Direct mail marketers are always seeking ways to maximize their return on investment (ROI). But in today’s complex marketing landscape, simply measuring overall ROI isn’t enough. To truly understand the effectiveness of your campaigns, you need to delve deeper into incremental ROAS (iROAS).
What is iROAS?
iROAS measures the incremental revenue generated specifically from your direct mail campaign, isolating its impact from other marketing efforts. It answers the question: “How much extra revenue did my direct mail campaign drive that I wouldn’t have achieved otherwise?”
Why iROAS Matters
True Campaign Performance: iROAS provides a more accurate picture of your direct mail campaign's effectiveness by isolating its impact from other channels.
Budget Optimization: Understanding which campaigns drive the most incremental revenue helps you allocate your budget more strategically.
Data-Driven Decision Making: iROAS gives you the data you need to make informed decisions about future campaigns and optimize your strategy.
How to Measure iROAS in Direct Mail
CONTROL GROUP
Establish a control group that doesn’t receive your direct mail piece. This group should be demographically and behaviorally similar to your target audience.
TRACK CONVERSIONS
Track conversions (e.g., purchases, website visits, donations) for both your target audience and the control group.
CALCULATE INCREMENTAL REVENUE
Subtract the revenue generated by the control group from the revenue generated by your target audience. This is your incremental revenue.
CALCULATE iROAS
Divide the incremental revenue by the cost of your direct mail campaign.
EXAMPLE
Target Audience Revenue: $10,000
Control Group Revenue: $6,000
Incremental Revenue: $4,000
Direct Mail Campaign Cost: $1,000
iROAS: $4,000 / $1,000 = 4 or 400%
How to Use First-Party Data in Your Direct Mail Campaigns
Targeted Audiences: Use data-driven insights to segment your audience and target those most likely to respond to your direct mail piece.
Compelling Creative: Craft engaging and personalized mail pieces that resonate with your target audience.
Clear Call to Action: Make it easy for recipients to take the desired action (e.g., visit your website, make a purchase, donate).
Multi-Channel Integration: Integrate your direct mail campaign with other marketing efforts for a synergistic effect.
Track and Analyze: Continuously monitor your campaign performance and make adjustments as needed to optimize your iROAS.
Conclusion
In today’s data-driven world, understanding iROAS is essential for direct mail marketers. By accurately measuring the incremental impact of your campaigns, you can make informed decisions, optimize your budget, and achieve greater success.
