The ratio of revenue generated to total campaign cost — typically expressed as X:1 or as a percentage.
Definition
Return on investment (ROI) measures the financial return of a marketing campaign relative to its cost. The standard formula is (revenue generated − campaign cost) ÷ campaign cost, expressed as a percentage; it's also commonly expressed as a ratio like "15:1." For direct mail, the inputs are number of responders × average customer value vs total cost of printing, postage, list, and labor.
Why it matters
ROI is how you decide whether to repeat, scale, or cut a campaign. It's also the language you use to justify spend to a partner, manager, or investor. Direct mail campaigns to house lists with phone follow-up routinely produce 10:1 to 25:1 ROI, putting them in the top tier of marketing spend for small businesses.
Example
A vet clinic mails $1,200 in postcards and reactivates 28 clients. Average annual client value is $600, so first-year revenue is 28 × $600 = $16,800. ROI = ($16,800 − $1,200) / $1,200 = 13:1, or 1,300%.
Related terms
- Customer Lifetime Value — The total revenue a typical customer generates over the entire time they remain a custo...
- Break-Even Response Rate — The minimum response rate at which campaign revenue covers campaign cost — below this, ...
- Direct Mail Response Rate — The percentage of mail recipients who take the desired action — call, visit, scan a QR ...
- House List — A mailing list of your existing or past customers, built and owned by your business.
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