How to Declare a Winner in a Direct Mail Test
When you are testing two direct mail pieces against each other, it is not always easy to determine a winner.
Unless, of course, you are basing it solely on initial responses.
One piece brings in 42 orders; the other brings in 55. You have a winner!
Or do you?
The truth is, direct mail pieces not only affect the number of initial orders; they also affect the lifetime value of the customer.
In the introduction to Million Dollar Mailings, Denny Hatch shares this interesting case study:
Circulation consultant Gordon Grossman illustrates the need for a precise understanding of the arithmetic in direct mail in his eye-opening analysis of the long-term value of the full-dress direct mail package (outer envelope, letter, circular, order card, etc.) vs. its cheaper cousin, the double postcard. At the end of year one of a mailing of 100,000 pieces, the double postcard brought in 955 paid subscribers and a profit of $2,418 vs. 900 subs for the control package and a loss of $4,436 for a swing of $6,854.
Based on this math, it appears that the postcard is the winner. But if you declared it the winner at this point in time, you’d have made a big mistake.
Hatch continues:
However, at the end of year five — after carefully tracking payments and renewals — the full-dress package was responsible for a net of 2,024 paid subs and a lifetime value of $53,803 vs. 1,517 postcard subs who paid $33,160.
In other words, in direct mail (and direct marketing in general) lifetime value is everything in terms of the health and growth of a business.
What are you basing your decisions on: initial orders or lifetime value?
-Ryan M. Healy
