February 5, 2010, Chapel Hill, NC:  "A good response is one that reaches your objective or better. How do you set a good objective? That depends upon measures that take in the bottom-line," stated Steve Cuno, author of The Bankers Direct Mail Bible and Prove It Before You Promote It.

[For more of Cuno’s secrets to direct marketing success, see Direct Mail Guru Tells Success Secrets.]

"If you can show provable results, the bean counters will leave you alone," commented Cuno.

Cuno, CEO of the Response Agency, Salt Lake City, Utah, offered his observations during an February 4, 2010 Webcast entitled, “Direct Mail: What Works, What Doesn't, and How to Get Started.” The presentation was hosted by OnsiteConference, Inc., a privately held research marketing firm located in Tampa, Florida.

"Your earnings objective should be based upon on what you know about the value of the customer,"stated Cuno. "That's where the LTV (Lifetime Value) comes in.  If you know the return you can expect over the life of an account relationship, you can figure out how much you're willing to spend to secure that relationship. If an SBA line brings in a net $2,500 per year in revenues over five years, the LTV for that product is $10,000.  When your cost-per-sale is equal to or less than that, you have attained a "good" response."

According to Cuno, It’s important to consider not just the income the product will generate over the life of the customer relations, but also the LTV of the client relationship itself. A new SBA client will likely open other accounts. The predicted profitability of all of these relationships combined should be considered when estimating the client's LTV. In the above example, $10,000 might be just the beginning of a new client's profit potential.

Once you have determined LTV, you can determine how much you're willing to spend to acquire the relationship. Again, let's say the LTV of a new relationship is an estimated $10,000. Now, do the math. What is the cost of your direct mail program? How many people is it targeting? What percentage of those people must sign on in order for you to average spending less than $10,000 per acquired account? Once you have that number, you can assess whether or not it's realistic to expect that from your direct mail. If you'll need to close 10% of the people on your mailing list to break even, that's ambitious. If you can make a profit by closing 0.25% of them, that's far more attainable.

Once numbers and objectives are in place, it's important to use every bit of direct response knowledge to your advantage. Include a compelling incentive offer.  "Remember, the better heeled and better educated your market, the better incentives work,” continued Cuno, adding, “I know that may sound counterintuitive.”"

Cuno recommended the use of proven direct response formats and strategies.  "If you don't know what these are, start reading direct response blogs, books and magazines. This is no time to proceed blind."

"So, how can you tell what response rate to expect?  You need to consider past campaigns, your own testing and predictive results," Cuno continued.

Cuno believes that to establish response expectations, begin first with precedent—what’s happened before when you’ve run campaigns. Yes, you want to keep and roll out winners. But be careful, sometimes a winning approach wears outs. Also, flukes happen.   A smarter approach, if you have the time, mail to a small, representative sample. If it gets the response you want, roll out the campaign.

"If your testing can garner thirty or more responses, you've got something predictable," says Cuno. Small tests keep failures small. Statistically valid small successes can indicate big wins ahead.

Cuno adds, "never retire a winning campaign simply because you’re tired of it.  But do keep testing."