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With marketing under increased pressure to show a return on investment, the crunch question for any direct marketing campaign is always: “What will the response rate be?” Answering that usually involves a careful balance of historical response analysis, predictive modelling, and outright guesswork.

Probably the best yardstick available is the time series data-set built up by the Direct Mail Information Service (DMIS).

The crucial top-line finding is that direct mail campaigns average a response rate of 6.7 per cent, a rise from the average of 6.2 per cent recorded last year. Among the media reported on, this is the best overall performance. Door-drops pulled an average response of 1.6 per cent, equal to the figure for 1995. Both press and inserts saw response rates fall to 0.2 per cent for press (from 0.3 per cent last year) and 0.88 per cent for inserts (1.0 per cent previously).

Since 1991 the DMIS has been compiling data from self-completed survey forms. In 1995 and 1996, these were distributed through Marketing Week and the base now numbers 736 questionnaires covering 1,696 campaigns. (For technical reasons, some data from earlier years has not been included in the breakdowns given here. It has also only been in the last two years that questions about media other than direct mail have been asked, hence the small base sizes for some responses.)

The figures are in line with response rates recorded by DMIS from other sources and suggest the findings are robust, even though they rely on the candour and honesty of readers. The distribution of response rates for each medium is also highly suggestive. The industry benchmark for direct mail response has always been one to two per cent. In fact, 13 per cent of campaigns performed at this rate. Remarkably, 11 per cent pulled more than 20 per cent response, with over one-third of all campaigns achieving rates above seven per cent.

In comparison, the distributions for other media were all at the low end of the spectrum. In door-to-door, over half (52 per cent) achieved a response rate of under two per cent, although 11 per cent pulled more than a ten per cent response. For press, 98 per cent of campaigns achieved less than a seven per cent response, with 55 per cent pulling less than a two per cent response. Among insert campaigns, 68 per cent achieved less than a two per cent response.

Another difference between direct mail and other media is the size of the average campaign. While mailings generally went to 98,000 targets, door-drops averaged at 750,000 per campaign, with press ads hitting 534,000 and inserts 312,000. This makes the decision about affordability complex.

Direct mail is certainly the most expensive in terms of cost per thousand – the average cost per item reported here was 46p, up from the previous running average of 42p. In comparison, door-drops cost 11p each, press ads 8p per hit and inserts were the cheapest option at 6p. This means that the average size of the door-drop campaign reported would cost nearly twice as much as the average mailing, at 82,500 compared with 45,080, while the responsive press campaign would cost roughly the same (42,720) and inserts would only cost 18,720.

When the cost per response (CPR) is calculated, however, there is less to choose between them. Direct mail, door-drops and inserts all averaged a CPR of 7, while direct press ads cost 40 per response. What is missing from the equation is the level of conversion to sale, and therefore the all-important measure of cost per sale. This would require a degree of honesty and reporting which might be beyond the bounds of what the average reader could accept. It might also require an ability which many marketers still lack – being able to track sales back to the medium through which the individual responded.

But it is this number which marketers need to consider when planning a DM campaign, assuming that making a sale is the ultimate objective. If the goal is to populate a database with respondents’ names and addresses, door-drops would deliver the highest actual number – the average campaign would deliver 12,000 responders – with direct mail running second at 6,566.

The nature of the product on offer also has a significant effect on response. Consumer campaigns generally perform better than business-to-business, with mailings for the former pulling a slightly above average rate of seven per cent compared with four per cent for the latter. The best-performing consumer campaigns were for entertainment or leisure products, which pulled an average of 34 per cent, followed by packaged goods with 26 per cent and food and drink at 20 per cent. Mailings for business services achieved the highest average response rate in this sector at 9.3 per cent.

Response rates will also be affected by the nature of the action required. There are signs of a tailing-off in the willingness of consumers to provide information on themselves – questionnaires still pull an impressive average of 15 per cent response, but this is down from the average of 21 per cent last year.

In 1995, surveys got the highest level of response of any action required. This year, that honour went to taking a coupon to a retailer, which pulled 24 per cent response, perhaps reflecting the growing use of direct mail by retailers within loyalty schemes.

Free events were the second most popular form of response, with 18 per cent of consumers taking up these offers. In terms of the response method required, consumers were more likely to visit a store (17 per cent) than any other form of action. Combining postal, phone and fax response channels generated an average response rate of 13 per cent. Postal response outstripped telephone at five per cent compared with one per cent.

In business mailings questionnaires fared best with an average response rate of 12 per cent. Business targets were also tempted by free trials (nine per cent response) and prize draws (eight per cent).

Mailings which offered a telephone-only response mechanism had the best average response rate at 11 per cent, although postal response was close behind with a rate of ten per cent.

Targeting is the very essence of direct marketing. Finding the right people to send your messages to will create significant uplift in response compared with blanketing broad population groups. In consumer campaigns in this survey, the best response rates were averaged by mailings which combined customer, prospect and rented-in lists, at 20 per cent. Customer and prospect files together pulled seven per cent, while customer-only and customer plus rented-in lists pulled six per cent.

The best response rates in business mailings were to prospect lists, at nine per cent, closely followed by customer-only lists at eight per cent. This improvement in targeting is also evident in the response rate when analysed by the size of the mailing. In business campaigns, tightly-targeted efforts did best – those sent to fewer than 500 people pulled a 14 per cent response, with mailings to between 501 and 1,000 pulling 15 per cent. Rates were relatively stable for larger campaigns at about five per cent.

For consumer campaigns very small target groups also returned high levels of response, with 28 per cent responding to mailings to fewer than 500 people. Where the list numbered only 501 to 1,000, the response rate was 15 per cent, and was 14 per cent on lists of 1,000 to 2,000. But larger mailings could also do well. Where the campaign hit 5,000 to 10,000 people, response ran at ten per cent, and rose to 12 per cent for mailings of between 10,000 to 20,000 items.

In most media, targeting can be refined to a relatively accurate degree. But in direct mail, it is the be-all and end-all of successful campaigns. In this respect, there is no end to the degree of scrutiny which can be applied to a mailing list before it is used. At the same time, almost every element of a campaign may have an impact on its success in a way which is true of few other techniques. By setting benchmarks for response rates the DMIS research provides a useful guideline to any marketer faced with the complexities of planning and budgeting a direct marketing campaign.