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The Six Vital Variables of Performance Marketing: Testing Markets, Products, Prices, Offers, Media/Materials, Creative Approaches.

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There are basically six major factors which affect the viability of any performance marketing operation, and it is important that you accept from the outset that each of them is variable, and you must test them. Without this realization, the best and most imaginative offers can often fail, and producers of products and purveyors of services are far too often unable to be objective about them.

The Market

In terms of performance marketing, the market is represented by a reachable online audience, mailing list or by response-getting offline advertising media in the form of print space advertising, loose inserts, or TV/radio airtime. At the risk of uttering a truism: whatever happens, the market should come first.

Too many companies begin with a product and then try to find a market willing to accept it. Performance marketing media can enable you to establish whether a market exists for your product and in what form and at what price the largest available market would accept it.

Online and offline audience targeting is one of the most difficult and sensitive areas in performance marketing. Audience selection has become a science with a more varied choice and a greater sophistication of ad networks than is offered by any media selection in the world. Audience can include segmentation, choice by past buying patterns, geographic location and by past and present associations of individuals in different combinations.

Data protection and consumerist legislation make matters more complicated. To hear some consumerists talk one would think that it is evil to offer anything for sale at all, or that consumers are morons, unable to decide for themselves whether they wish to buy a product or service. Making your market aware of your product is part of its cost which ultimately affects the selling price. Consumerists do not seem to realize that, when they make communication more difficult and expensive, they are increasing the cost of the products they buy.

Audience targeting by diverse sources is bound to overlap both on and off your target. Where they overlap off your target you have double waste in repeatedly touching people who are not interested in your offer. When they overlap on your target, you cause annoyance to your best prospects and, despite their original interest, may even cause them to become disenchanted and decide not to respond.

The Product

In many companies, be they manufacturers or service organizations, the product is a kind of sacred cow which can only be questioned or changed by the highest authority, and marketing people are often constrained to selling what they are given. This policy can be fatal.

The product should arise out of a study of the market and its needs. For ultimate success, six separate aspects need to be studied and thoroughly tested – not only objectively in professional market research, but subjectively in live testing where the customer is asked to vote with his or her credit card.

The unit size and quantity in which you sell your product will also affect response. An online premium subscription, for example, could be offered in the first instance for three months, six months, a year, or two years. Each offer will affect response and needs to be considered.

For instance, it may be relatively cheap to acquire new subscribers by offering the first three months’ subscription free in return for a commitment to subscribe for one or two years. This may be tested against a half-price subscription for one year. Only a test and a mathematical projection will determine the comparative profitability of these alternatives.

Frequency of supply is another question. It is important to study consumption and to ensure that the customer receives neither too much nor too little. An oversupply of product or service (be it online or real-world product) may repel some customers. On the other hand, if stocks run out, there is a danger that another supplier may win your customers.

There may also be an absolute limit to the amount of a given product that a customer can take. One interesting example is a remarkably successful streaming subscription service which sold access to hundreds of educational lectures by renowned university professors. The promotion campaign rapidly recruited 100,000 members who bought full-price 12-month access.

The company experienced remarkable growth and profits and prided itself on 5-star reviews until membership suddenly began to drop off and they went out of business. In retrospect, the reason is not hard to understand. The members had run out of free time to watch even one percent of what was available to stream!

Taking more every-day products, in the case of a wine club we are dealing in consumables and the life of a membership should, therefore, be capable of being prolonged indefinitely. But it is important not to force the member to buy too much, or to leave him alone for too long so that he is tempted to try elsewhere. In the case of a collectible subscriptions/clubs/memberships, both expense and shelf space are a problem and frequency of supply as much as subject interest needs to be studied accordingly.

The packaging and naming of products play an important part in their success. Even if a product is already established under a given name or with a specific pack, this should not be considered sacrosanct, and comparative tests should be conducted which would be difficult in the retail trade.

Above all, the benefits which a product is said to provide – and its description – can be tested and the most successful formula should then be chosen for ultimate large-scale promotion. The way the product is positioned in the view of the consumer must be evaluated.

In the eyes of different consumers, the benefits of the product which are important may vary. Economy may be the prime consideration for some, glamour to others. The image a product conveys can be the compelling factor for certain sections of your market, while utilitarian considerations may sway others.

All these factors affect the response of your market to the product, and all can be tested in performance marketing without changing the product in any way. This is probably one of the greatest advantages of such a promotion and those who ignore it are missing a major opportunity.

The Price

The price of the product should be tested. After all, if a reduction in price of 20% will double sales, it is highly likely that the lower price will create higher profits. But this is not to say that the lower price always works best.

I have known occasions where the higher price was not only more profitable, but actually produced more orders. The claims one can justly make for some products are just not credible at the lower price whereas, at the higher price, the customer will not only believe your claims but will be prepared to buy.

Testing alone should be your guide, but there are many considerations to take into account. Quantity is, of course, one of them. It may be highly profitable to sell a product at a higher price but, if sales are reduced, the total profits might not be worthwhile, whereas a lower profit on ten times the number might lead to an ongoing business.

The Offer

Just as the market and the product can be varied, so can the offer. Depending on your profit plan, it may pay you initially to give away your product to attract the largest possible number of people. The give-away may be linked to an automatic commitment to continue receiving a supply – unless the customer cancels. Or you may start at half-price for a shorter or longer period of supply and automatically pass to supplies at full-price.

You can offer premiums – something free if the customer decides to buy your product – a subject which could fill a book. It is possible simply to give away money, or to give away merchandise.

I am always reminded of the old joke concerning the self-made millionaire who asked his wife what sort of present she wanted on their Golden Wedding Anniversary. Without much hesitation, she suggested a lump sum of $10,000. Old Benjamin was dreadfully upset. “Why not a diamond tiara, or a Rolls-Royce?” he asked. “But Benjie”, his wife said, “they would cost much more than $10,000!”. “Yes, I know”, he replied “but where can I get 30% off of $10,000?”

In the same way a merchandise premium has, to the consumer, the apparent value of its retail price, whereas you can buy it wholesale, sometimes at quite spectacular discounts.

Better still is the self-liquidating premium. Another dealer who is interested in your market will gladly give you 50% off of his product in return for the introduction. You just give away the discount voucher genuinely worth $10 or $20 which has cost you nothing.

Suffice it to say at this stage that offers can vary enormously and should be tested. Offers apply not only to merchandise. The choice of cash, credit or extended payments is also part of the offer, and both the costs and the results will be affected by the form of payment.

The Media or Material

The fifth variable is the choice of media. Media should be tested not only singly, but also in combination. Every change in the choice and mix of media will affect ultimate profitability. Moreover, the media can help each other.

If you are planning a major direct mail campaign running into a million or more letters it will undoubtedly improve response if it coincides with a TV spot or online display ad telling the same story and designed either to obtain responses in its own right or referring to the mailing which will have dropped on to the doormat that day.

The use of different media can also be staggered so that one announces the impending arrival of the other or reminds you that you received it a week ago and should act on it before the closing date.

The Creative Approach

The market, the product, the offer, and the media are the bricks and mortar of performance marketers. The creative approach is the magic. If you have the other four right, this is what can set them alight and make them succeed. But creativity, as I hope to demonstrate throughout my blog, is not all inspiration and instant effect. It is generally the product of exceptionally deep understanding of the other four.

A true feeling for the customer and his needs, a burning enthusiasm for the product and the offer and sympathy with the medium will link your other instruments together and make them perform as an orchestra. A symphony is not a collection of instruments and players, a concert hall, or a good audience. It is what a brilliant composer and his conductor can do with them.

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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.