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Positive ROI with NFC and Direct Marketing

Are you selling a high value product or service and using direct mail? Then consider the additional user engagement that you get with NFC as part of your strategy.

NFC in Direct Mail makes sense if:

  1. Your traditional ROI is high enough so that adding the cost of NFC still maintains a positive ROI on the original marketed product or service.
  2. Respondents that do scan the NFC provide additional marketing value (consumer insights, improved engagement, social sharing, new revenue stream, download an app etc).
  3. You are selling a high value product or service that justifies the high cost per NFC scan and higher cost per response. Examples include travel agencies, schools, health care, insurance.

Let’s look at the numbers on NFC (near field communication) for your direct mail marketing campaign.

First, some benchmark numbers for a traditional direct mail campaign using plain postcards: (Source)

  • CPM $586 (or $0.59 per mailing)
  • Response Rate 4.3% (43 people out of 1000 recipients will “respond” and become a customer)

The cost per response is $13.70 ($0.59 ÷ 0.043). This means that the profit or value from each response needs to exceed $13.70 for your traditional post card campaign to deliver a positive return.

Now, let’s see how adding NFC to a postcard will affect the cost calculation. Assuming that an NFC chip adds a cost of $0.30 (this varies with volume), then the cost now becomes $0.89 per mailing.

To evaluate with NFC, we must account for two things:

  1. Not all consumers have phones with NFC, and
  2. Scanning NFC tags is not yet a mass consumer behavior.

About 30% of phones can read NFC tags (this takes iPhone and smartphone penetration into account). And, of people who have phones with NFC, how many actually know about it and can be motivated to scan a tag? With no research data, let’s assume 10% (1 out of 10 users).

The adjusted cost per response is now $20.70 ($0.89 ÷ 0.043). The NFC scan response rate is 0.129% (4.3%*0.30*0.1). For this example, the cost of an NFC scan is $689 ($0.89 ÷ 0.00129).

Comparing the numbers:

  Direct Mail Direct Mail with NFC
Cost per response $13.70 $20.70
Cost per NFC scan   $689

 

Bringing ROI into the Equation:

Knowing the cost of each response, we now look at how much money we make (or value we gain) from each response.

The typical ROI for a traditional direct mail campaign to a house list is 18-20%. Using 20% and a cost of response of $13.70, a traditional campaign generated a profit of $16.44 ($13.70 * 1.20) from each respondent.

Adding NFC increased the cost to $20.70 which is greater than $16.44, so in this case the non-NFC ROI is now negative. If you’re only adding NFC to your direct marketing and not changing your product or service, then the numbers may not work out depending on what the ROI was. However, If each scan of the NFC tag delivers more than $827 ($689*1.20) in profit (or other value like the examples below), then you have a winner since ROI is maintained or improved.

Increase ROI by Lifting Response:

  • Use incentives and a strong Call to Action. For this example, we assumed 1 out of 10 NFC phone users would scan. However, you can improve this with a proper Call To Action and incentives.
  • Target the tech-savvy. Filter your list to target those more likely to engage with NFC, either by demographic or behavior data.

Additional Benefits of NFC:

  • Unique tracking. Encode each NFC with a unique code and ties to your mailing list. Your marketing team will know who, when, and how many times the respondent engages. (Please follow all privacy protection laws and guidelines.)
  • Repurpose the NFC. Unlike QR codes and print media, information in the chip can be rewritten to suit your marketing needs and deliver more value to the consumer For example, the NFC can be used to connect guests to their home Wi-Fi or send vCard contact data to a phone. Scan our blog for other ideas.