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A
True Story - Quadrupling (4X) SALES With An Unlimited
Marketing (not Advertising) Budget, Powerful Tools And
Tracking EVERY Lead.
 By the
fall of 1993 an ex-AMEX Coal executive named Tom Blangiardo, who was then President and CEO of
BETA Group in
Fishers, IN, had built a $2 million business from scratch by selling phonics
reading programs on TV.
He
hired me to hire, train and manage the sales force but I quickly learned the key
to growing the company further started with how effective we were at
marketing.
Advertising anything on TV using a direct response format (a prospect or lead
calls your toll-free # after seeing a TV commercial and you try to convert or
close them on the phone to generate a sale) is a very clean and simple business
model.
But it
was dependent on 2 critical things. The cost of a lead
(advertising) in this case an
inbound phone call and our ability to convert those calls (selling) into sales,
tracked by our close
rate.
 Here's
how the numbers worked. Our phonics reading program sold for $250
plus s&h. It cost us about $20 to manufacture the product itself.
Our
company overhead was about $50,000 per week and we sold about 1,000 programs
each week. So another $50 of overhead we allocated to every product
($50,000 /1,000 = $50).
With
$20 in COGS plus $50 in Overhead we had $180 left in marketing and profit ($250
- $20 - $50 = $180). Our goal was to only spend no more than $100 of the
$180 on marketing and keep the left over $80 for profit.
The
Powerful Advertising Tools We Used On TV
Our
best and only tools on TV were :30 second and :60 second commercials or
"spots". They showed children struggling to read with a voice over talking
about reading problems. Then quickly we showed parents sitting with their
child and our product (You Can Read) with happy expressions of overcoming their
reading problem.
Finally
the offer or "call to action" was "TO ORDER CALL 1-800-???-READ, repeated twice.
We did NOT show or tell a price on the spot. This strategy is
called "lead generation" or a "2-step" where you want lots of callers/leads to
call (step 1) and then let your sales people in the call center close/convert
them into sales (step 2).
That
was our MARKETING SYSTEM. Tool #1 was our TV commercial (in Advertising mode) to
generate the lead and TooL #2 were our highly trained salespeople (obviously in
Selling mode) to convert the lead into a sale. Very clean and simple and
straightforward and SUPPORTED by detailed tracking systems (discussed
below).
 We bought our TV spots
on selected local broadcast stations, cable channels and syndicated programs.
The math worked like this. If a spot cost $100 to air and we
received 5 phone calls/leads, then our Cost Per Lead (CPL) was $20 ($100/5=$20).
Out of
those 5 calls if we closed 1 sale (a Close rate of $20%) our resulting Cost Per
Sale was $100 ($20 CPL / 20% Close Rate = $100 CPS) or right at our target of
no more than $100 in marketing costs with an $80 profit. If we closed
just one more sale out of those 5 calls, our CPS dropped to $50 CPS with profit
jumping to $130!
CLOSELY managing our Cost Per Lead, Close Rate and Cost Per Sale was THE SECRET
behind our rapid growth! Here's how we did it (and you should too)!
Do
You Have A Fixed Or UNLIMITED Marketing Budget?
If we were like most companies
(is this what you do?) we would have sat down once a year and budgeted a certain
fixed amount
we planned to spend on advertising & marketing. Then throughout the year we
would have
used portions of that fixed budget to buy our ads, mail our letters, etc.
However in a direct response marketing environment once a year budgeting is the
kiss of death.
Why?
Because within a week, sometimes in the span of days, your advertising
effectiveness may change. If it drops or your close rate changes and you
don't know it, you could be selling products with a CPS of more than your
product's retail price. And just a few
weeks of selling at a loss can kill your profits. A month or so of the
same can kill the business altogether.
So
rather than set a fixed budget like spending $2,000,000 in ads with this
syndicated show (like Oprah) or 500 ads with that channel (like Nickelodeon) and
check on it infrequently (typical
"fixed
budgeting" procedure) we tracked all our marketing DAILY.
Why?
If we found a winner we had the authority to find MORE STATIONS just like
that one (in the same city or with the same demographics) and test buying spots
on the new station.
 Our
TRACKING SYSTEM allowed us to do 2 things very quickly. One, based on our
tracking results and our business model ONCE A WEEK we prune out TV
stations that we're producing sales at less than $100 CPS. And two, we
were always
methodically TESTING new stations to see if they'd meet or beat our $100 CPS
target.
This
was the key, WE HAD NO FIXED DOLLAR BUDGET. If we found 20 new
stations that could produce $100 CPS sales, we'd add them.
WE HAD A VIRTUALLY UNLIMITED MARKETING BUDGET
because we knew if we could spend less than $100 per sale and get back $180 ($80
net profit) WE'D DO THAT ALL DAY LONG!
Marketing TNT (Testing-N-Tracking) Is
Key
From tracking our sales performance since the day the company started
advertising we knew our sales people would
typically close 1 out of 4 calls or convert 25% of the leads or people they talked to on
the phone.
So if
we could find leads for less than $25 (our COST PER LEAD or CPL)
and maintain a 25% Close Rate, our COST PER SALE was $100 ($25 CPL / 25% Close Rate =
$100 CPS).
 What
did we do operationally to support this
business model? Well we were absolute masters at tracking
EVERY
CALL,
EVERY DAY,
that came into the business from our advertising.
We used multiple 800
numbers, real-time call reports with caller ID (ANI & DNIS) from our long
distance provider and combined them
with TV station and cable network traffic reports (we called the traffic
departments of every TV station every day) when our commercials ran.
We even
had huge 10-foot C-Band satellite dish with TVs in the call center and
lunchroom that would pick up ALL the network
feeds so our salespeople could see our commercials run "live" and be ready to answer the
phones.
Cut Your Losses &
Reinforce Victory!
When
the phones rang all day we would track the Cost Per Lead
(CPL), Close Rate and Cost Per Sale (CPS) per COMMERCIAL - not just per channel
(we'd run 3 to 10 commercials on a channel each day and maybe 10-15 channels
per day).
So by 10 am
the next morning we could look at
the previous days results and could see which stations, which commercials and which time slots were
making us money,
which ones were breaking even and which ones were losing money.
 Then
every Thursday morning (when we'd place our media
buys for the next week) we'd drop the losing stations or time slots (cut our
losses), tweak the
breakeven ones and if there was availability, buy MORE media (reinforce victory) on the stations and
rotations that we were making money on.
If for
some reason there wasn't availability on the "money makers" we always had
access to a list of stations in markets we wanted to test. Our Media Buyer would
pull out the list, look at HH (households) and other demographics and then place
her buys.
Then the tracking process
started all over again the next week so we could see if new stations, after a week or
so, were going to be a winner, breakeven or loser for
us. What did this unlimited marketing budget driven
by focusing on our marketing efficiency do to our sales?
$2 Million to $9.4 Million in 18 Months!
 By the spring of 1995 we had become a $9.4 million dollar company, paying out
distributions of over $500,000 to the company's private investors. And Tom
proudly accepted the award for the local E&Y Entrepreneur of the Year
Award in the Emerging Category.
We had
quadrupled sales in less than 2 years and outgrew 2 office buildings in the
process. Granted the entire company was young and energetic and Tom, our
President, motivated us daily. But the key to all of this success was our almost
insane daily focus on our marketing results, tracking our CPL (Cost Per Lead),
Close Rate and CPS (Cost Per Sale) like a day trader tracks his or her stocks on TradeStation.
We
never would have grown our sales so quickly with a fixed budgeting mentality
applied to our marketing. It's the worst way to grow your business because
it doesn't take into account the overall effectiveness (CPL, Close Rate & CPS)
of the advertising combined with the selling.
 The
owners of the reading program we sold, 2 teachers, had limited
success selling their program via catalogs before BETA Group started
marketing the program on TV. TV is still the most
powerful advertising tool for consumer based products.
 Knowing
our numbers DAILY was the one big key to our growth. It takes a
lot of time in your organization to set up the systems to
track and report. Then it takes discipline to look at
those numbers every week and cut what's not working and
find more lead sources to test.
 Advertising
Tool #1 was our TV commercial and we constantly ran tests
(control vs. test) with variations on the audio and video to
improve the quality and quantity of our leads. We
were never satisfied with spent time & money to "sharpen the
advertising axe".
 To
quadruple sales in 2 years we consistently spent $100,000+
in advertising per week & tracked all our CPL, Close
Rate & CPS results on home grown spreadsheets in Excel.
What daily & weekly tracking systems are your
staff using to follow every lead from every source?
NEXT WEEK - Having trouble
generating leads for your business? We'll
take a look at some traditional and new methods for finding
people who need what you sell.
Until then keep Growing Your
Business!
Jeff Bell,
www.Growing-Your-Business.com
Do you have a marketing question?
I have an answer.
Click here and go to
www.AskJeffBell.com
Turn on your SPEAKERS to hear my
message.
Jeff Bell
Sales and Marketing RESULTS
PO Box 267
Noblesville, IN 46061
317-774-3787
www.Growing-Your-Business.com
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