When you think about evaluating
the success of a marketing campaign, what comes to mind? For many marketers,
it’s response rates. However, that just because someone “responds” by
contacting you doesn’t mean that the campaign was profitable. The true measure
of success is whether they actually buy something. That’s why one of your most
important measures should be conversion rate.
Let’s say you’re a gourmet
store in the heart of a college community. You just launched a line of
breakfast items that includes pastries, breads, and gourmet omelets. You
develop a campaign of 10,000 direct mailers that invite students to request an
email- or text-back coupon for 25% off one of the new items. As an incentive,
you offer a chance to win concert tickets to see the band Little Mix, which
soon will be performing in the area.
Initially, you’re thrilled by
the response rate. A whopping 32% of students requested the coupon. Then the
excitement fades. Although more than one-third of students responded, only 3%
actually visited the store and redeemed the coupon. When you work out your ROI,
you didn’t even break even.
Let’s say you had targeted the
local community instead.
Let’s say the response rate is lower—8%—but it’s an
affluent community with a high percentage of recipients working in and around
the university. Of those who do
respond, 32% redeem the coupon and try the new breakfast. From this pool, the number
of conversions is 150% higher than the college student pool. Your cost to
produce the campaign is the same, but your ROI is vastly different.
This simple example illustrates
the power of the conversion rate. Initially, who wouldn’t prefer 32% response
rate over 8%? But the conversion on the back end ends up being the deciding
factor in the profitability of the campaign.
So don’t think response rate —
think conversion!
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