How to estimate true revenue impact of email/direct mail campaigns

Marketer targeting improved campaign returnsEstimating the revenue impact of direct mail (catalog) and email campaigns over an observation window is complicated by a few factors.

  • Purchases may not be linked to a specific promotionor offer code
  • Prospects may be targeted with multiple campaigns;difficult to isolate response to specific campaign.
  • Purchasers may choose not to click through campaign email.

Furthermore the marketing manager needs to consider the point that the incremental revenue impact has to separate out the purchases from customers who would have made purchases even had they not been targeted with the campaigns. The simplest and most reliable method for the estimation is described below.

A few operational guidelines

  1. The method should be usable across both direct mail and email campaigns.
  2. The method should be robust and easy to automate – necessary conditions for basic process intelligence

Design: The incremental revenue impact of marketing campaigns is estimated by multiplying the count of the opted-in customers with the differential in the revenues per contact for the observation of the opted-in customers from the not opted-in customers.

Total revenue breakdown by customer opt in status

 

In the example above, the incremental revenue impact is 5,789,779 x ($0.10-$0.06)= $232K. 

Why it works: 

  • The method assesses the influence of the campaign but does not wade into the weeds of which campaign, which offer code. (It does not matter).
  • The critical factor is if a customer is part of the opted-in list or not. The working assumption is that by being in the opted-in list the marketing manager will make at least one attempt in the observation period to appeal to the prospect. (There is no excuse not to).
  • The method lends itself to further sophistication via segmentation. In the example below, the “Thrifty Browser” would be targeted with a different type of campaign than the “24 Carats”. Their respective Revenues per contact are $0.16 and $7.20 respectively. Marketing campaigns are typically assigned at a segment level and have different costs. The segment-wise separation is useful for improving accuracy in estimating marketing ROI. So if the manager spent $10K to market to the “Thrifty Browser” segment, the ROI would be (283,279 x $0.07)/$10,000 = 1.9.

segment breakdown of revenues by opt-in status

 

[Aside: The above screengrabs are taken from an implementation of the Polytab marketing intelligence solution]. To see how the calculation is done manually, download the worksheet by clicking on the button below.

Download Worksheet

 

For more guidance on picking the segmentation scheme that works best for you, click this article on the seven kinds of segmentation every marketer must consider.

About marketing intelligence automation: Tactics such as the above are critical to a marketing manager. The method described above is not perfect by any means but the measure is reasonably robust and has been proved to be reliable. Furthermore, once standardized the intelligence can be embedded into the marketing process. This helps the marketing manager get reliable decision support on a near real time basis. To learn more about marketing intelligence automation, check out Polytab.

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