Higher Profits Through Testing of Every Variable


zero point three equals two times

Zero point three equals two times

Pretend with me you’ve been conducting a direct mail campaign.

In testing your headline you’ve discovered that changing its focus from greed to fear increases the response rate from 1.5% to 1.85%.

Not bad. Three-tenths of a percent. That’s enough to get marketers excited.

You’re kidding,” I can almost hear you say. “People get excited about a tiny fraction of better response?

Well, yes. Yes, they do. You see, that tiny fraction amounts to a 23.3% improvement in top line sales. It has an even bigger impact on the bottom line.

First, Run the Numbers

For the sake of this example, let’s assume the following:

Your selling price is $74.95, and your gross margin is 65%.

The cost of printing your single-page, one color letter and its envelope, folding, stuffing, and addressing is $0.33 per piece.
The cost of postage (bulk mail) is $0.21 per letter.
You’re paying a list broker $40 per 1,000 names (4 cents each).

Add these individual sums, and the cost of promotion becomes $0.58 per lead.

You mailed 10,000 pieces with the first headline.

1.5% of the recipients of the letter purchased: a total of 150 sales. Each sale produced revenue of $74.95, for a total of $11,243.

You’re working with a 65% margin. Therefore, your gross profit is $7,308.

It cost $5,800 ($0.58 per lead times 10,000 leads) to make those 150 sales, which makes your net profit on this mailing $1,508.

Then You Tested Your New Headline.

You mailed 10,000 more pieces with the second headline.

This time, 1.85% of the recipients of your letter bought: a total of 185 sales.  (This is the three tenths sales lift we mentioned).

Each sale produced revenue of $74.95, for a total of $13,866.

You’re still working with a 65% margin, which makes your gross profit is $9,013.

The cost of promotion is the same $5,800.

Your net profit with the second headline is now $3,213.

When you run the numbers, this new headline has more than doubled your profit.

Wow.

Testing Needs to be Mandatory

This is why you must test at every stage of the persuasion process. (It’s also why you must keep detailed records of your results).

Test your headline, test your offer, test the medium, test the frequency of repetition of your message. Test every variable.

When you find an outcome which works better than what you’ve been doing, make the new way your new standard.  Then start testing against that.

It only makes sense that you use the most attractive bait when you’re fishing for customers.

Your Guide,
Chuck McKay

Marketing consultant Chuck McKayYour Fishing for Customers guide, Chuck McKay, gets people to buy more of what you sell.

Got questions about creating maximum impact through testing of your marketing? Drop Chuck a note at ChuckMcKay@ChuckMcKayOnLine.com. Or call him at 304-208-7654.

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The Customer’s Buying Process – Systemic Marketing™ Part III

Tire Sale

Tire Sale Sign

There tend to be two schools of marketing. The creative and the scientific.

Imagination and mathematics.

Right brain, left brain.

At least, it looks that way on the surface.

Marketing Yin & Yang

Some highly effective marketing uses evocative imagery.

“Melts in your mouth,”
“Cleans like a white tornado,”
or “Where’s the beef?”

Some is a bit less exciting.

“click here to learn more,”
“save 13 cents on your next purchase,”
“Dear Fellow nature lover.”

But truly effective marketing uses both. First the math. Then the imagination. First the who, and what. Then the how and why. And that makes sense, doesn’t it?

A marketer identifies the target market, measures responses, and calculates ROI. Then he provides the creative team with very specific direction: “Here’s what we know about the prospect, what we believe to be her motivation, and the offer we’re going to present.

The creative folks, the copywriters and art directors, focus on that customer profile. They detail our prospect’s life. They account for her time, her activities, and her choices. They find correlations in her other purchases.

And then they create “We are Farmers, dum te dum dum dum dum dum,” or “What it feels like to chew 5 gum.”

But it always starts with detailing, and measuring the buying process.

Tread Wears, “Blowout Worry” Accumulates

Eventually, the tread wears down on every tire, and every automobile requires replacement tires.

In most cases the wear happens gradually.

An early stage buyer notes that wear is accumulating on her tires. She’ll file that observation away into her subconscious as something that will need attention sometime in the future.

Her subconscious will, through reticular activation, allow tire ads to pass the mental filter which helps her to tune out the thousands of advertising impressions she’s subjected to each day.

What Runs Through The Shopper’s Mind?

At minimum (“Humm. Tires are showing slight signs of wear.”) she knows she can put off the purchase decision. Not feeling any pressure to buy, but aware that it will eventually become necessary, those lower price offerings from Mr. Tire Store Owner will appear more attractive and better hold her attention.

As the tread continues wearing, she’ll think less about price, and worry more about safety. As you might expect, the closer she gets to “OK… I’m scared to drive any farther on these tires,” the less price acts as the primary motivator.

Then there are those cases in which the tire catastrophically fails. When that happens, she will make a purchase. Probably today.

Purchase Trigger

It may be growing worry. It may be performance failure. It may be because she’s leaving in a week to drive across three states on her family’s vacation. It may be that she came across an unexpected tire sale. It may be an unexpected salary bonus. But something will happen that causes the owner of that car to decide it’s time for new tires.

We call that event a purchase trigger.

A trigger is a change in perception on the part of the shopper.  Its the realization that the actual discomfort of NOT owning has become greater than the perceived discomfort in making the purchase.

Triggers happen to different shoppers at different times, but all shoppers experience similar triggers.

That’s the fact which allows us to design customer acquisition programs.

Once we determine a strong appeal to an early stage shopper (say… reduced price), that appeal will be equally attractive to a different early stage shopper next month. Yet another completely different early stage shoper will be attracted with that same appeal the month after that.

Likewise, the appeal which works to attract this month’s late stage shoppers (perhaps safety, or guilt about safety) will work with other late stage shoppers later this year.

And when our primary appeal meets with a prospect’s strongly felt need, it acts as a trigger, moving that prospect to the next step, perhaps all the way to completing the purchase.

What Steps does the Shopper Take?

The specific shopping steps will be slightly different for every business. Some purchases are made on a whim. Others require research and the approval of a committee. Some buyers initiate purchase orders. Others simply pay cash.

Our tire shopping prospect likely goes through nine separate steps to buy tires.

Tire Customer Buying Steps

Tire Customer Buying Steps

The Sales Process is Always Similar, but Never the Same

So far, we’ve described the buying process, which begins with the shopper feeling a need.  Is the selling process the same?

Usually, its not.

The selling process begins when the seller identifies the buyer as a new prospect, and attempts to get her to engage.

And other than advertising, the seller has no control over communication with the prospect until she identifies herself.

In our tire purchase example the buyer has already taken five independent steps before the  seller knows she exists.

But detailing the customer’s steps between the first interaction with the seller, and the completion of the purchase, are what allow us to standardize the process.  It’s what allows us to set our marketing on  “Cruise Control,” when we’re fishing for customers.

Your Guide,
Chuck McKay

Marketing consultant Chuck McKayYour Fishing for Customers guide, Chuck McKay, gets people to buy more of what you sell.

Got questions about detailing your customer’s shopping process? Drop Chuck a note at ChuckMcKay@ChuckMcKayOnLine.com. Or call him at 304-208-7654.

 

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Reach vs Frequency – Systemic Marketing™ Part II

curb number

Curb Number

A young man shows up at your door.  For only ten dollars he’ll paint your house number in florescent paint on the curb in front of your house. Feeling no need for glow in the dark numbers on your curb, you pass on the offer.

The next day a different young man makes a similar offer. Again, you refuse.

He’s followed that afternoon by a young woman with virtually the same offer. Will you buy from her?

Believe it or not, you’ve just determined whether frequency or reach is of greater importance as a driver of sales.

Reach Trumps Frequency

In Systemic Marketing™ – Customer Acquisition on Cruise Control, we discussed the advantages of creating a a Marketing Cruise Control, a system to increase your marketing efforts in slack times and keep your company operating at capacity.

But the first decision is how to increase those efforts.

For decades media planners, buyers, and salespeople have argued whether it was more important to reach more people with your message (offer), or to deliver that message with greater repetition to the same people.

There are good arguments for both, but common sense will guide us to the following conclusions:

1. The more relevant the message, the more likely people are to notice it.
2. The simpler the message, the less repetition necessary for a prospective customer to “get it.”
3. Once a prospect has decided to purchase (or not), additional exposure to the message (during this purchase cycle) is pointless.

What should our original young man do to sell more fluorescent numbers? Go door to door on your block again? Obviously he should choose another neighborhood and make his offer to new potential customers.

And likewise, if you’re going to set up a Cruise Control system for customer acquisition, you won’t prompt additional sales by again offering the same people what you sell.* You’ll need to boost the number of people who receive your offer.

How to do the Boost

Don’t increase the number of ads in the same section of the newpaper you’re currently using. Put your new ads in a different section.

Don’t run additional ads in the local TV six o’clock news. Run new ads in the 10 o’clock news. Run new ads on another TV station’s six o’clock news.

1. Add a schedule on another radio station, or another TV station.
2. Add another section of the newspaper. Or another paper.
3. Post a billboard in a new neighborhood.
4. Send postcards to a fresh list.
5. Telemarket to a fresh list.
6. Expand the radius around your business and distribute more door hangers or flyers or yard signs in neighborhoods you haven’t been “working.”
7. Increase your pay per click budget.

You may be tempted to pull ad dollars from the media outlets you’ve been using, but if you unhook the engine, how long can we expect that train to keep rolling? And substituting an unknown return from a new media outlet in the place of the known ROI of a tested outlet only increases risk.

Systemic Marketing™ maximizes cash flow by eliminating speculation.

Everyone Has Opinions

Media people, printers, and your brother-in-law may feel qualified to opine about your marketing. Especially when you’re adding media to expose your message to additional prospects.

Your new media representative will want to make a strong positive impression in hopes of keeping more of your business. The printer will assess your need for additional flyers, or direct response packages as an opportunity. They will offer to produce new and/or different ads. Don’t let them do that.

By the time you’ve implemented a Marketing Cruise Control, your message will have been tested, refined, and polished. Everything from the offer to the choice of words to the colors, fonts, and images will be selected because they work better than those you tested them against.

And testing always works better than opinions when you’re fishing for customers.

Your Guide,
Chuck McKay


* OK. This is not completely true. But increasing the frequency of the message costs much more than it generates in additional sales for reason number three above. Most of the people exposed to your message will be those who’ve already decided whether or not to buy.


 

Marketing consultant Chuck McKayYour Fishing for Customers guide, Chuck McKay, gets people to buy more of what you sell.

Got questions boosting the number of people exposed to your message? Drop Chuck a note at ChuckMcKay@ChuckMcKayOnLine.com. Or call him at 304-208-7654.

 

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Customer Acquisition on Cruise Control – Systemic Marketing™

Cruise Control

Cruise Control

Imagine that you’re driving your car through the countryside. The road becomes slightly inclined, and your car begins to slow. You press a bit more firmly on the accelerator, and the car picks up speed again.

But then, you encounter a rather steep hill, and your car rapidly slows. You mash the pedal down, but the car feels sluggish, and takes a while to respond. Fearing a stall, you downshift to a lower gear. The engine picks up speed, the car begins to accelerate, and you successfully ascend the hill.

What happened to your fuel economy during this hill climbing incident? Can we agree that it suffered?

That’s because human beings are not particularly good at recognizing change. Until that change is obvious, we don’t adjust. Then, in order to restore the optimal conditions, we frequently over adjust.

Sometimes operating at peak performance is more a matter of luck than judgment. If only we had a device which would speed our reactions…

Enter the Cruise Control

The driver clicks the “set” button and a small comparator constantly checks the actual velocity against the desired velocity. The slightest change activates the throttle linkage to maintain the set speed without any intervention from the driver.

A good cruise control system aggressively accelerates without overshooting and maintains constant road speed, regardless of the mass of the vehicle, the weight of the passengers, or the road’s degree of incline.

Is Cruise Control a Convenience?

Yes. Yes it is. Cruise control offers convenience. It offers other benefits, too.

Use of such a system:

a) requires less attention of the driver. It requires less intervention by the driver.
b) adds a degree of predictability allowing better planning of rest stops and arrival times.
c) makes the trip less costly by maximizing fuel efficiency in miles per gallon.

Why doesn’t everyone use a cruise control?

Pretty much, we all do. At least when it comes to driving.

It’s advantages are so strong, and so desired by drivers, cruise control systems have become standard on nearly every new automobile.

Why Isn’t Cruise Control Standard in Marketing?

A cruise control for marketing would offer the same advantages to a company.

a) It would necessitate less attention from the “driver” – thus, less of the driver’s intervention.
b) It would allow for greater predictability in planning.
c) It would operate more efficiently, and thus produce higher ROI.

It sounds like a good entrepreneurial idea, doesn’t it – automating customer acquisition, much as an entrepreneur automates every other process in his company?

Cruise Control Flowchart

Cruise Control Flowchart

The answer is a qualified, “yes.”

Seasonal businesses can’t control the seasons. Extravagances will be subject to swings in the economy. Emergent responders can’t predict emergencies. But for a great many businesses, marketing cruise control is a very real possibility.

It has to do with the way potential customers are identified.

Revealed Targets, Non-Revealed Targets

Targeting involves defining and identifying the shoppers who are most likely to purchase. The ultimate identification reveals your potential customers names and addresses. This is possible if your target has, for example, subscribed to a magazine, lives in a particular neighborhood, or must be licensed with a legal entity.

Non-revealed targets are not identified as individuals. Non-revealed targets might include Country music fans, people who like Italian cooking, or parents considering hiring a tutor for their child.

Revealed targets can be contacted directly. Non-revealed targets are best reached through mass media.

Its much easier (and cost effective) for a marketing cruise control system to send offers to additional individual prospects.

What if Your Business Ran At Full Capacity?

Any company which will find an advantage in constantly running at full capacity will benefit from a Cruise Control system for marketing.

  • A pediatric dentist with an empty chair several hours each week.
  • A heating and air contractor with too few maintenance contracts.
  • A furniture store with inventory turning too slowly.
  • A jeweler with unpredictable demand for repairs.

And, of course, any owner preparing his business to be sold in the next few years.

Marketing Cruise Control is part of the Fishing for Customers Systemic MarketingTM system, which we’ll be discussing over the next few weeks. After all, it only makes sense to catch the limit when you’re fishing for customers.

Your Guide,
Chuck McKay

Marketing consultant Chuck McKayYour Fishing for Customers guide, Chuck McKay, gets people to buy more of what you sell.

Got questions about setting up a Marketing Cruise Control system for your company? Drop Chuck a note at ChuckMcKay@ChuckMcKayOnLine.com. Or call him at 304-208-7654.

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