #6 and subtract your answer for #5 – this will tell you how many new customers you will get from direct mail (compare that to your answer in #5!)
    • [Answer for #7] * [Answer for #6] = Total new customers
  9. Multiply your answer in #8 by your answer in #2. This is your total revenue.
    • [Answer for #8] * [Answer for #2] = Total Revenue
  10. Divide your answer in #9 by your answer in #3. This is your new revenue/lead.
    • [Answer for #9] / [Answer for #3] = New revenue/lead

Add your direct mail costs per lead to #1, then compare #1 with #10 to decide if the new cost per lead is worth the additional revenue.


How Well Did Direct Mail Work?

What are the best KPIs to measure for direct mail? In our experience, direct mail impacts B2B campaigns by increasing the average deal size and shrinking the time to close. Here’s how you can calculate that impact.

Direct Mail Impact on Average Deal Size

(Average Deal Size – Average Deal Size for Deals Not Influenced by Direct Mail)/Average Deal Size for Deals Not Influenced by Direct Mail = Direct Mail’s influence on deal size.

Direct Mail Impact on Pipeline Velocity

(Average Days to Close) – (Average Days to Close for Deals Influenced by DM) / Average Cost of Direct Mail Campaign

This formula gives the number of days each dollar spent on Direct Mail saves you in closing a deal. E.g. If you spend $100 on an average Direct Mail campaign and your average # of days to close goes from 400 to 200, then (400-200)/$100 = 200/$100 = 2/$1, so every dollar you spend on direct mail shaves 2 days off your time to close.

How to Drive Digital Responses with Direct Mail  

Direct mail should be used to drive digital responses, such as site traffic, downloads or data capture. Here are some ideas to bring your direct mail and digital channels together.

Trigger Direct Mail Based on Behavior or Lead Score

You can keep the cost of direct mail in check by only sending it when it makes an impact. Leverage digital marketing to capture customer behavioral data, such as interactions with your site, sales development reps, and email marketing then turn that data into triggers for direct mail.

A prospect engaged with your site downloads content and even shares a video. Your marketing automation platform scores them as an MQL now, and it’s time to reach out to them with a sales call. Before the call happens, your marketing automation platform sends them a piece of direct mail to prep them for a call.

Use Personalized Direct Mail

Take the customer data you have, combine it with firmographic and demographic data and use that to create personalized direct mail. Believe it or not, it is not expensive to print direct mail that has unique text, images or even entire design changes for each prospect in your pipeline. Personalized direct mail is more effective if you’ve used personalized digital messages you already know how well this tactic works to grab attention and drive action.

Using the example above, imagine the direct mail piece you send references the content the prospect has already engaged with along with their name and other info you captured from some gated content.

modern direct mail example

Real Time Phone Calls

Use a solution that automatically notifies you when your direct mail has landed on a prospect’s desk. Get a digital notification in your CRM so a sales rep can follow up in real time. This is a great example of direct mail sending response action data back to digital channels.

Sticking with this example, the sales rep on your team gets a notification as soon as the direct mail is delivered. A call happens within a few moments of delivery, the prospect can’t get much warmer than this.

Conclusion

Direct mail is an excellent tool for capturing the attention of hard-to-reach prospects. When you are calculating the cost of a direct mail campaign, remember:

  1. Define your high-value lead.
  2. Know how well your high-value leads are responding and converting.
  3. Measure direct mail’s impact on other channels.
  4. Don’t forget deal size and pipeline velocity as core KPIs for B2B direct mail.
  5. Orchestrate, orchestrate, orchestrate!

This content originally appeared in the Radius Omnichannel Direct Mail Playbook, October 2017

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