Before you start your next direct marketing campaign, do you know what response rate you will need to reach your goal? How many new customers are required to attain an acceptable cost per name? How many orders to cover overheads? How much income to break even?
Companies with finance directors and accountants generally have these questions covered, but if you’re a small enterprise or entrepreneurial-type venture, it’s not always that straightforward.
Naturally, it’s relatively simple to analyse a campaign once it’s finished, but by then it could be too late! You really need to accurately forecast the possible outcome before you start, so that you can judge whether you are being realistic. At least then, if your estimate looks unachievable, you can make changes or alternative plans before you make a big mistake!
‘Back of a fag packet’ calculations are not enough! You need to take all your costs into account when you produce your forecast. Elements like returns, packaging, promotions, exchange rates etc., can easily tip the balance and turn what looked to be a promising campaign on your cigarette box, into a complete fiasco.
At the planning stage, you should ideally have the capability (and flexibility) to quickly find answers to questions like: ‘What would happen to my profit if my returns rate went down to 1%?’, ‘Would a saving of 1% on my buying prices have a big effect on the cost of recruiting a new customer?’, ‘How much easier would it be to break even if I could increase my average order value by £1?’, ‘What uplift in response would I need to cover the extra cost of this promotion?’ and so on…
If you feel your direct marketing campaign forecasting could benefit from sharpening up please contact Laurence White for an informal, preliminary chat. Rest assured any matters discussed will be in complete confidence and without future obligation.
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