National Clothesline

When the question of how to calculate a rate of return on a marketing program is posed, the average cleaner I talk with is completely in the dark. They haven’t a clue how to define or gauge a good response. While some are happy with two percent, others I know have actually dropped programs which brought them returns of nearly 50 percent.

Cleaners who seek help in writing an ad campaign often ask, “What kind of response rate do you think we might get? 15 percent, 25 percent? Just a ballpark guess. And don’t worry, we won’t hold you to it.”

That’s a natural and necessary concern. After all, before it’s over, they will very likely spend a lot of money promoting their business, so it’s important to know that every dollar is working as hard as it possibly can.

With each inquiry, I wish I could look into a crystal ball and give them an accurate answer, but I can’t. It would be a wild guess on my part because there are so many variables at play.

The most important variable is the list.

The decisions you make regarding the criteria for selecting your list can ultimately determine the overall effectiveness of an entire marketing program. The list determines who will receive your message and, as such, can be defined as the market itself.

When choosing a list, there are many considerations to make. For example, is it a house list of current customers that’s up to date and clean? Is it a compiled list or is it a brokered list that you've never tried before?

The list you select will have a huge impact on the return you get. Your house list, for example, should easily beat out a prospect list by a wide margin. But without having experience with a specific list, you’re in the dark!

Another key factor affecting response is the offer you use to attract interest. Rewarding your prospects with a FREE widescreen HD TV will likely bring a high percentage of responses whereas a free report outlining the advantages of cleaning garments in water versus chlorinated solvent probably will not.

A third major factor affecting response is the creative format you employ. Your “creative” factor is the way you present yourself to your target consumer. It not only represents your service but it also reflects your corporate image… so it must be presented in the best possible light.

If you want to reach prospects in your neighborhood and draw them into your drycleaning plant with a mailing piece, your choices are many.

You can go with a postcard, a multi-fold self-mailer, a letter, etc. It can be four-color, two-color, or straight black. You can use photography, illustration, cartooning, or go with all types. It's hard to make a guess about response rates until you know exactly what format you're using!

These are the major variables affecting a response rate on a direct mail campaign. In fact, it’s generally accepted that these three factors taken together account for approximately 80 percent of the expected response.

Other variables include the price of your service, your positioning with regard to your competition (i.e., are you a full-price cleaner or a discounter), the competitive climate itself (is your competitor an aggressive marketer), the time of year (summer will not bring as good a response as the fall season will) and so on.

In short, because so many variables can affect the final outcome of your direct mail project it’s a very difficult task, at best, to guess what your return rate will be.

So what’s the answer? How is one to gauge a response before blindly embarking on a costly marketing program? Is there an alternative to simply guessing what we think the response rates will be?

Actually, there is. The answer is to do a break-even analysis.

First of all, figure what your total costs will be. This is not a number you have to guess at. You can actually compute it accurately. Simply add up all of your costs including printing, creative, postage, list rental, etc.

Next, based on your average size order, calculate how many responses you’ll need to break even. Let’s say on a postcard mailing to 500 prospects your total cost is $275 and your average size order is $22. That means your break-even (including any discounts) will be 12.5 orders.

Now that you have the response rate required to break even in front of you, you should have a good feel for whether this rate seems achievable. This makes a lot more sense than just guessing at response rates in the dark.

Going one step further, if you want to get a handle on rate of return and be able to improve your response factor, you have to be willing to test. Testing is vital and should include such components of your mailing as the list, the offer and the creative, just for starters. Ultimately, it's better to test than to guess. Rigorous, and aggressive testing requires resources and commitment, but it's the way to make money!