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NMOA Direct Marketing Article
Direct Marketing Strategy and Planning - Testing
By Tim Little

How to Test Mailing Lists
Direct marketing lists is the most critical element of a direct marketing campaign. One of the greatest features of direct marketing is itís ability to measure and test any element in itís campaign including testing copy, testing campaigns, dry tests, testing the offer and testing the list.

Probability Tables
The predictability of direct mail marketing is another great advantage of direct response. If a direct marketer has a history of information about past direct-mail efforts, than it is possible for him or her to forecast the results of a new rollout for marketing planning and budget projections.

When projecting the results of a planned mailing you must keep in mind to measure the exact same things consistently. In other words you must keep all items in your campaign identical, like offer, lists (be sure to select every other address in zip-code order) and other and time of season if possible. If you make any substantial change, the predicted results in the probability tables will no longer be accurate.

The laws of statistical probability will only apply when the elements of the package are consistent with the test. Time is a variable that cannot be duplicated but season and month can, the economy and competitive conditions are conditions that cannot be controlled.

Probability tables are based on standard statistical formula for predicting the future outcome based on sample results there are three tables and each is based on the percentage confidence level for example one is 99% confidence, another for 95% confidence and the last for 90% confidence level.

How You Predict Future Results with Probability Tables
The classic direct mail sample size is usually 5,000 pieces with the normal 2% response rate (response rates could be higher or lower depending on offer, list and market). You can now predict a future response rate if you replicate the mailing exactly. Tables will show you that if you that at a 95% confidence level and a 2% response level from a sample mailing of 5,000. That you can expect percentage variation of 19.4% indicating that 95 out of a 100 replications that there is a 5% chance that you will not achieve the exact result.

When you look at the tables close enough, you will see a distinct pattern emerge that helps to clarify the idea of margin of error and confidence in the projections.

Using Probability Tables To Plan Your Direct Mail Campaign

Predicting future results from testing or a rollout of a major direct mail companies with probability tables as a guide will help you with direct mail planning and budget during the next fiscal quarter or year. Another purpose is to determine your breakeven response level to anticipate before scheduling a large-scale roll out.

After completing a test mailing, you can analyze the results in the probability projections that you forecasted. If you mailed 20,000 pieces with a 2.5% response rate you can expect than you need to decide at which confidence level or margin of error percentage that you are most comfortable with when you plan a large roll out or buy mail list. 

About the Author, Tim Little:
My professional direct marketing experience began in magazine circulation management. From this I honed my skills in list purchasing, testing, and analyzing. I learned the importance of direct response planning and budget forecasting and most importantly, providing a follow-up with back-end analysis, fulfillment of orders and business webcast. ( I also gained some valuable job experience with Jackson National Life Insurance as Marketing Database/Direct Mail area and with Alumni Association of the University of Michigan as Membership Manager.
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