One easy and straightforward measure of a direct mail campaign’s effectiveness is its Return On Investment, or ROI. This represents the percentage of the campaign’s cost that is recovered by sales that result from it, or more simply, the profit-building power of the campaign. The ROI can be calculated by subtracting the campaign cost from the profit from sales that resulted from the campaign, then dividing by the campaign cost.
A campaign that costs $10,000 may generate $30,000 in total sales. The profit from these sales might be $12,000 (subtracting cost of goods sold). The campaign profit is thus $12,000 – $10,000 = $2,000. The ROI is thus $2,000 / $10,000 = 20%.
Calculating the ROI provides a way to compare different direct marketing campaigns or to compare a DM campaign with other marketing efforts. The higher the ROI, the more effective that campaign or technique is for generating profit.
And with all this in mind, we have built a Direct Mail ROI Calculator so that you can figure out your return on investment.