Not only are old-school direct-marketing channels like the telephone and snail mail here to stay, the latest report from the Direct Marketing Association on response rates finds that in many cases they are more effective than buzzed-about digital channels.
Overall, however, the survey found that email and digital channels produce by far the better return on investment.
The report is based on data from the association's online survey of its 481 respondents, as well as transactional data on internet display ads run through Bizo and email data from Epsilon.
The survey found that although direct-mail response rates have dipped, they remain well above those for digital channels. Direct-mail response rates have decreased from 4.37% in 2003 to an average response rate of 3.40% today. That said, they have remained fairly stable since 2010, when the DMA's last survey showed average rates of 3.42%.
Even though response rates haven't risen, the report shows that direct mail is 10 to 30 times more effective than email, and other digital channels have similar low rates. To quote the report, "for every 1,000 existing customers receiving a direct-mail piece, 34 will respond on average. For email, the average response -- measured by taking the click-through rate and multiplying the conversion per click -- is 0.12%." That means that only 1 customer out of 1,000 would follow the email solicitation through to sale.
The continued effectiveness of direct mail has a lot to do with the quality of data and the ability to target mail more effectively, said Yory Wurmser, director-marketing and media insights at the DMA. "The future of direct mail lies in that [data], but the quality of the response for direct mail also indicates that direct mail is not disappearing," he said. "It's not the situation you had with newspaper advertising where it just fell off a cliff. It's probably stabilizing instead of continuing a steep decline."
Paid search campaigns averaged a 3.88% click rate, but the conversion-per-click rate, which indicates that someone took action after clicking on an ad, is only 5.8% of those 3.88% that clicked. For internet display, Bizo's data showed average click rates of 0.024% and ultimate conversion rate of 0.010%.
Traditional tactics like direct mail and telephone marketing show the highest response rates -- nearly 13% of customers on a house list respond to an offer over the phone, according to the report. Yet online channels attract a greater percentage of marketing dollars because they generate a far better return on investment.
ROI for email was $28.50 in sales generated for every $1 dollar of email spending. In contrast, telephone was break-even: It's median ROI was $1 in sales generated for $1 spent.
Comparing the return-on-cost of direct mail with email, Mr. Wurmser said: "The cost is equivalent when we're talking about getting a new customer, but for [a response from] an existing customer, email is more efficient, with ROI that 's four times higher than direct mail."
The report goes on to show that the ROI factor is contributing to widespread use of email marketing. Eighty-three percent of the DMA respondents use email in their promotional campaigns -- it's the highest usage level for the measured media. Direct mail followed with 79%, and was trailed by paid search, internet display and telephone.
