Marketing Crash Course: How Response Rates Impact Campaign Costs and Profits
When it comes to advertising and marketing your products and services, common sense dictates that the higher the response rate, the better.
But just knowing that is not enough.
It's important to understand exactly how each additional response can affect your marketing costs and profits.
The better your understanding of the potential value of each additional response, the more effort you'll invest into increasing your response rate over time.
Increasing your response rate can increase your net profit in one of two ways.
You can either: 1.
Maintain (or increase) your marketing investment and frequency and capitalize on your higher response rate to bring in more revenue.
If the response rate for an ongoing campaign that reaches 10,000 people can be increased by 20%, let's say from 1.
5% to 1.
8%, that increases your actual responses from 150 to 180.
That may not sound like much, but depending on what you charge for your products and services, those extra 30 responses could add up to more than enough sales to justify the effort.
2.
Decrease your marketing investment and frequency, leveraging your higher response rate to maintain the same net number of responses but at a lower cost.
The higher your response rate, the less money you need to spend to generate the same amount of business.
Remember that this kind of measurement is only possible using a direct response marketing approach (marketing that solicits immediate action on the part of the recipient, such as an inquiry, request for information or sale), as opposed to a branding or image advertising campaign (marketing that seeks to increase mind share for eventual sale or action).
Unless there is a specific call to action ("Call today for a free guide") to generate an immediate and measurable response, you will find it very challenging to gauge a campaign's effectiveness at all.
But just knowing that is not enough.
It's important to understand exactly how each additional response can affect your marketing costs and profits.
The better your understanding of the potential value of each additional response, the more effort you'll invest into increasing your response rate over time.
Increasing your response rate can increase your net profit in one of two ways.
You can either: 1.
Maintain (or increase) your marketing investment and frequency and capitalize on your higher response rate to bring in more revenue.
If the response rate for an ongoing campaign that reaches 10,000 people can be increased by 20%, let's say from 1.
5% to 1.
8%, that increases your actual responses from 150 to 180.
That may not sound like much, but depending on what you charge for your products and services, those extra 30 responses could add up to more than enough sales to justify the effort.
2.
Decrease your marketing investment and frequency, leveraging your higher response rate to maintain the same net number of responses but at a lower cost.
The higher your response rate, the less money you need to spend to generate the same amount of business.
Remember that this kind of measurement is only possible using a direct response marketing approach (marketing that solicits immediate action on the part of the recipient, such as an inquiry, request for information or sale), as opposed to a branding or image advertising campaign (marketing that seeks to increase mind share for eventual sale or action).
Unless there is a specific call to action ("Call today for a free guide") to generate an immediate and measurable response, you will find it very challenging to gauge a campaign's effectiveness at all.
