Tuesday, October 16, 2012

Why an ROI of 1.0 in acquisition could be a bad thing

Direct mail is having an amazing resurgence in Australia.  Charities have been used to large volume acquisition mailings pulling maybe 1.0% response rate.  An initial return on investment of 0.70 would be considered really, really good.

But more recent innovations - particularly using 'premium' packs - have lifted response rates considerably.  Many charities are achieving response rates unheard of on large volumes; 3.5% is now met with a little bit of appointment even though it is fantastic.

These packs tend to be large, with lots of elements such as these two examples posted out recently.

Even though they cost more to print and post, they can do very well indeed.

Recently, we have had quite a few actually break even on acquisition - something very rare not long ago.

When the results below came in, Pareto staff and clients were jumping up and down with joy... (the results are NOT one of the packs above, they are different examples).

This means that the $215,000 raised covered the cost of this pack in total.

So why am I saying this is not a good thing!?

Well, as a one off it isn't - but if we keep getting ROIs of 1.0 it really means that we are not taking advantage of a great opportunity.  It means we are not targeting enough people, not going 'deeper' into less responsive lists and donor sources.  It is good news - but only if we interpret it correctly: that it is an opportunity for more acquisition.

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