[Advice] Estimating direct mail ROI for a brand new business

Hey guys, just posted this on a forum thread over at GKIC

Ted wrote:

"Hello everyone!

I wanted to get some feedback to one of the two central questions I have in a new business I am starting. The business is a high end coffee bean subscription service, selling beans overnight from the best roasters in 3 cities in Europe directly to the US consumer.

I have access to a list with a profile that meets my expected target audience: high income travelers to Europe who like gourmet food and buy online/through catalogs (list is from Ron Kurtz).

My goal is to send out direct mail as lead gen, to the website, which will offer 100% money back guarantees, etc.

What should I use as my estimated response rate (here meaning eventual sales) to a mailing? (let's assume that it's a "good" offer)

-->Is 2% overly optimistic?

Many thanks, Ted"

Hey Ted, that’s a great question it could be really difficult to figure that out if you don’t have previous tests or any numbers to go on. But whoever you’re getting the list from, they should have some statistics to look at or maybe they have some stats from other business similar to what you’re doing and how they’ve done and what kind of response they’ve gotten.

But if I’m going into direct mail situation completely blind. I have no clue what the response rate going to be. I tend to try to calculate my numbers based on 1%, just because I know that if I write a good ad I should be able to get 1% and I generally get a lot higher percentage than that.

But if you just calculate that 1%, it will help you determine if at that low of a rate or at that lower return, if it is worth it for you to do the mailer.

So maybe that will be a good way to start is to take that 1% and just plan if 1% respond, would it be successful, would it be profitable. Do you need 5%, what do you need for that mailer to be successful. If you can design a mailer to a market and get a good price on it so that 1% return equals a descent amount of profit. I’d say it’s worth testing out and seeing how it does and then of course make the offer better and better from there and tweak it to get higher percentage.

Hopefully that helps you out, good luck with the ad.

- JR

JRGriggs.com || RedWallMarketing.com