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How to Slash Your Advertising Costs And Increase Number of Orders – Both At the Same Time.

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This Blog Post's Table of Contents

This blog post is directed primarily to the general marketer who is looking for practical, proven ways to:

  • Reduce risks
  • Cut costs
  • Improve performance, and
  • Get more value for the dollar.

Small-budget considerations are highlighted throughout the article in an effort to focus on the many cost-saving opportunities open to the small- to medium-sized business, as well as the large corporation with small-budget projects.

My emphasis is on the practical, the usable, and the doable. The ideas and techniques described here are applicable to the needs of general marketers who seek greater accountability and control of their ad dollars.

Bear in mind though that tips, as such, are but the bits and pieces to a complex puzzle. Some fit your situation, others do not – even though they look as though they should.

Indeed, when cost-saving tips are forced at random on a marketing problem, the result can be disastrous. For example:

  • What good is a “70 percent Off” media buy that gives you the wrong market?
  • What is cost-effective about a rock-bottom price for printing a brochure that hardly anybody reads?
  • Why run a small-budget promotion that is likely to raise your lead generation costs, not lower them?
  • What is smart in slashing your Facebook and Google Ads marketing budget and sticking to email marketing (“because it is free”) if it reduces your profits by 20% long-term?

Clearly, cost-savings at one end can destroy an entire budget at the other end. This is why it is essential that, as a marketer, you take a step back and view all elements of your cost-saving equation.

By doing this, you will be able to combine the components most likely to produce savings and correct those certain to produce waste, and become a performance marketer.

The Cost-Saving Performance Marketing Equation

First, what are the major components of the cost-saving equation in performance marketing? In my judgment, they are:

  1. Product value
  2. Marketing efficiency
  3. Media effectiveness
  4. Outstanding creative
  5. Customer retention
  6. Development and production efficiency

Product value, in the overall equation, rates higher than all the other components combined. The reason: A demonstrably superior product or service (with a unique value proposition) advertises itself long after the sale is made, thus making it the most cost-effective in terms of an advertising and marketing investment.

True, it is possible to succeed without demonstrable product value but the costs would be astronomical. Such a strategy would dictate that you focus more on acquiring new customer leads at the expense of creating a strong customer base for reorders or referrals.

When product value is truly outstanding, it carries the bonus of word-of- mouth advertising. This can make it possible for some advertisers to reduce media spending or eliminate it altogether. (See Tip #1 in below.)

Still another benefit of product value is its power as a communicator. When clearly positioned in terms of quality, price, service, convenience and/or uniqueness, product value gives the marketer a powerful “advertising hook” on which to spearhead ads or promotions.

What Determines Product Value?

Product value is determined by the perceived worth that a buyer places in a product or service.

Example. Two aspirin tablets selling for $10.00 from a vending machine may sound outlandish but not to the person running a fever who happens to be two miles from the nearest drug store. Worth here is expressed in terms of accessibility and convenience.

Perceived worth is what defines product value in the marketplace. It targets customer needs and wants. It determines whether a sale is made or further information (as in lead generation) is requested.

Examples of product value positioning include:

  • Quality merchandise at reduced prices (T. J. Maxx / T.K. Maxx)
  • Meaningful guarantee (FedEx)
  • Accessibility/convenience (McDonald’s)
  • Status symbol (Rolex)

Second in importance to product value in the cost-saving equation is marketing effectiveness. Without it, the other components in the marketing mix – media, creative, development / production and all the rest – are certain to collapse. So be sure to look closely at the marketing ideas and suggestions covered below.

Since costs per lead or order are tied so closely to media efficiency, this component requires scrutiny. But bear in mind, as competition tightens, it is essential that both marketing and media effectiveness tie in with outstanding creative in order to break through the clutter.

Examples of creative’s role in cost savings are highlighted throughout this article and my blog.

Customer retention is also included in the cost-saving equation. Its importance can be appreciated when you consider that it costs much less to retain customers than it does to replace them with new ones.

Production and development are other major components offering numerous cost-saving opportunities, particularly in light of new platforms, online tools, project management software catered to marketing needs etc.

When you string these components together, your cost-saving performance marketing equation shapes up the following way:

Product Value + Marketing Effectiveness + Customer Retention + Media Efficiency + Creative + Production / Development = Savings

As you increase product value, you increase the cost-effectiveness of the components in your marketing and advertising mix. Conversely, as product value is reduced, the effectiveness of these components is markedly reduced or eliminated.

As noted, what determines the degree of cost savings, or losses, in performance marketing are:

  • The components in your equation;
  • The strengths or weaknesses you attribute to each, mainly product value; and
  • The way in which the components are linked to produce a result.

Predictably, when all components are top-rated, the result is maximum savings, but when major components are weakened with below-average performers (ostensibly to save money), a domino effect is created that triggers waste across the board.

Clearly, the components in each cost-saving equation will vary with every project, from a simple landing page to a full-blown multichannel campaign.

But the challenge remains constant: View each cost-saving equation in its entirety rather than focus on a single area, such as production / development or creative or media.

By seeing the relative strengths of each component and how each works to maximize the effect of the whole, you will be able to improve your ability to project the likely result before marketing funds are committed.

Six Keys to Real Savings

As the cost-saving equation shows, getting more for your money is a function of how your performance marketing components are linked to strong product value. But cost-savings also result from proper management and planning. Here are some valuable tips to consider.

Tip #1: Do Not Spend, Invest

When you have advertising money to spend, spend is what you are likely to do. But when you view your advertising in terms of investment, it is surprising how quickly your plans revolve around a Return on Investment (ROI) strategy that focuses on response, orders, yields and dividends.

By using the ROI approach to marketing, performance marketers literally program their strategies and computers to help them maximize returns on an ad-to-ad basis.

Many of the cost-saving techniques they use are applicable to general advertising – promotions, ads, web pages, sand the like. The ROI approach, in any ad, simply requires the prospects to respond to an offer, sale, inquiry or demonstration.

The challenge is to build your ad around an idea or offer whose job is to generate responses within the framework of an image-building campaign (if image building is something you care about, that is).

Example. Smart marketers measure everything by including a call to action in each ad in every medium they use. While online campaigns with landing pages that let you order the product directly or make you leave your contact details to receive more information (and possibly a free gift) are common place, it is not so with other media.

If you are into performance marketing make sure all your ads, including billboards, flyers, radio ads, print ads, YouTube videos as well as any social media activities you have include a specific call to action that gets measured and evaluated.

To determine Return on Investment on these ads and activities – the performance marketer must devise a tracking system that shows at a glance the cost per lead or order.

Either the ad is delivering a fair return or it is not. If not, change the headline or offer or medium – or scrap it altogether.

By monitoring dollars and performance in your advertising and marketing activities as you would with a stock portfolio, you are not likely to let a bad ad run amok with your budget.

Tip #2: If You Do Not Have to Spend Media Dollars, Do Not

Thousands of highly successful businesses in literally all fields spend little or nothing on media advertising. They depend, instead, on word-of-mouth, one of the most effective ways to grow a business and keep it profitable.

Example. The power of word-of-mouth advertising is exemplified by one family restaurant chain with locations in Europe. This privately held firm grew from one restaurant to a chain of more than 100 restaurants in 13 years – a feat achieved with virtually no media advertising, couponing or promotion.

Rather than using promotion dollars to lure guests to its restaurants, the restaurant attracts customers with generous helpings of fine-quality food, friendly service and incomparable value as well as distinct marketing activities on-site.

By the time guests finish their meal and due to several marketing tactics, they will be so elated that they will be induced to (1) make exact plans to return and (2) share their enthusiasm with friends and coworkers in real life and in social media.

And this is precisely what happens. All the media hype of the fast-food chains prove no match for powerful word-of-mouth advertising and marketing activities on-site.

The firm simply elected to put its “advertising money” into improving its food and service – a move that translates into superior value and volumes of free word-of-mouth advertising.

Tip #3: Losing Sales? Look For a New Twist

When sales begin to dip, the temptation is all too great to beef up advertising or cut prices. A better solution is to improve your product’s appeal or value proposition.

Often, a simple idea can pull it off without adding to product costs or requiring advertising or promotion.

Case in point is a consulting client of mine, a publishing house with a subscription-based magazine that was converted into an elite membership business club. The subscriber’s benefits became member privileges and subscription fees became membership dues.

This new product innovation was first test-marketed with no additional media advertising whatever but in a simple A/B test. The important thing is the core of the product never changed.

To improve product sales, look first to improve the value proposition and appeal. Hands down, it is the fastest, most effective way to make your advertising dollars pull harder.

Tip #4: Never Advertise a Me-Too Product In a Me-Too Way

Advertising a me-too product is like advertising a bag of sand, a box of bolts. It does not mean much unless you tie it into service, variety, instructions, price advantage that sets it apart from the competition.

When an ad fails to do this – or does it poorly – you wind up advertising a commodity, something you can get anywhere. Besides being a huge waste of money, a poor ad may even benefit competitors who sell the same item.

By far, the fastest-growing companies with me-too products achieve their success by adding value to their products or services. Examples of added value are free cloud backup for computers, free limousine service for hotels, or a 24-hour maintenance service for new office equipment customers.

The idea is to promote what your competition does not – or cannot. Does it work? Take the pizza business and the classic example.

It would be difficult to find a more competitive field, yet Domino’s was able to create a marketing niche with the promise of “30-minute delivery or you don’t pay.” It was a service idea – added value – that the firm brought to the pizza business, not low prices or a tasty new recipe. This theme made the advertising work.

No business is really stuck with a commodity. To give your product or service added value, make it a regular practice to come up with “differentiators” – ideas, no matter how small – that can bring meaningful value to your prospects. When you achieve this, your advertising message can be strengthened substantially.

Tip #5: Tap into the Gold Mine You Already Have

As noted, meaningful cost savings in advertising are possible only when product value carries a significant advantage over your competitor’s products or services.

Fortunately, you need not go further than your office to generate ideas to get started. Just ask your employees.

Toyota did, and within one year the automotive giant received nearly two million suggestions, or 32.7 suggestions per employee. Over one million were implemented, helping the firm to fine-tune every facet of its operations, including promotion and marketing.

Rather than going to an outside research firm, you can go to your employees. All you have to do is to involve them, promote two-way communication and make it rewarding for both you and them.

Tip #6: Do Not Forget That the Stingy Marketer Pays the Most

Never confuse wildly discounted prices with value. And never have a price-tag mentality which takes command and literally blinds you as the buyer to factors such as quality, trust and value.

So how do you protect yourself from risky “cost-saving” deals? Know that the best deals in the long run come from your trusted suppliers or from referrals from business acquaintances.

Second, know there are always deal which are too good to be true. Fortunately, in advertising and marketing they can be easy to spot. Here are a few examples:

  • Some media houses provide clients with free creative “guaranteed to sell just anything”. That is the bait, of course. “Free” gets translated into big dollars in the final tab.
  • Some SEO agencies provide 1000s of “guaranteed, high quality backlinks” in 24 hours or less that are purported to bring qualified traffic in no time instead of months or years.
  • A sales representative from an independent local web portal offers ad rates that are 20% lower than the leading local online traffic source. What you are not told is that the independent web portal’s daily unique users number is only half as large.

If you like this blog post and want more expert advice on performance marketing, direct marketing, direct response advertising, please share it. Thank you!

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The expert's thoughts on direct response - growth hacking - performance-based marketing activities - DIRECT MARKETING

About Me, Rafal Lipnicki.

the direct / performance marketing consultant with a strange sounding name

Who.

Not your usual "guru" but a real-world performance marketing & innovation consultant based in Europe and an experienced senior executive at leading multinational companies.

What and Where.

I am a consultant for hire, working remotely and on-site all over the world (but Europe is always preferred). See my consulting services page for details.

How.

Contrarian advice most of the time. Document-based audits, workshops, one-off projects, mentoring programs, and more.

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