Email vs Direct Mail: An ROI Analysis

Postman rivalery - Mail deliveryMarketers are very often faced with “do this” or “do that” decisions when it comes to deciding on a platform for their next marketing campaign. Very few businesses have marketing budgets large enough to simply hedge their bets and explore all the avenues and options. This is why the savvy marketer will often take the time to sit down and examine the return on investment (ROI) for a particular marketing strategy. In the past direct mail – expensive print mail delivered to a physical address – has been used with varying degrees of success. Now the option to utilize email marketing has come to the forefront, and email is giving direct mail a run for its money.

Direct mail still has its place, and admittedly it generates the highest response rates of any marketing platform available, including email. However, direct mail tends to be very, very pricy when compared to email: email costs next to nothing per 1000 pieces, while direct mail costs over $600. The sheer difference in these price points means that email starts with a large lead over direct mail when discussing ROI.

The Harvard Business Review published an excellent report measuring email vs. direct mail and other marketing platforms. Perhaps one of the most interesting points made in the report, that goes beyond simple ROI, is that, “email beats the competition from a measurability standpoint.” Meaning that with email, as opposed to direct mail, a marketer can nearly instantaneously know who has received the email, opened it, who clicked on links and what links they clicked on, and even if the email led to the purchase of a product. In a world where data is king these immediately available metrics prove invaluable to marketers.

“But email doesn’t lead to many sales!” Detractors will decry. Direct mail leads to many more responses and thus many more sales – but only on the surface. The same HBR report cites a study conducted by a major retailer that broke down customers into groups and targeted each group with email or direct mail. Due to their loyalty program it was easy for them to track the outcomes of the marketing initiative, and to see if email or direct mail led to more sales. The findings were fairly shocking.

Direct mail did have a higher response rate than email, but it also cost nearly 100 times as much. However, the shocking number comes from email’s “off-email multiplier” – people who received the email and then drove to the store, or purchased through a catalog, etc. That number was 3.76. Meaning that for every one purchase directly through an email another 3.76 sales were made through other means due to the email marketing.

After factoring in this off-email multiplier, the HBR concludes that, “it’s a very safe bet that email will beat all your other marketing methods in terms of return on investment.” Another well-respected email marketing blog discusses email’s edge on direct mail in terms of ROI, citing a Direct Marketing Association report on the subject.

It appears many experts agree, email exceeds direct mail’s ROI. It’s as simple as that. So the next time the marketing budget is tight and the choice is email or direct mail make the ROI choice, and choose email.

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