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A SCORE COUNSELOR'S ADVICE

Direct Marketing 101, page 2/3
Steve Lember, SCORE 513 Counselor

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5. Test and keep testing.
One of the neat things about direct marketing is that it is measurable and projectable. That means that you can test things like concept, price, offers, lists, copy and design, etc. on a small sample of a larger total market. Then you can analyze the results from that sample and make some fairly accurate projections on the total. Once you have satisfied yourself that all the components are working and you are making money, you keep testing to see if you can tweak the components to make you even more profit. I won’t get into sample size and “multi-variant” testing here but you can learn the basics from books on direct marketing or by attending local or national direct marketing conferences.
6. Ask for the order.
Once you have made all of your points to the right audience, you want to be sure that provide an easy way for the prospect to take you up on your offer. Keep it simple. Don’t give the prospect too many choices. Give them an 800# or a “click here to order” button. If you use a coupon make it easy complete and the blanks should large enough to write in. Some folks say that you should start with the order form, then figure out what you have to do and say to get the prospect to use it.

What represents good results?

The basic key to the success of a direct marketing program: Did it make money? It doesn’t make any difference whether you received a 10% response rate or a .01% response. Each one could be successful if the bottom-line is PROFIT. You also have to understand something called LTV. That stands for Life Time Value of a customer. If you’re only looking for a one-time sale with no hope of selling that person anything else, you’re customer has a very, very short LTV (not very good). However, if you sell them something that they keep re-ordering, or renewing, or subscribing to, or you have a whole line of other products or services you can sell them, then you have a business. Let’s look at some very simple examples:

Scenario 1. I’m selling a book called “101 Ways To Cook Liver” The book costs $1.25 to produce and ship. I have developed a pretty good direct mail package that offers the book for $5.00+$1 for postage and handling ($6.00 total sale). I’m offering a 30-day money-back guarantee if the customer is dissatisfied and a free coupon for a pound of calves’ liver (I made a deal with the Liver Producer’s Association so the coupon costs me $0). I have 5 lists I will be testing. My mailing cost including the cost of lists, postage, printing, etc. is $1 each. The only variable is the list. In reality there could be multiple variables, which makes things too complicated for the space I have here.

 

List A

List B

List C List D List E
Quantity Mailed

1,000

1,000

1,000 1,000 1,000
Response (%)

10 (1%)

20 (2%)

50 (5%) 100 (10%) 200 (20%)
Revenue $60.00 $120.00 $300.00 $600.00 $1200.00
Cost of Sale $12.50 $25.00 $62.50 $125.00 $250.00
Gross Profit $47.50 $95.00 $237.50 $475.00 $950.00
Promotion Cost $1000.00 $1000.00 $1000.00 $1000.00 $1000.00
Profit/(Loss) ($952.50) ($950.00) ($762.50) ($525.00) ($50.00)
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