In marketing we tend to use the analogies of war. We talk about objectives and targets, about campaigns, overcoming consumer resistance and about mailing shots and the instruments of persuasion.
Just as weapons have changed greatly in recent years, so have our means to resist them. The media of marketing have had to adapt to the needs of new products and new markets. Above all, your marketing methods now need to take account of the changing mathematics of modern products which cost less and allow smaller margins for marketing, at a time when the cost of customer service, telemarketers, sales reps, and transport has risen alarmingly.
The hand-to-hand wrestling of the sales reps with his individual customer, and the supporting barrage of expensive blanket advertising have, in many cases, given way to automated and yet highly accurately targeted, direct response promotion.
If I may stay with my military analogy for a moment longer, modern conditions call for the infra-red target-seeking device and the intercontinental ballistic missile, aimed and controlled to arrive within an inch of the center of its target.
This blog is concerned with the art of persuasion – not through opinion forming, large-scale advertising, TV and billboard campaigns, but through carefully devised, accurately aimed personal communication, with measurable results, leading to a sale and the means of assessing the precise promotion cost per dollar of turnover.
Just One Word of Caution
Performance marketing a.k.a. direct marketing is not a universal wonder drug which will totally replace large-scale opinion forming image-based, institutional advertising.
It will not make all your telemarketers and sales reps redundant overnight. Mass advertising is still appropriate when you are selling large numbers of units through thousands of outlets to millions of consumers with a relatively low profit per unit.
At the same time, mass consumer advertising can contain a direct response-getting element. The objective may not be to obtain sales directly, but to gather customer opinion about the product or about your distribution; or it may be used to highlight the gaps in your distribution system.
For instance, a company retailing warm winter boots asked the readers of its consumer advertising to fill out a survey, in which one of the questions asked if they had difficulty in finding the pair they wanted. A flood of replies enabled them not only to satisfy these customers by personal communications, but also to identify the areas where their retail distribution was weak in relation to demand.
Sales reps or telemarketers are still appropriate when we are concerned with very large units of sale to a relatively low number of important prospects. In the analogy of war, mass consumer advertising can be likened to saturation bombing. The sales rep is the equivalent of the commando in hand-to-hand combat. Direct response promotion is highly accurate sniping with telescopic sights, and occasionally with a machine-gun.
The Best Products for Performance Marketing Tactics
Having established the principles of direct response promotion, let us turn to the products which can be sold by these techniques.
To begin with, you can, of course, sell everything by mail. The kind of goods that are sold direct nowadays vary enormously and the scope is constantly extending. Luggage, books and clocks. Mink coats, streaming services and hardware. Or socks and diapers.
Jewelry, worth hundreds of dollars, and expensive holidays are now all sold by through performance marketing tactics. Financial products, including motor vehicle and life insurance as well as savings and investment plans, are all ideal for performance marketing, including phone and long form online landing pages.
But there is another category of sale altogether: the ‘sale’ of intangibles. Answers to a questionnaire which will give you important information that can lead to
- major sales;
- invitations to seminars online and offline, which will give you an opportunity to make major sales to groups of prospects can be promoted through performance marketing;
- an agreement to a meeting can be obtained;
- confirmation of a vital name and address;
- the announcement and implicit acceptance of a price increase.
All are functions and objectives which can be handled and attained by direct communication techniques. They can all be dealt with automatically and yet individually, for each different case, in a personal way, with a fixed profit objective and the saving of time and expense of a personal, i.e., through a salaried person, contact.
Finally, you can create a need which will lead to a product sale.
This is demonstrated in the following example, designed to sell car fleets for a motor company main agent.
Chief executives of companies with fleets of cars are hard to approach. They are not primarily interested in cars at all. What concerns them is the cost of motor transport and the best ways of financing it. So, instead of sending them some lovely full-color literature describing the range of models available, you may produce an interactive video called The Vital Economics of Motor Transport for Companies, and your mailing shot may be designed to ‘sell’ them this free interactive video, possibly with some valuable premium. It should give them the answer to many questions which deeply concern them and while at the same time gather information about the company’s needs, which could enable you to make a suitable offer.
Usually, in performance marketing, we press for a direct measurable conversion. But in some instances, a conversion is not only unnecessary, but actually undesirable. A good example of this is the classic ‘negative option’ where you confirm that you wish to continue receiving your supply of a product by doing nothing.
Let me give you a more recent example. Nowadays, when you sell video streaming subscriptions, the favored technique is to obtain a commitment for the subscription to continue until it is cancelled – even if the price goes up. This is called an ‘open-ended’ or ‘til forbid commitment. In the case of sophisticated office products or computer hardware, service agreements can be incorporated in the initial sale in much the same way.
So far the blog post has concentrated on some of the concepts and products you can sell, or achieve, by direct response promotion.
The Best Method of Performance Marketing Budgeting
Measurability and accountability are the great virtues of direct response promotion. You can budget beforehand what you can afford to spend and afterwards measure precisely what you have achieved and what you had to pay for each unit of achievement.
In order to arrive at a budget for a performance marketing campaign, it is necessary to define your objectives clearly and to divide them into ‘units of achievement’. Your objective may be to obtain leads for sales reps or to sell units of merchandise. Clearly the value of a sale, and the amount available for its promotion, are different in each case.
In some instances where you are selling a whole range of merchandise through an ecommerce site, for example, you may have to measure your achievement after a test campaign and add up your values to arrive at the total benefit from your promotion. So, your first task is to put a value on a unit of achievement – to decide how much better off you are for having achieved it.
This is frequently the most difficult task in budgeting, but it is vital. If you are not clear what it is worth to be successful, how can you decide how much money to spend?
Once you have made this value judgement, there will usually be a number of alternative paths to your objective. You then have to calculate the cost of each one and make a judgement about the path – or paths -which will get you there most economically. Some of them will be simple and straightforward, others may involve a variety of different direct communication vehicles in different proportions and you will need to calculate a cost for each of them.
Costs for every medium fall into a number of categories:
- Tooling up: Design and starting up
- Roll-out: Production costs, including web development
- Distribution: Traffic & media, phone charges
- Fulfilment: Time, office and warehouse space, handling costs
- Conversions: Programming backend, customer service
- Follow-through: Data capture and follow-up systems
- Incentives: Give-aways, premiums and discounts
All of these need to be considered and the full cost of every one of them has to be calculated.
The Best-Suited Markets for Performance Marketing Methods
We have now seen how important it is to decide precisely what you are trying to achieve, and once you have defined a unit of achievement you have to put a value on achieving it. In this respect especially, direct response promotion concentrates the mind. Furthermore, where you are aiming to sell to individuals, you obviously need to be clear who these individuals are.
In terms of digital marketing, we are usually talking about buying traffic. But the best prospects of all are usually contained on records of your own past customers.
The method of identifying our target depends largely on the scale of our operation. When counting prospects in millions, you have to use different techniques from a case where there are only hundreds.
The value of a sale, or a unit of success, is also an important factor in the identification of your market: where the value of a unit of success is only $19,90 you have to use large-scale, highly-automated methods of targeting. Where the value is thousands of dollars, you can afford to make a highly personal search and hand-pick your prospect list with great care.
Whether you sell to a pinpointed market of 100 key decision makers or to 3 million individuals within a given geographical or socio-economic group, it is vital to consider your total prospect universe and to define it as clearly as possible. The next step is to choose the ideal media for communicating with this universe.
In most cases, whether you use a number of different media or just one with strict capping, there will be some overlap, so that you will hit the same targets several times. In an impersonal communication, such as Facebook advertising, this is not only acceptable, but desirable. In email or telemarketing, it could be disastrous.
Imagine phoning the same person several times with the same message. Similarly, in emails, SMS texts or direct mail, a highly personalized approach which is addressed to the same person by the use of several overlapping mailing lists can make you look ridiculous.
That is why a single non-duplicate database of your total prospect universe is ideal both for direct mail and telephone prospecting. But one should also be highly selective and critical in the choice of advertising medium. Harvard Business Review, however up-market and C-Suite-concentrated its readership, will give you a substantial waste circulation when you are selling a niche industrial product.
You will need to calculate the cost per approach to true prospects and ignore total readership.
The Best Media for Performance Marketing
Let’s now consider the three basic direct response media and the principal benefits and drawbacks of each, bearing in mind that you shall, at this stage, look at the forest rather than the trees.
At a later point, I will concentrate on each of the media in far greater detail but before I do so, let’s look at them all in comparison with one another. Each one because of its particular characteristics, attracts differing costs and offers totally different possibilities. They therefore have to be chosen with care and discrimination.
Semi-targeted: Online ads (direct buys, Taboola and Outbrain traffic networks), magazine, radio and TV advertising can deliver the largest number of users, readers, listeners and viewers at the lowest cost per approach. However, users, readers, viewers and listeners are largely casual or accidental and rarely correspond 100 per cent to your target universe. You will compete with hundreds of other advertising messages and with the editorial and program content of the site, publication or station itself.
Highly-targeted: Online ads (e.g., Facebook ads), email, direct mail and telemarketing (including live agents, SMS texts, robocalls, and bots), provided that the prospect list is carefully chosen and meticulously maintained, can be very accurately aimed with minimum fall-out.
The volume is usually much lower and cost per approach far greater than in semi-targeted advertising, but the penetration and force of your argument can be far more powerful. There is a greater likelihood of your material being read, retained and acted upon.
The telemarketing has the advantage of total one-for-one personal communication. Your message can be adapted to each individual and through two-way communication you have a chain of action and reaction which enables you to amplify and vary your message as you go along.
On the other hand, there are limitations to what you can communicate through the phone. No pictures, charts and tables, for instance, can be transmitted in this way and your prospect has no hard copy of your message to consider and keep. The cost of a phone call, considering live agents’ wages, is also likely to be many times as great as a click and the number of contacts you can make in a day are limited, whereas robocalls, phone bots, SMS texts, email, direct mail is limitless in scope.
The Best Policy and Planning for Performance Marketing
The best way to achieve an objective is to first clarify your intentions, your resources and your methods.
- What is your product, how it benefits your prospect.
- What is your objective – immediate, intermediate and ultimate.
- Who is in your market – and where can your prospects be found.
- What benefit are you offering – and how you can benefit at every step.
- What budget can you afford, to reach each partial objective, and the whole.
- What is the best time for selling your product.
- What methods will achieve each objective most cost effectively.
- What is the estimated response at every stage.
- Is small-scale testing of alternative courses possible before total commitment?
- How responses are to be handled.
- How you will measure achievement of objectives and effectiveness.
- What exploitation of your first effort and success is possible.
- What continued effort will result from your first action.
These questions will help to concentrate your mind and save you from pursuing unproductive paths. In many cases the answers to these questions will, in themselves, suggest the medium and the methods to be used.
Now, let’s examine the actions which each one requires for its execution.
The Best Measurement Practices for Performance Marketing
- Achieving success in marketing is not unlike navigating:
- You have to know where you are, to begin with.
- You must decide where you wish to go.
- You need to study, evaluate and allow for the influences which push you off your course.
- You need to check your position frequently in relation to your point of origin and your required destination.
Above all, you have to keep records of everything that happens and the effect of everything you do and be prepared to change your course in the light of events.
In performance marketing, as in navigating, you need to think ahead. Only if the past is recorded can you judge events and correct your course for the future. For instance, unless you record the conversion form differently for each differing traffic source, mailing list or ad you use, you will never discover which traffic source, list or medium performed best for you.
Unless you key every ad and record the key against the names you obtain from each campaign, you cannot follow through beyond the original response, to the ultimate sale and the value of a sale in order to arrive at the promotion cost per dollar turnover.
If you propose to phone all those who fill out your lead form, it is also essential to ask for their phone numbers in the form. You need to record the source of the inquiry at every stage, so that you can judge later whether respondents from one medium were easier to convert by phone than those from another.
A great deal of time and money can be wasted if you do not look ahead and key everything so that you can record the source against every response and maintain this data through several stages of conversion.
Above all, it is important to keep track of costs. It may be cheap to get coupon site-based conversions to a particular landing page or a dollars-off promotional loose insert, but it may be that only one in ten turns out to be a good prospect. It might be more cost effective to build a good list of prospects and to phone them in the first place. By that means you might convert one in three and save the cost of advertising altogether.
Detailed records of past campaigns are crucial. Again and again, one hears of people who have been in direct response promotion for years but have not kept records of past campaigns. Such people invariably repeat previous mistakes either because they have forgotten or because new people arrive who have no knowledge of what has happened before.
Always keep a print or online archive with every piece of material or ad into it. Add a sheet giving the costs and results on every page, including performed tests. This will enable you to go back years later and compare. It also makes it possible to justify what you want to do from past evidence.
Execution of the Performance Marketing Plan
If you follow all the steps outlined in this presentation, you will be able to make a good case for your performance marketing campaign by stating every cost, by forecasting conversion rate, establishing the value of each action and reaction, and calculating the anticipated profit from your investment.
Not all your plans will work out, but by having meticulously budgeted each source of cost and revenue and every step of your plan, it will be easy afterwards to see where you have done worse and where better than expected and, as long as you know what went wrong, it is always easy to do better next time.
At this stage it may help for me to give you a checklist which will enable you to arrive at a reasoned business case, properly costed, efficiently carried out and capable of evaluation.
- Clarify your product and USP. First, it is essential that you should clarify the product or application of a product which you are aiming to sell. You must then decide upon your unique selling proposition – that is to say, what can you offer that is better than the alternatives available? By studying this carefully you can often build in benefits which cost you little extra but make your proposition considerably more attractive.
- State your objectives. Now you must determine your immediate objective. For instance, you may wish to try to sell the product directly without the personal involvement of the sales rep, or you may decide that your first objective is to invite potential customers to a webinar so that you can subject them to an elaborate sales presentation.
- Define your method and your markets. By what method or combination of methods do you hope to achieve these results? What market are you aiming at?
- Evaluate your resources. What resources do you have for accomplishing your task? By resources I mean internal or external people, equipment, space and money as well as existing creative work.
- Collect your creative ideas. You have now arrived at the point where you should think in terms of creative ideas. That is to say, by what particular method do you hope to attract your customers’ attention to your message or proposal? This first list does not need to be final. However, it needs to be good enough to convince those who have to sanction your expenditure and those who will help you to carry out your intentions.
- Write a brief. Now you will be ready to write a brief for your agency or internal promotion department so that they can come up with the words, designs and final quotations which will lead to the realization of your plan. Be sure to give them as much information as possible about your market, competition and costs so that they will produce proposals which make financial sense and, above all, make them familiar with your product, its character and image.
- Produce a business case. Finally, you can then make a business case which will get you the approval for your plan.
- Execute your plan. The execution of your plan will differ for each medium, but all media require careful timing to ensure that each element with a different production and lead time is ready when it is required to fit in with each other element.
- In modern marketing, there is a shift towards targeted, automated direct response promotion, rather than traditional methods like sales reps and blanket advertising.
- Performance marketing, or direct marketing, is not a universal replacement for all forms of marketing, but can be more effective in certain situations, such as selling smaller numbers of high-profit items to specific prospects.
- A variety of goods can be sold through performance marketing tactics, including physical products and financial products, as well as intangible items like how-to guides or access to webinars.
- To be effective, performance marketing tactics should be carefully planned and aimed, with measurable results and a clear understanding of the promotion cost per dollar of turnover.
- It is important to consider the overall marketing strategy and determine the appropriate mix of mass consumer advertising, sales reps, and performance marketing tactics based on the product, target audience, and business goals.