Hot Gossip >Stop wasting money on advertising (or at least know which advertising is working and by how much)

“Half the money I spend on advertising is wasted;
the trouble is, I don't know which half.”

You've probably heard that before right? It may even ring true for you and your business. This month, popular direct marketing guru, Rachel Ah Kit, joins us to share some knowledge on effective use of direct marketing.

So, would you be interested knowing which half of your marketing is wasted?

Yes? Read on and find out how to measure your marketing successes and failures.
No? I wish you well in business!

Consider that this happens all the time, more than people would care to admit.

If you track, measure and analyse your responses, you can do some testing to discover what does work for you. Once you have this knowledge you can make better informed decisions next time and stop making the same mistakes.

How can you track the source of your lead or sale?

Ask
It sounds simple, but every time someone calls, walks in or emails, ask them how they found out about you or your offer.

Coupons
Old fashioned as they might seem, they still work. Have different versions of coupons with your offer for different sources – a blue heading for The Press, green heading for the letterbox flyer, red heading for the email etc. so you can easily tell.

Different 0800 numbers
There's a bit of cost involved here, but you can get reports from Telecom on the number of dials, hang-ups and connects for each number. A different number for different ads.

Different e-mail address
You can easily setup additional e-mail addresses if you have your own domain name, often for free. Then you can have sales1@yourdomain.co.nz for The Press, sales2@yourdomain.co.nz for the letterbox drop etc.

Through these methods you can actually measure your responses. The most important part here is to actually have a way of recording this information. If you don't have a sophisticated CRM system, a simple spreadsheet with dates and codes for each of the sources will be fine. But you need a bit of discipline.

Once you have measured some responses, now it's time for some maths.

There are lots of ways of analysing results – some take a statistics degree.

Here are a couple of easy ones that will give you some useful information:

Response rate: (number of responses / number of pieces sent) x 100, i.e. if you send 250 emails and 12 people respond, that's a 4.8% response rate.

Is that good? It is if last time you only got 2%. It's not if last time you got 15%.

Cost per response: (total cost of ad or campaign / number of responses), i.e. you spend $1200 on print and distribution of a letterbox drop and get 28 responses, that's nearly $43 per response.

Is that good? It is if they each bought something worth $100. Maybe not so good if they only spent $10 each.

So what's a good response rate? It will depend entirely on your industry, the size of your target market and what you've achieved previously. For some a 0.1% response is good and profitable. For others at least 10% is required.

Testing, testing.....1...2...3

If you've never measured responses before, start now and start small. Do a test. If you have 1,000 customers, try sending something to 100 of them to gauge the response, then use that as a start point.

Testing one thing against another – keep it simple. Don't test more than one thing at a time or you'll just complicate matters and never actually know what made a difference!

Example: If you do letterbox drops, you could try a black & white flyer with a coupon for say 500 people, and a full colour one for the same quantity. Mix them up so they are distributed randomly; you don't want all the colour ones going to a completely different area. Then measure and analyse the results. You might find that while the colour ones may have a slightly higher response rate, the cost per response might be higher too... so you might end up making more profit from the black and white ones.

You could also test things like:

• 1,000 letterbox dropped flyers vs. 1,000 of the same flyers (but with a different coupon/response code so you can track!) sent out via addressed mail
• A 2 for 1 offer vs. 50% off (same thing, different wording)
• “Get a free widget when you buy a gadget” vs. “Buy a gadget and get a widget for only $10”
• Letter with an email follow-up vs. the letter alone
• Email with a phone follow-up vs. the email alone
• Email vs. postcard

There's tonnes of things to test.

The important thing is to measure then analyse then test then measure then analyse.... Do them all regularly, and you'll quickly learn which of your efforts works better than others!

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