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Advertising, like most things in
life, offers two equal-but-opposite approaches. These are known as branding
and direct response. The goal of branding is to become the name people think
of immediately when they need what you sell. The goal of direct response is to
create a measurable, cause-and-effect relationship between your ad budget and
its identifiable result. Today we're examining direct response. The key to
getting a direct response to an ad is to dramatically increase the ad's
relevance to the customer. There are a number of ways this can be done:
1. Reach only those people who are actively in the market for what
you're selling. Your offer will be more relevant to customers who are in
the market for your products than to customers who are not. My mind flashes
back to a radio campaign for Campbell's Soup that was broadcasted back when
America was full of stay-at-home Moms. Just one ad each day, three days a
week, always in the final commercial break before noon, you'd hear:
"Wouldn't a hot bowl of Campbell's Soup taste really good right now?"
The idea was that most housewives already had a cupboard full of Campbell's
Soup and they weren't going to buy any more until they ate what they already
had. Those ads were written and strategically timed to convince these Moms to
walk to the cupboard, open a can of Campbell's Soup and serve it to the kids.
Genius. Successful targeting is more often about the timing of your message
than about reaching the correct age and gender demographic.
2. Increase the urgency of your offer. If a limited quantity is
available, name the exact number. Specifics are more persuasive than
generalities. If your offer has a time limit, say so. "Offer ends soon" will
be perceived only as shallow hype. Be specific. Be accurate. Tell the truth.
"Offer ends Saturday the 15th at 6 p.m."
The downside of urgency is that customers who aren't immediately in the
market for your product won't remember your ads since there will be nothing
relevant for them to remember. If they desire the product on Wednesday the
19th, the ad whose message expired at 6 p.m. Saturday will have no relevance
to them. You paid to reach these people, but the message didn't stick. That's
the price of urgency.
3. Elevate the relevance of your core message. Put yourself in your
customer's shoes. What, exactly, would an offer that would stand head and
shoulders above all your competitors' offers sound like? Since this is a
matter of strategy that goes to the core message of your offer, it often
requires a modification of the business model. An anemic core message can't be
glossed over with superior graphics or wordsmanship. Let me explain:
I was once hired by a liquid fertilizer company that offered homeowners a
five-step treatment program. The first treatment included a pre-emergent weed
killer, the second included a root stimulator, and the fifth had a grass
conditioner that was supposed to prepare the lawn for winter. They said they
wanted me to reduce the number of misunderstandings with customers regarding
the price of that fifth treatment. Customers often thought it was supposed to
be "free" when the actual offer had been, "Buy each of the first 4 treatments
and receive the 5th treatment for half price."
I decided to probe a little deeper and quickly uncovered seven additional
problems but was told not to worry about them because each of these problems
were "standard for the industry." The seven problems I was up against were:
- The company's income was seasonal with very little cash coming in during
the autumn and winter.
- There was little for the staff to do during this off-season except
repair and maintain the equipment.
- Fully one-third of the customer base failed to renew their agreements
each spring. The company had to sell hundreds of new customers each year
just to break even with last year.
- The company had to get their customer's permission prior to scheduling
each treatment. This effectively required them to get a new "yes" answer for
every treatment they applied.
- The cost of their service fell on the "unbudgeted" side of their
clients' monthly household budgets, rather than in the "budgeted" side, like
cable TV.
- Very few customers were buying the optional treatments: core aeration
and liquid lime.
- They were receiving minimal benefit from word-of-mouth.
I solved the "5th treatment not free" problem I'd been given along with all
seven of the other "industry standard" problems through a single,
revolutionary new strategy: "We'll work year-round to make your grass green
for a monthly fee that's less than you're paying now."
So instead of hoping to collect 4.5 times the treatment price from a
customer each year, my "Unlimited Service" plan charged them full price for
all five treatments, and added, at full price, the two "optional" treatments
that customers hadn't previously been buying. We divided the 7x treatment
total into 12 equal payments to be paid by automatic draft each month. The
customer who used to pay $40 per treatment now paid only $23 per month.
Because of the new plan, route scheduling became a breeze; customer
satisfaction skyrocketed; cash flow became constant; revenues per customer
increased by an immediate 56 percent; word-of-mouth advertising went through
the roof; and their ads began to work a lot better. In a nutshell, advertising
works better when you have something to say.
4. Amplify the voltage of your clarity. "We guarantee the quality of
the diamonds we sell" is a statement of very low voltage. To increase its
voltage and clarity, you must close the loophole that exists in the customer's
mind. "If the Gemological Institute of America doesn't confirm our diamond's
color, clarity and carat weight to be at least as good as we promised you,
we'll buy back that diamond for the price you paid, reimburse you for the cost
of grading, and pay you an additional five thousand dollars. If other jewelers
aren't willing to match this offer, you've got to wonder why."
More and more businesses are investing larger
percentages of their advertising budgets in direct response advertising for
four simple reasons:
- lt works.
- It's affordable.
- You can test different parts of your ad, your
package or your list to determine what works best for your dealership.
- You can measure results easily and quickly.
Direct response is not so much a kind of media as it
is a method of advertising. Any ad that asks the prospect to respond directly
to you is a direct response ad. For example, your newspaper coupon ads are one
kind of direct response advertising. Door hangers and postcards which promote
specific offers and which include response cards or your phone number are
another kind of direct response advertising as well.
One of the more popular media in which you can use
direct response advertising is the U.S. Mail. In fact, it is so popular that
many people actually think that direct mail is the only kind of direct
response advertising that there is.
There are some distinct advantages to direct mail
over other forms of media. When you use direct mail, you can send your message
specifically to highly qualified prospects. To find the right names for your
list, you work with list brokers or you develop your own list. You can develop
your own list by building a tickler file.
It’s easy to build a tickler file. Every time someone
calls or walks into your dealership, your employees ask for that person; name,
address and phone number. Whenever you send out a mailing, you include these
names on your list.
When you work with a list broker you tell him exactly
what kind of people you want to reach. For example, you might tell the broker
that you only want people on your list who:
- live in a particular zip code
- are between the ages of 30 and 50
- own their own home that was built before 1980
- have a single or combined family income of
more than $50,000 per year
Because you send your advertising message only to
qualified prospects, you save money when you use direct mail. You know you're
paying only to reach people who might be very interested in replacing their
windows. In fact, a good list is so important that experts say that 40% of the
success of any direct mail package is dependent upon the quality of the list
The next 40% depends on the offer. When you use a
direct response ad in any media, you must include an offer, and that offer
must have an expiration date. The stronger the offer, the better your response
will be. The expiration date should not be too far in the future or your
prospects will not be motivated to act promptly.
The final 20% depends upon the creative execution of
the mailing. If your ads are well designed and well written, your response
will be stronger. In direct mail, there is another axiom you should be aware
of: Copy is king. Your direct mail packages should be well written and full of
great information. One of the most beneficial and powerful advantages of
direct response is that you can easily measure your results. Because the
prospect responds directly to you usually by mail or by phone, it's easy to
keep track of your results. But perhaps the best reason to use direct response
is that you can test and constantly reshape your direct response advertising
to produce consistently better results.
The value of direct response
A direct response mechanism is a call to action--the element of an
advertisement that tells the audience what to do next. In a printed
advertisement, the mechanism could be an 800 number for requesting literature.
In a sales call, it might be an invitation to see a new product demonstration.
A website ad might prompt the viewer to e-mail for a free sample. The key is
that there is a way to capture the contact’s name, address, business name, and
telephone number. With this basic information you can keep track of the total
responses to any given promotion or communication. Other statistics to keep
track of are size of average sale, frequency of purchase, and average life of
customer.
Let’s say you’re comparing two media in which you advertise. For the past
six months you’ve captured and recorded all the information just mentioned.
Medium A produces 10 leads per $1,000 spent, while Medium B produces only six
leads per $1,000. Before you draw any conclusion from these figures, though,
you should consider other issues. You may find that the average dollar amount
of sales per lead is much higher with Medium B, or that Medium B buyers are
long term customers. With this information, you can decide whether to change a
poorly performing medium, or increase your presence in a more successful
medium.
How to make the change
Shifting to direct response marketing doesn't require that the scrap current
company’s marketing materials be scrapped. I suggest starting simply, by
adding a call to action in advertisements, as I described earlier. Pay
attention to the results and carefully record the data for future reference.
This data will serve as a baseline to test other marketing options against,
helping you develop strategies to improve your marketing plan.
The most important variables to test (that is, make changes to and then
note results) include the media you’re advertising in, the wording of your
advertisement or sales presentation, the mailing lists you’re working with,
and your product or service price. It’s best to test only one variable at a
time so it is obvious where changes originate.
How much to spend; how much to expect
Briefly, I'll introduce a tool that can be used, along with testing, to
determine an affordable amount to spend, per customer, on marketing. Known as
marginal net worth theory, or total customer value, it is the total revenue
base an "average" customer can be expected to produce throughout that
customer’s relationship with your company.
After collecting enough data about customers through these testing
techniques, and accruing some evidence of how long a customer will continue to
patronize your business, the lifetime income flow from a customer can be
calculated. Organized growth can be planned, based on goals and timetables.
I will be dealing with this concept in more detail in future articles. My
next piece will be the first of a two-part article on putting together, from
scratch, a basic marketing plan that works. Whether trying to get a new
business up and running or unhappy with the results of current efforts, the
information should be useful.
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