The Direct Marketing Association (DMA) – in conjunction with Demand Metric – has released its latest “Response Rate Report” [download page], an intriguing study last issued in 2012. The report examines several direct media types, providing performance and cost benchmarks. The results, based on a survey of almost 500 industry respondents, show the consistent strength of email for ROI as well as continued high response rates for telephone and direct mail campaigns.
A couple of quick notes about the sample and methodology:
This article will cover the cost and performance benchmark comparisons and then provide some highlights for each medium. As per usual with these types of studies, the data provided are benchmarks and may not mirror readers’ own results.
Starting off with perhaps the most important metric, the report finds that email campaigns provide the highest median ROI, of 21-23%, followed closely by telephone campaigns (19-20%). (Click on the above chart to enlarge.) Measured for the first time, social media ads are said to garner a median ROI of 15-17%, on par with direct mail campaigns.
Mobile ads are slightly behind on this measure (median ROI of 12-14%), but are still ahead of paid search campaigns (9-10%) and internet display (6%, based on return on ad spend).
This year, the DMA used median rather than mean figures due to the data not being normally distributed. It should also be noted that both the mobile and social media advertising ROI benchmarks are derived from small sample sizes.
Display advertising’s lower ROI results from a high cost-per-acquisition (CPA) figure of $41-50. Among the select media, this was by far the highest cost when using house lists, with email having the lowest average cost (of $11-15). Mobile and social ads (each at $16-18) were both slightly cheaper than direct mail’s still-competitive cost per response of $19, while CPA for paid search ranged between $21 and $30.
Prospect lists – as expected – have higher CPAs, with direct mail ($71) coming in at roughly twice the cost of email ($36-40).
While email has the lowest CPA when house lists are used, it tends to also have lower response rates, at least in comparison to offline channels.
The DMA multiplied click-through rates by conversion rates to determine response rate benchmarks for the digital media types, which ranged from a low of 0.02% for display to a high of 0.2% for mobile. (Email, paid search and social media each had a response rate of 0.1%.)
By comparison, direct mail generated a high response rate of 3.7%. But telephone campaigns were even higher, at 9-10%, consistent with findings from the 2012 report.
The following provides some quick highlights from the direct media covered in the report.
Mobile advertisers responding to the survey estimated:
These figures should be used for informational purposes only, though, as they rely on a small sample.
A significant 42% of respondents reported not knowing the click-through rate of their mobile advertising campaigns, with this being the broadest lack of knowledge across the digital media tracked.
Meanwhile, of the various desired outcomes identified, direct sale was the primary goal of one-third of mobile advertisers, followed by lead generation (26%) and brand awareness (26%).
While mobile advertising was used by the fewest respondents, it is projected for an increase in usage this year by the largest proportion (73%).
The medium with the broadest usage (82% of respondents), email is primarily used for lead generation (44%) and direct sales (31%) as opposed to driving retail traffic (9%) or other goals (16%).
Emails sent to house lists averaged open rates about twice as high as those sent to prospects (19-20% vs. 9-10%), with conversion rates also significantly higher (2-2.9% vs. 1-1.9%). For campaigns sent to house lists, B2B and B2C respondents reported similar open, click-through and conversion rates, although acquisition costs were significantly higher among B2B ($21-25) than B2C ($6-10) respondents. The opposite was true for emails sent to prospects, which averaged lower acquisition costs for B2B ($26-30) than B2C ($41-45) respondents.
Online display’s median click-through (1.1-1.5%) and conversion rates (1.1-1.5%) were the lowest of the digital media identified, contributing to the medium’s high acquisition costs. Median CPMs were reportedly in the $5-10 range.
The study authors caution that display’s high acquisition cost and low return on ad spend may be affected by the surprisingly large share (39%) of respondents who reported not knowing the click-through rate of their display ads.
Meanwhile, lead generation was the desired outcome for roughly half of display advertisers, with direct sale (22%) and brand awareness (15%) further back.
As with display advertising, the top goal of paid search is lead generation (64% share), followed by direct sale (28%) and brand awareness (8%).
The study compares branded and generic keywords, with the results indicating that:
Overall, B2C respondents tended to report slightly higher click-through and conversion rates than their B2B counterparts.
Unlike display and paid search, social media advertisers focused more on brand awareness (40%) than on lead generation (35%). Though these figures are based on small sample sizes, the report suggests that when comparing B2C and B2B advertisers:
For telephone campaigns, used far more commonly by B2B (25%) than B2C (7%) respondents, direct sales (41%) and lead generation (37%) are on almost equal footing when it comes to desired outcomes.
While overall response rates ranged from 9-10%, respondents estimated house lists to generate rates twice as high as prospect lists (13-14% vs. 7-8%). Still, more than one-fifth said they don’t know their response rate. Even more (49%) don’t know their CPM, with a majority (59%) reporting not knowing the ROI of their telephone campaigns.
Nevertheless, among the estimates (which rely again on a small sample size), the study notes that B2B CPMs averaged $17-18, with a high ROI of 25-26%.
The median response rate for direct mail sent to house lists was 3.73% in 2014, per the study’s findings, up from mean averages of 3.4% in 2012 and 3.42% in 2010.
While response rates for house campaigns have remained relatively steady over the years, they have decreased for prospect lists, with 2014’s median rate of 1% continuing a steady decline from a mean average of 2.14% in 2003. (The use of a median figure in this year’s study may be a contributing factor, although previous years that used mean figures also show a general decline.)
Looking at various metrics across letter types, the study demonstrates that:
The full report, available for purchase here, contains many more interesting breakdowns by company type and desired outcome, as well as more figures on usage of these various media by industry. The full report also provides more details on the study’s methodology.
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