The Data & Marketing Association (DMA) – in conjunction with Demand Metric – has released its latest Response Rate Report, an in-depth study of direct marketing. With direct marketers’ use of multiple channels on the rise, the report takes a look at several types, providing performance and cost benchmarks. The results, which are based on a survey that generated 252 complete and 340 partial responses, demonstrate the consistent popularity of email marketing and its continued strength in terms of ROI.
A couple of quick notes about the sample and methodology:
- 37% of respondents reported most frequently running B2B campaigns, with 47% mostly running B2C campaigns and the remaining 16% mixed. Some 53% hail from smaller companies with less than $25 million in annual revenues, while 28% are from mid-sized companies ($26-500 million) and 19% from large companies (more than $500 million). Almost two-thirds (65%) of respondents are marketers, while 14% identified as agency respondents, 9% as suppliers, and the remaining 9% as being from other roles.
- The study notes that some media types had a low number of respondents. Rather than omit them, disclaimers are added in these cases (and can be seen in the following charts, where appropriate). Moreover, with some skew apparent (as well as outliers) such that the data was in many cases not normally distributed, the study most commonly uses a median average rather than a mean average.
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.
Median ROI Benchmarks
Kicking things off with perhaps the most important metric, the report finds that email is head and shoulders above the rest in terms of ROI, with a median average return of 124%. Telephone campaigns – measured in the 2015 report, were not examined in this iteration of the study.
Social media ads were found to garner a median ROI of 30%, basically on par with direct mail campaigns (29%).
Mobile ads were also not measured in this edition of the report. Among the remaining channels, paid search (23%) topped online display (16%) in median ROI.
It’s worth noting that while the sample sizes were larger than 100 for email and direct mail, they were relatively smaller for paid search (57), social media (33) and display (28).
The results are generally in line with consumers’ own perceptions of purchase influence. In MarketingCharts’ primary research into media and advertising influence, email marketing emerged as one of adults’ top purchase influencers, with direct mail also in the mix and social ads a strong contender among youth.
Display advertising’s lower ROI results from a high cost-per-acquisition (CPA) and low response rate.
Among the select media, online display’s CPA (~$25) was higher than the other digital media tracked when using house lists, with email having the lowest average cost (of around $10). Acquisition costs for paid search (~$16) and social media (~$20) were also lower than for display.
The highest CPA (measured in this case as cost per response) belonged, however, to direct mail, with an average of $26.40.
Direct mail also had a higher acquisition cost than email when looking at prospect lists ($31 and $21, respectively).
Once again, the sample sizes are small in this analysis, with only email house lists having a sample size greater than 100.
Response Rate Benchmarks
While email has the lowest CPA when house lists are used, it tends to also have lower response rates, at least in comparison to direct mail.
The DMA multiplied click-through rates by conversion rates to determine response rate benchmarks for the digital media types. For house lists, these ranged from a low of 0.2% for display to a high of 0.6% for email and paid search. (Social media had a response rate of 0.4%.)
By comparison, direct mail generated a far higher response rate of 5.1% for house lists. Its response rate was also far higher than for email when examining prospect lists (2.9% and 0.2%, respectively).
Highlights by Medium
The following provides some quick highlights from the direct media covered in the report.
Email emerges as the medium with the broadest usage (92% of respondents) and planned increase in usage (50%).
For prospect lists (n=138), it is primarily used for lead generation (52%), with direct sales and brand awareness goals secondary.
For house lists (n=221), email’s goals are more varied between direct sales (31%), lead generation (29%) and brand awareness (26%).
Emails sent to house lists averaged open rates about 50% higher than those sent to prospects (25% vs. 17%), with click (10% vs. 5.4%) and conversion rates (5.7% vs. 4.2%) also higher.
For campaigns sent to house lists, B2B and B2C respondents reported similar open, click-through and conversion rates, although ROI was significantly higher for B2B (143%) than B2C (96%) respondents.
The opposite was true for emails sent to prospects: acquisition costs were lower for B2C ($11-12) than B2B ($17-18) respondents, with average ROI slightly higher for the former than latter (118% and 107%, respectively).
(These figures are derived in some cases from very low sample sizes.)
Online display’s median click-through (5%) and conversion rates (4.8%) were far higher than reported in the 2015 and 2012 reports – and much higher than other benchmarks have shown. This may be due to low sample sizes of 49 for click rates and 35 for conversion rates.
Some 55% of the 128 respondents using display this year said that they use retargeting, with about half of those reporting that click rates are higher for retargeted ads.
Average CPMs ranged from $12-13 for the 38 respondents who reported on this metric.
Meanwhile, lead generation was the desired outcome for 36% of display advertisers, on par with brand awareness, which was the primary goal of an equal 36% share.
The top goal of paid search campaigns is lead generation (51% share), followed by brand awareness (23%) and direct sale (22%), per the report.
The study compares branded and generic keywords, with the results indicating that:
- For B2C respondents, branded keywords averaged significantly higher click-through rates than generic keywords, while tallying lower cost-per-click and acquisition costs ($11-12 vs. $13-14). Overall ROI was considerably higher for generic keyword (28%) than branded keyword (20%) campaigns, though the sample sizes for these metrics were very very small.
- For B2B respondents, median ROI was relatively equal regardless of brand or generic keyword (26-27%), though acquisition costs and costs-per-click were reportedly lower for brand keywords.
Overall, B2C respondents tended to report higher click-through rates and lower costs per acquisition than their B2B counterparts.
Unlike display and paid search, social media advertisers focused more on brand awareness (45%) than on lead generation (35%). Though these figures are based again on small sample sizes, the report suggests that when comparing B2C and B2B advertisers:
- B2C respondents had higher click-through rates (6.9% vs. 5.7%);
- B2C respondents also had higher conversion rates (7.3% vs. 5.8%);
- CPCs were lower for B2C ($2.98) than B2B ($7.10) respondents; though
- Costs per acquisition (~$21) and ROI (28-30%) were comparable.
The median response rate for direct mail sent to house lists is 5.1% this year, down slightly from 5.3% last year but up from 3.7% the year prior.
Likewise, the median response rate for direct mail sent to prospect lists is steady from last year (both years at 2.9%) and up from 2015 (1%).
Looking at various metrics across letter types, the study demonstrates that:
- Response rates for direct mail sent to house files is fairly consistent across types, ranging from a low of 4.3% for letter-sized envelopes to a high of 6.6% for oversized envelopes;
- Response rates for direct mail sent to prospect files were almost twice as high for oversized envelopes (4.9%) than they were for letter-sized envelopes (2.5%);
- Oversized envelopers had the highest response rates for both B2B and B2C advertisers;
- CPMs are highest overall for oversized envelope formats ($481 for house files and $467 for prospect files) and lowest for postcards, with this order of costs consistent across B2C and B2B respondents; and
- Oversized envelopes sported the highest ROI for B2C (61%) and B2B (37%) respondents, though the sample numbered fewer than 10 in each case.
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.