Interesting ROI Trends in Direct Marketing

What’s happening in the world of direct marketing these days, and where is the best ROI to be found?

Certainly, a lot of inboxes are positively groaning under the sheer quantity of e-mail volume, and many people have responded by beefing up their spam filtering. But the most recent economic impact study conducted by research firm Global Insight for the Direct Marketing Association reports that commercial e-mail marketing delivers the best bang for the promotional buck – more than $43 for every dollar spent on it.

By comparison, ROI from Google AdWords and other paid search advertising activities generates about $22 for every dollar spent.

According to the analysis, postal direct mail initiatives deliver lower returns on investment — with catalogs returning just a little over $7 per dollar spent and other forms of postal direct mail around $15.

Depite its stellar ROI numbers, it is true that e-mail marketing is actually showing a slight drop in ROI. And that is forecast to continue to decline in the upcoming years, at least partially because of the reasons noted above. Even so, e-mail is forecast to deliver an ROI of ~$38 for every dollar invested in 2013.

Of course, it’s important to recognize that search marketing is where much of the heavy action is these days. Internet search drives ~$244 billion in sales as compared against a related cost of ~$11 billion.

Commercial e-mail? It drives just ~$26 billion in sales … although the cost to drive those sales is a relative pittance at ~$600 million.

And over on the postal side of the ledger, no one should be surprised to learn that direct mail expenditures, while still large at ~$44 billion, are down ~16% in just the past year alone.

[But you can look on the bright side: Your promo piece is going to be noticed a lot easier among the smaller stack of daily snail mail that’s being delivered!]

Searching for effective lead generation and conversion.

In the current business climate, companies are relying more than ever on new sales opportunities to replace business that has been lost with current customers. And it’s pretty clear by now that “search” has emerged as the form of online promotion that generates the best lead generation and conversion results — outstripping other e-promotional tactics such as online display advertising and newsletter sponsorships.

This isn’t surprising, of course. Search advertising captures the interest of online viewers precisely when they’re in “search mode” for specific products and services, rather than when they’re just surfing the ‘net for news and updates.

(In fact, some advertisers have come to believe that even print advertising outperforms online display advertising. That’s because readers are more likely to browse all the way through print publications. Compare that to visiting informational web sites where viewers are far more prone to selectively pick and choose the pages that they open. A well-placed display ad on a “new technology news” page, for example, might be invisible to the vast majority of viewers who come to the home page and then decide to click through to only one or two additional pages on the site.)

But back to search. Many advertisers wonder which is most effective: gaining high “natural search” rankings that occur based on the content of the web site, or opting for pay-per-click search listings such as Google’s AdWords program with their entries on the right side of the screen.

As it turns out, both tactics have their pluses.

In fact, a new year-long study that ended June 30, 2009 of more than 25 e-tail web sites by Engine Ready, Inc., a search engine software development firm, found that visitors who clicked through to the sites from paid search ads were ~50% more likely to make a purchase, compared to visitors who came to the same sites via clicking on a natural search link.

Specifically, Engine Ready discovered that the conversion rate from pay-per-click links measured 2.03%, while the conversion rate was only 1.26% from organic search clickthroughs.

On the other hand, various research studies conducted over the past few years demonstrate the clear popularity of natural search listings over paid search listings. It’s been shown pretty consistently that around two thirds of total clicks are made on natural search listings, compared to just one-third on pay-per-click listings.

So the key takeaway is that any marketing program worth its salt incorporates search marketing as a key component. And in most cases, that effort should encompass search engine optimization for natural search rankings along with a pay-per-click advertising program.