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One Metric That Can Boost Your Direct Mail Success

How do you know if your direct mail marketing campaign was a success? For most marketers, it all comes down to this formula:

Total money earned from sales - Total Money Spent = ROI

If your “ROI” (return on investment) is positive, the campaign was a success. If it’s negative, the campaign wasn’t a success. But is this really the most important metric to consider when measuring the success of your direct mail campaigns? I don’t believe it is. There’s another metric which is more important. If you measure and improve this metric, it could change the way you do business:

Introducing Your (VPC) “Lifetime Value Per Customer”

Your VPC is the total amount of money you earn from a customer over the time they do business with you. For example, let’s assume you make a $100 sale to a customer, but then you sell them $2,100 more in products and/or services over the next 10 years. Now, let’s assume that’s your average success rate for all your customers. This would make your VPC $2,200. Now, let’s assume that you invest $10,000.00 into a direct mail campaign and you only gain 105 new customers by selling them each $100 worth of your products.

That’s more than a $9,000 loss on your direct mail campaign. Was it a success? Considering that those 105 customers will bring you over $200,000 in sales over the next 10 years, of course it is. Unfortunately, many marketers can’t think this far ahead. They need to send out a direct mail and make an immediate profit; otherwise they’re going out of business. But what if you narrowed down your prospect list, send fewer pieces and focus the rest of your marketing efforts on improving YOUR VPC?

What if you were to take 50% of the money you’re already spending on other kinds of marketing and what if you started using that money to build a solid follow-up campaign using a company newsletter or a catalog? This is much more effective than using email to follow up, because direct mail pieces are less likely to get deleted. If you start using direct mail to create a continuity strategy and to increase your VPC, you’ll start thinking differently about your ROI equation. Instead of thinking like this…

Total money earned from sales - Total Money Spent = ROI

You’ll start thinking like this…

Total VPC for all customers - Total Money Spent = ROI

Now, the question is…how do you measure and improve your VPC using direct mail marketing?

How to Increase Your Lifetime Value Per Customer

To find your VPC, count the number of customers you have on the books right now, then count the total money you’ve earned from sales to those customers. Then, apply this equation:

Total money earned from sales (divided by) Total number of customers = VPC

So if you’ve acquired 1,000 customers to date and made $50,000 in sales, your total VPC is $50.

50,000 (divided by) 1,000 = $50

Now, let’s assume you want to increase your VPC to $75. You could create and market two additional products to your customers and, if you close one out of four customers, you’ve just increased your VPC to $75. You can do this by building a direct mail marketing campaign especially designed to market to existing customers. In the above case, that would be $25,000 in extra profits. As you know, it’s much easier to make a sale to someone who has bought from you than it is to make a sale to a complete stranger.

Just imagine how much harder it would be to accomplish the same result by creating a brand new direct mail campaign which only targeted brand new customers. Are you starting to see why ROI isn’t the only metric that matters when creating a direct mail campaign? Try this next time you launch a marketing campaign. Find out your total VPC and work on a follow up strategy for increasing it. You’ll find that it’s much easier than trying to constantly push for new sales.

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