Since the goal of most campaigns is to generate the highest number of qualified leads (or sales) at the lowest cost possible, any change in direct marketing strategy must accomplish one of two goals; either:

• increase the rate of response, or
• decrease the overall cost of the campaign

An example: let's say you want to generate the maximum number of registered users at your Web site before a specific date. Registration is free. Could you afford to offer say, a $20 Amazon.com gift certificate just for registering, even though the lead generates no immediate revenue?

Recently, we played out this scenario for an e-commerce client. The offer was to register for a free service via the client's Web site, and one of a number of tests (lists, creative, offer) that we incorporated into the pilot program was a free $20 Amazon.com gift certificate just for registering.

The test cell with the free gift generated twice the response as the control (no free gift), resulting in a lower cost per lead, even including the cost of the gift. (Lead quality wasn't an issue, since the registration process weeded out unqualified leads.) For future campaigns, this means the client can generate a target number of registered users at a lower overall cost by offering the free gift.

Assuming test cells of 10,000 names each and using hypothetical costs, the campaign might appear as follows:

CONTROL (NO GIFT)

Campaign Cost          $15,000
Response Rate                  2%
# of Leads                     200
Cost Per Lead                  $75

TEST (FREE GIFT)

Campaign Cost          $15,000
Response Rate                  4%
# of Leads                     400
Cost of Free Gift              $8,000
Total Cost                     $23,000
Cost Per Lead (inc. gift)      $57.50