An 80% optin rate on my latest squeeze page for a client is gobbling up leads at a remarkable pace.

Why do I think we’re getting such amazing optin rates?

In a nutshell -the copy in the traffic drivers heavily presells the optin PLUS an almost irresitable headline on the squeeze page.

It’s too early to post links because this campaign is live and my client wouldn’t appreciate my sharing it at this stage - but I will post it in the near future after we get through a series of campaign launches.

It’s too good not to brag on. =)

John

THE FIRST REASON CUSTOMERS ABANDON YOU:

They think you’re products are too expensive. Either because:

• They found an alternate, cheaper solution. For most people, that means you didn’t deliver enough value OR you’re basically selling a commodity product
• They don’t think the benefit you offer is worth the money. In other words, you’re pricing your self out of the market.
• They don’t have the money. You can’t do much about that and still stay profitable.

THE SECOND REASON YOUR CUSTOMERS ABANDON YOU:

They think your product stinks. Common reasons they have that reaction are …

• Your product does, in fact, stink.

• Your products are over-priced for what they deliver.

• You’re using snake-oil sales copy and over-promising what your product can do …

“Buy my product. Women will want you. Men will want to be you. Bill Gates will envy your bank account. Just click here.”

(I bought that product. It didn’t work leaving me despondent for weeks,)

THE THIRD REASON YOUR CUSTOMERS ABANDON YOU:

You ticked them off. They didn’t like the way you, or your employees treated them.

• 70% of customers leave because they feel they were treated poorly a  study by The Small Business Administration found .Let’s look at that statistic as direct marketers:For every second sale you make, you may have been able to make 7 more sales by being a little nicer. Sell 1,000 of your second tier products? You could have sold 7,000. Make $30,000 of that product? Maybe you should’ve made $210,000.The lesson? Don’t be a jackass and don’t hire jackasses to handle customer service. Customer Service is a MARKETING ACTIVITY. Never, NEVER forget it or relegate it to the cheapest alternative.

• You annoyed them by ‘churning and burning’ your list. You know how it goes …

Annoying Marketer — “Knock, Knock.”
Customer — “Who’s there?”
Annoying Marketer –“BUY MY PRODUCT!”
Customer – “What the heck are you talking about?”
Annoying Marketer – “MY PRODUCT IS THE BEST — BUY IT!”
Customer — “Loser.” Slams door, unsubscribes.

THE FOURTH REASON YOUR CUSTOMERS ABANDON YOU:

The Grim Reaper called: Send flowers. Sadly, not even the best customers are immortal.

But there is a lot you can do to keep your customers coming back.

How to Over Deliver So Customers Love you

They can’t all be gems, but if your product stinks — fix it or find a new one.

It’s more profitable and your customers will stick around longer and (Gasp!) maybe even buy something else.

Even when your product is good you should look at your pricing strategy.

There is a positioning aspect of content delivery that seems to escape many marketers. Simply put, it’s easy to differentiate yourself in a market by delivering greater value at a lower price point.

I’m not talking about being the cheap man on the block here. This is actually one of the keys to consistently being able to charge premium prices.

I’m talking about over-delivering….

1. So YOUR lower price products deliver more value than your competitors medium priced product…
2. And YOUR medium price products deliver more value than your competitors high-end products…
3. And YOUR high-end products deliver more value than your competitors delivers total.

A little basic research will show you how to do it in your market.

Go look at your competition.

• What exactly are they providing to their entry level customers?
• Do they have an intelligent product ladder in place?
• What FORMATS are they delivering their products in?
• What OFFERS are they using?
• What kind, and how many PREMIUMS do they deliver?

Do this simple exercise and you’ll find a dozens ways to deliver more sellable value, often without significantly increasing fulfillment costs.

The great amount of value you provide in the early stages of your product ladder, the more you can charge for the higher stages of your product ladder.

And by consistently providing more value you’ll notice a couple of things:

• You’ll have stronger relationships with your customers. This usually translates into more sales of your other products. Because customers will never feel ripped off by buying your products. That gives you built-in credibility when you offer another product.

• Your customer will like you MORE than your competition. You’ve raised the bar. So when your customer buys a product from your competition it’s more likely they’ll feel under whelmed.This cuts both ways – when customers get greater value from your competitors for the same, or lower price, you’re the one who looks bad.

• You’ll be able to charge HIGHER PRICES for your products. Premium pricing is appropriate because you’re delivering greater value.

That’s enough for today.

Later, we’ll talk about another way to keep customers – by building relationships with them. Why? Because price shoppers never make good long term customers and by definition don’t pay premium prices. But relationships buyers do.

Just a few things to think about,

John

Direct response marketing is the marketing & business model that gives you the fastest, most effective way to attract more customers and sell more things to them.

And today we’re going to look at some of the best (most profitable) versions of that model.

Let’s take a famous example, Gary Halbert’s ‘Coat of Arms’ letter that spawned an enormously profitable business and was mailed somewhere in the neighborhood of 600,000,000 times!

That’s equivalent to mailing a letter to every man, woman and child in the entire United States, twice.

And when you read the letter, you’d almost never believe it because it’s not high energy… it doesn’t even have a headline or subheads… no complex closing strategy… or price justification.. and doesn’t pile on the copywriting ‘bells and whistles.’

Here’s how the one page letter starts:

‘Did you know you that your family name was recorded with a coat-of-arms in ancient heraldic archives more than seven centuries ago?

‘My husband and I discovered this while doing some research for some friends of ours who have the same last name as you do. We’ve had an artist re-create the coat-of-arms exactly as described in the ancient records. This drawing, along with other information about the name, has been printed into an attractive one-page report.’

The idea was pure genius and created a gorgeous example of a perfect direct response business model.

• THE PROSPECT UNIVERSE WAS GI-NORMOUS! They were actually able to mail to names in the PHONE BOOK! That’s unheard of in direct mail because without a tightly targeted list you’d lose your shirt in printing and postage costs because your response rate would suck.

• THE OFFER WAS IRRESISTABLE! Send in $2 for a special report about your family name and beautiful reproduction of your family’s coat-of-arms. That’s a slam dunk offer!In an interview in Time magazine Dennis Haslinger, Gary’s partner in Halbert’s Inc. (the company formed around Gary’s idea), explained what they were really selling:‘We sell instant ego. People get their shields because they are turned off by being a social security number. They want to remind themselves that they are something special.’

• A KILLER BACK END! They weren’t making their money on $2 reports – I’m sure that probably just covered their cost to get a new customer. The real money in direct response is in the SECOND SALE and the third, fourth and fifth sale to your existing customers.

Halbert’s Inc., had an array of products to offer you with your family crest – including a $350 deluxe wall plaque called ‘Cathedral Oak’ that was 22 inches high and mounted on hand-carved wood. (I wonder how many fireplaces in America sports one of these beauties. An old mentor of mine still has his.)

It’s a beautiful business model and one common to traditional offline direct marketers.

The Direct Response Health & Financial Newsletter
Business Model in a Nutshell:

Here’s how the same basic model works for newsletters like the health or financial newsletters from major mailers like Agora Publishing or Phillips Publishing.

The bones of your business model are:

You work to break even on promotions designed to bring in new subscribers; basically get all your money back and a get new paying subscribers in the process.

You give your new customers the chance to renew their subscription right away or very early on in the relationship – this gives you immediate revenues. You even have a ‘bump’ or ‘up sell’ offer for them when they order – a 2 year subscription price instead of 1 for instance.

Then you start offering higher price back-end products – these are your real profit centers because you already have a highly qualified, paying customer to sell similar products to. And since you’re promoting to a much more targeted list you’re Return on Investment is much higher.

Near the end of a subscription term you try to get customers to renew their subscriptions all over again.

And you’re constantly repeating this process of getting a new customer, getting him to renew and trying to sell higher priced back-end products to him.

Direct marketers have developed slight variations of this for different industries and media. But the fundamentals are the same across the board.

Because you want to build a list of qualified customers… get revenue from them as fast as possible… and keep them buying as many products as possible for as long as possible.

The Purpose of Direct Response Customer Acquisition
is NOT NECESSARILY to make a profit on the first sale

It’s totally counter-intuitive that you wouldn’t want to make a profit on your promotions but that’s exactly how many direct response businesses operate.

Think about the ‘Coat-of-Arms’ example, I’m willing to bet dollars-to-doughnuts the $2 they made on each report was just enough to cover printing and postage costs for enough letters to get one new customer.

By offering a valuable report for a measly $2 they vastly increased the number of people who responded to their promotion.

If they charged $39 sure they would have made a profit on some customers but the response rate would have gone way down… the universe of prospects they could mail to would have been cut into a fraction of what it was… and they wouldn’t have nearly as many customers to sell all their backend products to.

In fact, you probably want to LOSE money
on your new customer promotions

That goes against the grain but many of the most aggressive direct response marketers are very emphatic about it.

Because by being willing to mail to lists that only return say 80% of their money on their new customer promotions they get more new customers.

And if you’ve built a strong back-end sales model it becomes worth it to you to lose money on the first sale because you get it back on the second, third and fourth sale.

The truth is; many of us won’t even bother taking on clients that aren’t willing to mail to break even or a loss on the front end promotions because it limits their growth so much.

And remember, it pays to make people feel special

You really do have to marvel at Gary’s ‘Coat of Arms’ business. It tapped into a common emotional core of mass amounts of people.

And has a simple purity to it that is the hallmark of genius. By making it so cheap to respond and appealing to such a wide audience they were able to generate massive amounts of new customers to sell to.

And you see a slight variation of that proven model in the newsletter business.

So the simple plan of attack if you want to follow these models is:

• Acquire them most new customers as possible by promoting your acquisition campaigns to break even or at a loss.

• If possible use a low cost special report to generate the most customers…

• Have bump or up-sell at the point of purchase to help generate additional revenue…

• Sell your customers a series of higher priced products and services to generate profits….

• Wash, rinse, repeat…

Bob King, legendary president of Phillips Publishing said it clearly:

“What we do is provide people with benefits in ways
they are willing to pay for.”

And if you can find a product that gives people the benefit of feeling special and that they are important in a way they will pay for – you’ve probably got a blockbuster on your hands.

Hope that helps.

John Newtson

• Why your “list” may not be as big as you think it is …

• How to increase the volume of sales promotions you put out without ticking off your list …

• Why the ‘blanket blasting’ marketing strategy of so many marketers is costing them money. And the simple alternative making smart marketers rich …

• How to dramatically increase response without better sales copy …

• And whole lot more!

Dear Business Builder,

I’m on a lot of email lists – somewhere in the range of 30-40 over my various email accounts. And the lack of sophistication in email marketing from even some very successful marketers is surprising.

Some of them are train wrecks I can’t look away from.

I actually bought one marketer’s product over two years ago and to this day I still receive bi-weekly promotions prompting me to buy the SAME product.

This guy doesn’t know or care who I am as a customer.

Every bit of personalization that goes into his emails is lost on me because no amount of “Hi John’s,” will explain away that he doesn’t know he already sold me the product he’s trying to sell me now.

As a direct marketer you know “the money is in the list.” You’re building a list so you can promote your products to it more efficiently.

Email is the tool of choice for most communications with your list.

• Email helps you bond and build your relationships with your customers through newsletters, announcing blog posts and delivering valuable content.
• Email is a powerful selling tool. Promotional emails to your house file will produce more sales than almost anything else you’ll do.
• It doesn’t cost you a lot of money to send emails. It’s practically free outside of the basic infrastructure you need to manage your business.

Today we’re going to go over some of the basics of email marketing.

Why the basics? Because without good fundamentals you’ll always leave a lot of money on the table.

So let’s get moving.

First things first: Your list isn’t as big as you think it is

Let’s clear some smoke out of the room and get a real picture of a critical part of your online marketing.

You, or your clients, have a list of email names consisting of two groups of people:

1. Prospects: These are names on your list, ezine subscribers or people who’ve requested your free information, who have never bought anything from you.
2. Customers: These people have given you money in exchange for your product or service.

A lot of folks brag about how big their list is, even when they’re lumping buyers and prospects together.

The two groups of people represent different things to your business.

Someone who’s one your list for three years but never buys anything from you is just an extra name on your list.

Try this test: Compare the total number of names on your list to the total number of buyers on your list.

I just ruined some one’s day, I just know it. Marketers who see that number for the first time tend to get depressed.

Let’s make it worse, run a list of customers who’ve bought from you in the last three months.

Why? Because the single greatest indicator of whether a customer is going to respond to your next promotion is how recently they bought something from you.

If you know much about direct mail this already makes sense to you.

Because you know “hot-line” names, or the most recent names on a mailing list to respond to a promotion, are the more responsive names you can mail to.

And hot-line names cease to be hot-line names after three months.

People on your list who haven’t bought or responded to you in the last three months are cooling and are less likely to respond to your next promotion.

Once someone joins your list your first goal is to move them from prospect to customer. And then get them to continue the customer relationship by buying more products.

Let see how we can do that better.

Email Marketing Fundamental One:
Give More, Sell More

The more promotional emails you send out, the more money you make.

Send out too many and you’ll beat up your list, everyone will unsubscribe and your business will be a bust.

You have to find the sweet spot.

If you’re only sending out valuable content once a month then sending out one promotional email a month that means you’re 50% content and 50% sales promotions.

So every other time you stop by to say hi, you’re asking me for money.

Sheesh, we’re not even related.

This is a great way to get folks to kick you out of the inbox and their lives.

In order to be able to send out more promotional emails you need to give away more valuable content.

What’s the right mix of promotional to informational emails? There’s no single right answer, generally plan somewhere in the range of 80%/20% - 90%/20% valuable content to sales promotions.

Deliver more valuable content and you can promote more aggressively.

And this is another reason why advertorial promotions are so important. There really shouldn’t be that much of a difference between your editorial copy and your promotional copy.

The goal is to deliver value at every, or nearly every, contact with your prospects and customers.

So your marketing planning should include serious thought about whether you deliver content monthly, weekly or daily. Because it directly effects how much you can sell.

If you don’t want to commit to weekly or daily contact and still want to be able to promote more, you’ll need to plan to deliver a lot of relevant, valuable information as part of your marketing campaigns. That’s another article in itself though.

Email Marketing Fundamental Two:
Segmenting Your List Lets
You Promote More Often
and More Effectively

No list is monolithic.

At the most basic you have a list of prospects and customers. If you have multiple products your customer list breaks down into buyers and non-buyers.

And as we know, plenty of folks are ignoring the rudimentary practice of NOT promoting a product to someone who already bought it.

Still, ‘blanket blasting’ is everywhere. Marketers are blasting the same promotions to every body on their file with no regard for their status as a prospect or customer, or as a buyer and a noon-buyer.

Here’s an example. Say you’re promoting a new high-end product or service. Say the price point is $2,500. On your list you have folks who’ve never spent a nickel with you and you have folks who buy several products from you.

Does it make sense to promote the $2,500 product to everyone? Often it makes more sense to put together two products — the high-end version and a smaller, less robust $200-$300 version.

Then promote the high-end version to the segment of your list most likely to buy it and the smaller version to people who haven’t bought anything yet. You can use the same front end sales copy (headline, deck and sales logic) for both series of promotions and just change the offer copy.

That’s just one way to handle it, but it’s a profitable one.

Targeting your products and offers more precisely to the different groups of people that make up your list is an easy way to increase sales.

Another problem with the blanket blasting approach is that when you’re promoting products and offers that are enticing to one part of your list, you’re basically ignoring another part of your list.

Email Marketing Fundamental Three:
Promoting Landing Pages vs. Email Campaigns

This is something I think is a hold over from direct mail.

It’s like your long copy landing page is your sales letter and your email is your envelope teaser copy. And the whole reason your email exists is to lead people to your workhorse of a landing page.

Consider this: Every time you ask readers to click on a link, you lose up to 90% of your readers. So your brilliant sales letter, with a show stopping headline and sales logic out the wazoo never makes it to 9 out of 10 of your prospects.

What do you think that does to your response rates?

Email is not direct mail. You don’t have to spend hundreds of thousands of dollars to get an email in front of your list. You just click send.

Side note: Which model converts higher? Blasting a long copy landing page as an email that only gets to 20% of addresses because email filters block it?

Or a short email that gets 99% deliverability and links through to a landing page?

The long copy blast with the lower deliverability tends to convert higher. Because you always lose a significant amount of eyeballs when you ask people to click through. So the long copy blast gets your sales copy in front of more people.

But that’s still not the strongest approach.

Why send only a single promotional email anyway?

A well thought out email campaign of various long-copy blasts tends to out-product a single blast of the long copy landing page by factors of ten.

I’ve written and planned email campaigns that have increased sales of a “tired” product by over 1,450% over previous promotional methods. On one we got close to a 5,500% increase in response (that’s another article).

And these are on sophisticated lists, which were already seeing stellar sales copy. You don’t even need better sales copy to see a significant increase in sales. Applying a more profitable marketing structure will give you enormous increases in response without better copy.

We’ll go in depth into how to plan these kinds of campaigns later in Email Marketing Strategies 201.

Email Marketing Fundamental Four:
Recycling Successful Campaigns to New Prospects
Maximizes Your Time and Sells

The lazy among us will love this one.

If you’re building your list you have new blood coming on all the time. And you have past email campaigns that were very successful these people haven’t seen.

When you want to segment your file and promote to these new names, maybe to capitalize an acquisition campaign you’ve run recently, you don’t need to reinvent the wheel.

It’s very easy to fall in the trap of creating everything from scratch, all the time. But an email series you ran last year can be adjusted slightly and run this year just as well. Provided you’re not always promoting it to the same people.

In fact, if you’re getting enough traffic you can create a campaign you run every month to your new names. So every one who comes to your through a specific traffic source sees a successful promotional campaign within 30 days of joining you.

Remember, the more often you can promote the more money you’ll make and this lets you promote more often.

Email Marketing Fundamental Five:
Know When to REST Your File

Every one needs a break.

You’re building a relationship with your list. You’re delivering more and more value to them and helping them achieve their goals. This is letting you promote more and more and it’s a win-win situation for everybody.

But you still need to plan periods when you DON’T promote anything. Let your list rest and just deliver value. How long this period should be again depends on how often you deliver valuable content.

If you have a weekly newsletter you’re rest period will be longer than if you have a daily newsletter.

Planning on not promoting to your file is a passive way of resting your file.

You can also take an active role and reinvigorate your file by planning periods where you over-deliver, valuable, unexpected content.

Unexpected gifts, especially things we would be willing to pay for, are great relationship builders.  Marketers who realize the power of the phrase, “Surprise and Delight” easily build long-term, profitable customer relationships.

So how’s your email marketing? Can you reexamine some of these fundamentals to improve sales to your file?

• If you want to increase the volume of promotions you send out, increase the volume of valuable content you deliver.

• Get to know and understand the different segments of your list. And plan your marketing with those segments in mind. Think about running multiple campaigns simultaneously to different segments of your list.

• Test running long-copy email campaigns against just promoting a landing page. Talk to your customers in your marketing, their people who are hoping you can help them.

• Use advertorial copy to deliver value in your promotions. More people will read it them and respond.

• Don’t let all your past work go to waste. Find ways to use past campaigns by targeting them towards newer prospects.

• Give your list a break from promotions every so often. Better, give away unexpected, valuable gifts every once in a while to reinvigorate people.

This is not an exhaustive list but it’s probably enough to chew on.

That’s enough information for several of the lists I subscribe to easily double their sales or better.

Hope that helps,

John Newtson

Without a thorough understanding of it, you can have the world class copy…powerful offers .. and great lists and STILL end up losing money.

This is fundamental to building a successful direct response business – online or off.

“Break-even” is the point in your campaigns when you make back all the money you spent to get new customers and opt-ins. When you hit break even you’re basically getting a customers and opt-ins for FREE. You spend $1 to get them and they give you $1 back.

There are basically FOUR ways to define “break even” depending on how conservative or aggressive you want to be with your marketing:

1. VERY CONSERVATIVE: Your minimum dollars sold in order to cover ALL COSTS for the business. Including, marketing/advertising costs, Cost of Goods Sold, fulfillment costs, overhead (on & offline: shopping cart – office space) and finally your targeted profit.
2. MODERATELY CONSERVATIVE: Minimum sales needed to cover ALL COSTS like above MINUS profit. So if you don’t need to profit on the initial sale but want to stay conservative on your marketing spend this is your target.
3. MODERATELY AGGRESSIVE: You’re not trying to cover your overhead in your initial sale. So your break even is calculated to cover your marketing/advertising costs, Cost of Goods Sold, fulfillment costs only.
4. VERY AGGRESSIVE: The minimum sales needed on the first sale to let you break even on a future date. For example; the more aggressive direct mailers push their strongest promotions to 80%-90% of costs to market and fulfill calculating their break even into their second sale – often the first continuity sale or the subscription renewal.

The more money a customer is worth to you the more aggressive you can be.

Businesses that have to break even – or even profit – on the initial purchase are a stark disadvantage to the business that can wait until the 2nd sale to break even.

The next aspect of break even to consider is our break even time-frame because this becomes a cash-flow issue pretty quickly when you’re buying traffic.

1. Do you need to break even on day one? Again, this is the most conservative approach and there are times when it’s appropriate – particularly when you’re “product poor” or have cash flow issues.
2. Can you wait 7 days …14 days …30 days to break even? The reason to think about this is because supplements and newsletters continuities tend to be sold best on a FREE TRIAL basis. To maximize revenue and the total number of new customers acquired we’ll want to use free trials effectively but that pushes revenue back for the trial period.

With hard goods like supplements 14-day to 30-day trial periods are normal. One caveat is customers need to actually receive the product before the billing date to keep complaints and refunds down. Considering, on average, we see 30% of our orders come internationally you need to build in shipping time into your trial periods when selling physical products online.

The other thing to keep in mind besides cash-flow when determining your break even is that the shorter your break even period – which determines how many contacts you can have with your leads – the smaller your potential universe of customers is.

Obviously there’s a point of diminishing returns specific to every business. Shorter break even periods focus on selling the most active, least skeptical segments of the market. As you extend your break even period you tend to see a large segment of total customers.

Once we get to break even, every sale we make to those customers after that is profit (minus fulfillment costs).

So understanding break even is critical to managing your marketing risk, planning you media buys and increasing your revenue.

John Newtson

Here it is:

WHY DID WE SEND YOU THIS FREE ISSUE OF COUNTRY WOMAN?

If that question puzzles you, here’s the answer: You’re part of a very special “test” group.

That is, we selected your name and several thousand more from a mailing list that included people we felt would be interested in a magazine like Country Woman. If you and others selected to receive our special “Collector’s Edition” respond well to our offer, we’ll send a free copy to the rest of the folks on the same mailing list. So we’re highly interested in your response.

$7.00 Savings: The Savings Certificate above is made out specifically to YOU. It is not transferable, and entitles you to a Charter Subscription at 41% off the regular subscription price

That’s it. Simple. Some would say deceptive too. Since after 22 years the “marketing test” was probably over… though I suppose each new mailing is a test in direct mail… if you wanted to stretch things.

John

This is about your bottom line.

You do all that work to build your list and convert your prospects into customers. Then your customer stops buying.

You already know the main ways to increase sales …

• Get more customers

• Increase profit per sale

• Increase purchasing frequency

Notice how two out three is about what you do AFTER you get a customer.

If it takes 5-6 times more money to sell to a new customer than it does to sell to an existing customer … And the whole point of building a list is so you have a built in market to sell to … it follows that knowing how to keep a customer is a major marketing activity.

So today let’s talk a little about one of the
most OVERLOOKED ways of keeping your customers longer…

It’s also one of easiest problems to fix.

Imagine this: A customer shows up on your website. Loves what you have to say. Your products perfectly target his needs so he buys … everything.

He’s known as a hyper-buyer and, quite simply, he’s in love with you, your products and your business.

As far as he’s concerned, the reason his credit card exists is to buy your products.

Sadly, you’ve only got three products. He spends his $1,000 and all of a sudden you won’t take any more of his money. Oh, you might try selling someone else’s products but the magic’s gone.

When his money starts burning a hole in his pocket next month he’ll HAVE to go somewhere else to spend it.

This is just one scenario of how a customer becomes a non-customer. But it’s one you can solve real quick and move on.

Many product’s have a life-time too,
eventually becoming under performers

Product creation is an ongoing part of a successful business. None of us want our best customers run out of things to buy. Or find more interesting products elsewhere.

Product sales diminish over time because …

• Your market changes
• Your competition increases
• You’re too successful so your best prospects already have your product
• New technology or information makes your product obsolete.

Complacency is rarely rewarded in business, or in life.

So if you have one, two or three products and you haven’t developed anything new in years, chances are you could be making a lot more money.

If you’re committed to doing it, creating valuable products doesn’t have to be an overwhelming process.

Remember “buy, build or borrow” works for product creation too.

Just something to think about,

John Newtson

Ever since high-school I’ve been a math-hater.

I was never one to put much effort into things I hated so my math skills never progressed beyond basic geometry.

Fortunately, basic math skills are all you need in direct response marketing.

And now, living hip-deep in the numbers behind multiple marketing campaigns on a daily basis I’ve developed a new appreciation for basic math.

For the simple reason that …

Your ability to generate large amounts of new customers
is directly determined by your ability to do simple arithmetic.

Let’s look at this in terms of return on investment. For this example we’ll use an extremely SIMPLE online new customer acquisition banner ad campaign that goes something like this: Banner ad >> Squeeze Page >> Sales Letter Redirect >> Autoresponder Promotional Emails

Prospects see the banner ad and click on it. This takes them to squeeze page offering several FREE reports and a free subscription to a newsletter. Once they opt-in they are redirected to a landing page selling a product.

This is just one way to successfully run one of these campaigns. It’s not ALWAYS appropriate to use a squeeze page, sometimes it’s better to use a product landing page that has sign up options, but that’s for another article.

So you run those ads on four sites you think perfectly target your prospects.

Unfortunately, the margins from one media placement to the next are very different:

1. Site #1 hits it out of the park with an up-front ROI of 250%
2. Site #2 pulls breaks even with 100% ROI
3. Site #3 gives us 50% ROI
4. Site #4 a mere 25% ROI

For the sake of argument let’s say each one of those cost you $3,000. And each one gave you the exact same number of new customers, say, 300.

So the numbers look like:

• Site #1: $3,000 x 250% ROI = $7,500. 300 new subscribers generated at a profit of $15 each.
• Site #2: $3,000 X 100% ROI = $3,000. 300 new subscribers generated for $0 each – they’re FREE!
• Site #3: $3,000 x 50% ROI = $1,500. 300 new subscribers generated for a cost of $5 each.
• Site #4: $3,000 x 25% ROI = $750. 300 new subscribers generated for a cost of $7.50 each

Which of these campaigns would you continue to run?

Many people’s first reaction is to say to keep running the ads on sites one and two and cut their losses on three and four. But those of us who know basic arithmetic say HOLD ON!

Let’s look deeper.

When you combine those four campaigns together what do you get?

Exactly, you just ran four tests with an initial cost of $12,000 to grow your list by 1,200 and gave you sales of $12, 750. You made a profit of $750 and got 1,200 new customers.

You use the high-performing campaign to subsidize the lower performing campaign so you can build a bigger list.

“So what,” you say, “If I cut out the low performing sites I can make a bigger profit.”

To which I say, “Keep up with me, Sparky. You’ll make more money this way.”

The better your backend sales are
the more aggressively you can go after new customers

If you were completely ignorant of direct marketing fundamentals and the only product you had to sell was the product you used on your acquisition campaign – you have to make money on the initial transaction.

Because you’ve already sold your only product when you acquired the customer.  And that dramatically limits where and how you can market your business.

But, as a savvy direct marketer you’ve got a second product … a third product … product … a fourth product and more to sell to new customers.

And if you bring 1,200 new folks onto your list in a month a certain percentage of those people might buy something else. And the better you are at helping them find additional products or services they want to spend money on, the higher that number will be.

Let’s do some more math.

You’ve now got 1,200 new folks on your file. It’s time to promote something to them.  Say you have a $300 product they haven’t seen yet that would be perfect to help them achieve whatever it is their interested in doing.

If you create an email campaign to those people in the first month they join you and you get a measly 1% response rate, what happens?

Exactly, in the first 30 days you made an additional $3, 600:

1,200 x 1% = 12 x $300 = $3,600

The next month you do the same thing with a $500 product and this time you get only a .5% response:

1,200 x .5% = 6 x $500 = $3,000

Two months out from your initial campaign and those 1,200 names produced an additional $6,600.

Apply those numbers back to your acquisition campaign and look at the numbers again:

• 12,000 names at an initial $750 profit
• At 30 days, your profit is $4350: ROI of about 141%. Each one of those names was $3.62 to you in the first 30 days.
• And at 60 days your profits are $7,350: ROI of about 167%. Each name is worth $6.12 at 60 days.

If through testing you can keep these numbers relatively stable you can actually go after even lower performing media placements because you’re able to make up the cost in the first two months.

And that means you can go after more new customers even when you have to lose money on the initial transaction.

This is all about back end marketing. The better your product ladder is the more products your customers will buy. The more effective you are at promoting your products the more your customers will buy. The better your relationship is with your customers the more products they will buy.

And that means you can spend more money to get more new customers.

One marketers I know of knew a qualified name was worth at least $650 to them. And that meant they could very aggressively promote to get those names.

Sorry, there are no absolutes in direct marketing

All of these numbers are just examples.

Always be aware of the fact that customers you get from different sources will behave differently.

• It’s true when you compare different types of media: You might find that a customer who comes to you through pay-per-click spends three times as much a customer who comes to you through co-registration.

• And it’s true when you compare variations within the same media: Customers generated with the same copy from two different websites may have two dramatically different purchasing patterns.

And customers who came to you through pay-per-click through one keyword group may buy and behave different than customers who come to you through another keyword group.

By staying on top of these variations you can make much more intelligent and profitable decisions when planning your strategy.

If you’ve been studying or working in direct marketing for awhile you’re probably already familiar with the concept of lifetime customer value. This is simply, the amount of money a customer will spend with you over the course of their lives.

But industry to industry, business to business the amount of time a customer sticks around is different.

In the direct mail newsletter industry customers often stick around for about 7 years. So someone who’s only been in business for a year or two can’t determine their true lifetime value. They have to go on shorter term projections.

In other markets a customer may only stay with a company for a few months.

So the numbers change. But it’s all still basic arithmetic.

The great Gary Halbert once said direct marketing at its core is nothing more than psychology and arithmetic. And while the arithmetic isn’t as ‘sexy’ as the copywriting, sales and market psychology it’s critical to succeeding in this business.

Keep a close eye on the math in your marketing or your client’s marketing and you’ll consistently find ways to be more profitable.

Hope that helps,

John Newtson

Where will you make more money – on a monthly billing option of say $99 a month? Or a quarterly billing option of $299 a month? A recent long-term test I ran showed the quarterly option is beating the pants off the monthly option for a newsletter.

We have a 75% pay-up rate to six months – which is two quarterly payments.

Compared to an average stick rate of just 10%-20% stick rate at the six month mark using a monthly billing cycle in this market.

Average customer value BALLOONED from this test.

• Starting average customer lifetime of 3 months or $297
• At the end of the 30-day trial on the quarterly option 100% of customers had paid $299
• 75% stuck for the second payment totaling $598 in sales. This gave us an average lifetime so far of 5.25 months for an average value of $523.25. And that is just at the six month mark on this test group! I expect this number to continue to climb for at least 1-2 more billing cycles.

On top of all that, you would think the quarterly option would generate fewer customers on the front end but we didn’t find that to be the case when selling on a 30-day free trial basis. We generated the same total number of customers but made a lot more money.

NOTE: This is pretty cool, when selling on a 30-day free trial basis I’m not seeing a drop off in total acquired customers from this higher-price continuity program than we did for a one-time $99 sale. That’s not a conclusive test but it is an interesting point needing further study.

Every 100 customers normally would generate $29,700 on average now those same 100 customers generate $52,325 and growing.

I don’t expect this offer to perform exactly the same in every scenario but it’s a good example of the kind of test that can dramatically increase customer value.

John

1. The Total Package
2. The Gary Halbert Letter
3. Bencivenga Bullets
4. John Carlton’s Big Damn Blog
5. The Copywriter’s Roundtable
6. Bernsteins Swipe File Blog
7. Copyblogger
8. Drayton Bird’s blog
9. Ted Nicholas’s site
10. Michel Fortin’s site