Measure Your Campaign Success With these 7 B2B Direct Marketing Metrics

We run direct marketing campaigns because we need to make incremental revenues. Leads are fantastic, but revenue is the real gold at the end of the rainbow. Before we bask in its glow, we’ve got to consider our campaign expenses and determine if our efforts were really “worth it.” Well, how do we know?

Let’s look at some metrics and do some math (we’ll make it as painless as possible) to get a feel for how we can measure the bottom-line performance of our B2B direct marketing campaigns.

Under Pressure for Profits
The aesthete that lives inside the heart of each marketer must come to terms with the fact that even our proudest campaigns, with their gorgeous creative, motivating copy and compelling offers, must be exposed to objective, dollars-and-cents analysis.

But tracking and measuring campaign results is what enables us to get even more creative as time goes on. We learn what works—and what works best—so we can keep pushing the (direct response) envelope further. We can discover new ways to drive even more leads and encourage even more sales. And if we get really good at it, we can increase our budgets and expand our strategy, and….are we getting ahead of ourselves?

Key Direct Marketing Campaign Metrics
OK, we’ll get down to looking at the basic success metrics that will help you look at your campaigns more objectively and do your marketing work more profitably. Keep in mind that campaign analysis can get really complex for some companies and some initiatives, especially when they use multiple offers, multiple lists, multiple creative, multiple channels, etc. We’re keeping this simple so you’ll stick with us.

1. Response Rate = the percentage of people who respond to your offer.
Let’s say you mailed a direct mail package to 5,000 contacts and 50 people sent back a business reply card, 20 people called the campaign’s dedicated phone number, and 30 people visited the campaign’s dedicated website landing page. That’s 100 responses and a 2% response rate.

This number might be meaningless without a frame of reference, or a benchmark, that tells you if this level of response is something to get excited about. This is why we set up control groups as a basis for measurement. A control group is a selection of your marketing list that doesn’t receive the campaign offer. By monitoring the performance (i.e. sales revenue) of your control group vs. those who received the mailing over the same time frame, you can determine whether your campaign made a positive impact on sales. In other words, did the campaign “work?”

2. Qualified Response Rate= the percentage of people (who are seriously interested in your offer) who respond to your offer.
So you generated 100 leads on a 5,000-piece mailing. But after the sales team talks to these respondents, it’s clear that only 50 of them are actually likely to take advantage of the offer. Your qualified response rate is 1.0%. Still not shabby! And definitely more meaningful to the sales team.

What makes a lead qualified? That depends on what is important for your sales organization. Typically, lead qualification factors in when the prospect will be ready to purchase, the mailing recipient’s authority to make a buying decision, and the lead’s budget. You may decide that setting up a sales meeting or delivering a proposal is what qualifies a lead for qualified status. What matters here is whether or not your campaign yielded “enough” qualified responses for the sales team to pursue—to make the campaign worth their while.

If your campaign resulted in only 20 qualified leads—and a 0.4% qualified response rate that generated 4 conversions to a sale, depending on your selling price and profit margins, you still may have a success.

But, if 20 qualified leads is too few, you’ll have to try and figure out what might explain the low response. Maybe your mailing list wasn’t targeted enough or large enough. Maybe your offer didn’t resonate with the audience. Maybe your mailing dropped at an ineffective time. Any number of factors can be at play…but your metrics give you a great opportunity to revisit your strategy and tactics.

3. Conversion Rate = the percentage of people who made a purchase.
Let’s work with the 50 qualified leads from your 5,000-piece mailing. Your sales team is able to close 15 of the responses. That’s a 30% conversion rate. In other words, about one-third of your qualified leads became customers.

This is where things get interesting if they weren’t interesting enough. Now, your company has 15 new customers—and depending on your goals, profit margins and potential lifetime value (LTV), which we’ll cover in number 6, this could be a reason to celebrate or reason to revisit the campaign plan and search for answers. Either way, you can start putting some hard sales numbers to the campaign performance and connect the dots to your bottom line.

4. Cost per Acquisition = How much you spent to get each new customer.
You have 15 new customers. And let’s say your total campaign costs were $4,000. This means you spent roughly $267 for each new customer.

Is this too much? Is it a great deal? Again, it depends on how much each customer is worth to you. Figure out your average revenue per customer by taking your yearly revenue and dividing it by your yearly customer count. For example, let’s say your annual revenue is $3 million and you serve 1,500 customers annually. That means each customer spends roughly $2,000 with you, and a new customer is “worth” about $2,000 to you. And, if the average customer remains a customer for 5 years the customer value is $10,000.

How much are you willing to spend to get a new customer on board? In our example, spending $267 for one new client is a great value.

This metric is also useful when comparing campaigns, so tracking this number for every lead-generating campaign, from email to direct mail to social media advertising, will help you determine where your budget is best spent.

5. Revenue per Order = average amount of revenue you earned from each sale that your mailing generated.
How about we say that your direct mail campaign resulted in $22,500 in revenues. This puts your revenue per order at $1,500, on average.

The value of a customer is relative, right? We already found that your customers are worth about $2,000 each, so the revenue generated from this campaign we’re measuring falls a little short, which is indeed less than you projected. And you have to go back to that control group—what did customers in that segment spend over the same period of time? Is it more or less?

OK, back to that campaign strategy. Maybe you need to experiment with different offers that attract customers with deeper pockets? Or maybe it comes down to using a list that contains more affluent prospects. Of course, it’s possible that your sales team under-delivered—maybe they need more sales training or take a different approach to signing on new customers.

Next time, you’ll likely be looking for a revenue per order of at least $2,000.

6. Lifetime value = the dollar amount you expect a customer to spend over their relationship with you
In our example, your customers spend around $2,000 with you annually. And we’re going to assume you engage customers for about 5 years, taking their lifetime value to $10,000.

Nice to know, but how does this help? It leads us to ask questions about what it takes, financially, to keep customers happy and spending money with us year after year. This ties to the adage, “It costs less to keep a customer than to attract a new one,” and gets us thinking about our marketing to existing customers versus new ones.

What if you were to develop a highly effective campaign (and a killer offer) to get existing customers to increase their orders by 25% each year, or an additional $500? For this new campaign (let’s assume it costs $4,000), cost per acquisition actually becomes a retention metric.

If 100 existing customers respond to the 5,000-piece mailing and a full 30 of them intend to purchase $500 more from you as a result of your offer, then it only cost $133 per customer to do so! And the lifetime value, at least for these 30 customers, just went up to $12,500. Think of the impact on your annual revenue!

7. Total ROI = did you earn more than you spent on your campaign?
Calculated most simply, you earned $18,500 on this direct mail campaign. It cost $4,000 and you generated $22,500. There’s always more to the story—depending on the other, non-marketing costs associated with getting new business on board, for example—but the total ROI is a good, basic measure of success. Money was made!

Whether or not the campaign will be duplicated or tweaked based on updated sales goals remains to be seen. Again, how did your control group perform?

Many variables are involved in a campaign’s creation and performance, so it can be hard to answer “why” questions about your results, positive or negative. That’s why testing—and taking a long-term view—is so important. (Don’t miss If You’re Not Testing, You’re Not Maximizing Results!) When you’re testing creative and consistently measuring your campaign performance and benchmarking your results, your efforts will keep improving. And that’s what your sales team wants to see!

Contact us to learn more.