Hey marshmallow!! If you go fishing and your fishing rod has no hook, how many fish do you predict you’ll catch?
If you predict you’ll catch seven, then I predict you’ll go hungry for the whole week!
In the previous tutorial in this series, I explained the method to generate Warm Leads who are ready to buy your product or service.
Sell an alternative product to generate a list of Warm buyer leads. And, do it through the media by placing ads.
But casting your fishing rod to catch a fish is not the same as casting your rod to let the fish know you exist. And placing ads to make a Direct sale is not the same as placing ads to create brand awareness.
That’s why you need to learn Direct Marketing.
What is Direct Marketing?
Direct marketing is not just any old marketing. It’s designed to solicit a specific, immediate and quantifiable response.
- it is sent out to a specific list of people, not just everyone and anyone.
- It’s designed to get someone to open their wallet, not just store something in their memory.
- Its performance can be measured and tracked.
These three wisdoms, in case you’re a bonehead and it’s not obvious to you, make Direct Marketing very suitable for making sales through the media.
Branding is the opposite of direct marketing. That is, it is very unsuitable for making sales through the media. That’s because Branding is visible to everyone, does not solicit an immediate response and is difficult to measure.
In this tutorial, in case you’re difficult to convince, I explain why direct marketing beats branding.
How Not to Do Direct Marketing
Branding is what you see in a Super Bowl ad. Imagine you’re watching the Super Bowl and you see an ad for Doritos. You’re not going to immediately run out to the store and buy Doritos the minute that the ad finishes.
Instead, the ad will be stored in your memory. Next time you’re in the store, you’ll see Doritos and remember the ad. If you liked the ad, you’ll be more likely to buy.
This works well for Doritos, but is your product on the shelves at the corner store? If not, then don’t create ads as if it were. Direct Marketing doesn’t work that way.
Keep reading for some tips on how to keep your Marketing of the Direct variety.
Always Target Your Marketing
Direct marketing is meant to be targeted. That is, you don’t bother advertising to anyone but that one person who will buy.
Every viewer of the Super Bowl got the same commercials, no matter their demographics and tastes. On the other hand, when each person logs into Facebook, they get different ads tailored to them. That makes Direct Marketing not just more pleasant for consumers but also a money saver for you.
Since you’re going for a sale right here and now, what could possibly come from advertising to “everyone else” other than a frowny-face about all the money you’ve wasted?
Always Keep Your Marketing Deliberate
When you’re going for a sale, you’re going for a sale. Not wowing your audience, or making them laugh, or talking yourself up.
If you don’t keep your eyes on the prize, your Marketing’s not Direct and it won’t work for this purpose.
Infomercials are another example of direct marketing. When you watch an infomercial, it’s not concerned with impressing you or entertaining you. It has only one intent: to get you to buy, call a phone number or take some immediate response.
That’s how your ads must be when you’re generating leads. Be an informercial, not a super bowl ad.
Once you have a targeted list that you’re advertising to, don’t send that list just anything. If the material you send to your list does not have a specific intent and does not solicit an immediate response, it’s not direct marketing. It’s pure branding and won’t generate leads.
Other Reasons to Stay Direct
The main reason we’re talking about Direct Marketing is it works for making low-dollar sales directly through the media. But if you’re still not convinced, I guess I can give you more reasons. Geez Louise, you’re difficult to please!
Another benefit of direct marketing is it has a low cost of entry and it works in smaller niche markets.
If you have a million dollar budget and your product has mass-market appeal, then perhaps you could do a Super Bowl ad. Otherwise, you will have far better luck with direct marketing and it’ll be all your budget permits anyway.
The final benefit of direct marketing is you have the ability to accurately measure the results.
If sales of Doritos go up after the Super Bowl ad, it’s difficult to know whether it was because of the ad or due to other factors. When you send out marketing to a specific list and solicit an immediate response, you can measure your success rate and your ROI exactly. That’s convenient if your budget is low, isn’t it?
Your Life as a Direct Marketer
As a new business owner, being a direct marketer should be your primary role.
That means you spend most of your time gathering leads that have a general interest in what you offer, or a problem that your offer can solve.
Then, you communicate on a regular basis to inform, entertain and position yourself as a credible leader.
Finally, you use direct marketing techniques to identify a segment most interested in buying. In other words, you ask those people the right questions and give them instructions to identify their interest.
That’s what you spend most of your time doing.
Keep Building Your List
Direct marketing starts with building a list. Pick one media, whether it’s Facebook or something else, with the purpose of placing direct Marketing ads and building a list of Warm Leads.
When you start in direct marketing, you will have a feeble little list. After 3 months, you may get 100 subscribers and think you’ve reached a major milestone. You finally have a big list!
Then you’ll hear about other marketers whose lists are in the hundreds of thousands, and you’ll feel disheartened. You’d struggled enough to get just your first 5.
Grow up, you cry baby. Building a list is the easy part. As long as you don’t mind taking big bets with your media buys, you can be getting a thousand new leads every day.
As soon as you get your first lead, start sending out more direct Marketing to your list every day. This might be by email, direct mail or social media.
Remember, Direct Marketing always includes an offer. Every time you make your offer, give people a clear instruction of what they need to do if they’re interested.
Most will not respond. You might send out an offer of a 7 day free trial to 100 people on your list. Maybe 3 of them put up their hand and tell you they’re interested. But now you know who’s ready to buy and who’s not.
Turn Cold to Warm to Chilli-Hot
With the few who are ready to buy, isolate them to the side. Contact them individually and hold a sales conversation.
You might say, “Hey, I noticed you took a 7 day free trial. How are you finding it?”
Don’t send a message like that to everyone. Only those who have identified themselves as potential buyers. That’s the principle behind direct marketing.
Don’t Be a Marshmallow
The biggest mistake made in direct marketing is trying to create a “self liquidating” sale instead of focusing on long term customer relationships.
By making this mistake, dumb direct marketer marshmallows think they’re being smart and avoiding losses, but in reality, they’re missing out on far bigger profits.
Let me explain…
A Marshmallow’s Approach to Direct Marketing
Imagine that a dry cleaning business is considering running a direct mail campaign. They plan to mail out 10,000 pieces at 60c per piece, for a total cost of $6,000. They expect 1% of the recipients to take up the offer and pay for the dry cleaning service. They also know that the average dry cleaning bill is $35.95.
This campaign, then, will bring them $3,595 in revenue. That amounts to a $2,405 loss.
The less savvy marketers will look at those numbers and decide the campaign is not worth doing.
Or, they’ll try and look for tweaks to make the campaign pay for itself. In other words, they’ll try to make it “self liquidating.” They might think of increasing prices to cover the costs of the marketing, trying different tactics to increase the 1% response rate, or looking for cheaper media buys.
The Right Way to Do Direct Marketing
The smarter marketer will realize that they don’t need a “self liquidating” sale. Out of those people who say yes to the dry cleaning offer, many of them will choose to do business with the same company again.
Suppose that the average customer spends $139.70 with the dry cleaning business over 6 months. This means that the direct mail campaign will actually bring in $13,970 in revenue over the long term, not just $3,595. That’s not a loss, but a profit of $7,970.
Companies that make over $100 million a year take this approach to marketing. They are OK with marketing campaigns that make a loss in the short term, because they can recoup those costs over the course of a year.
Unmarshmallowing Yourself Is Not Easy!
There are a few caveats to make the above approach work for your business.
Firstly, you must be able to make additional offers to your customers. If your customers typically buy from your business once and never again, you have a problem.
Make sure you have a range of different products and services that you sell. The first sale must not be the only one. A good sales process is one that enables you to make a series of sales to the same customer, each one bigger than the last and each one warming the lead more than the last.
If you can do this, you will maximize your customer value and afford to spend more on your media buys. More on media buys in a later tutorial.
Secondly, you need to know how much your customer is worth over a lifetime. This is not just the amount of the first sale, but the sum of all the sales you make to them over time. If, for example, you know your average customer will spend $700 over time, you can afford to spend $300 to acquire each customer. Hooray!
How Breaking Even Is Central to Direct Marketing
When the amount a customer spends with you surpasses the amount you spent to acquire that customer, you break even.
Is breaking even a good thing? Of course it is.
Once you know you can spend a dollar on media and consistently get a dollar or more back in sales, there’s no limit to how big you can scale your direct marketing. You simply increase your media spend.
To finish off, let’s clarify why breaking even is central to the success of any direct marketing campaign.
Breaking Even Takes Multiple Sales
In his 2012 book, No B.S. Trust-Based Marketing, Dan Kennedy wrote that his approach to acquiring a customer is like “taking title to an oil well.”
By this, he means that he doesn’t think of acquiring a customer as making a one-time sale. He thinks of it as starting a relationship that will produce repeated sales for years to come, like a well that continues to pump oil.
If you think of customer acquisition in this way, breaking even or even losing money on your media spend is nothing to sweat. Remember, you don’t need a self-liquidating sale.
The cost of acquiring a customer is fixed. But if you keep following up with that customer, maintaining a good relationship with them and selling to them, there’s no reason they can’t spend more money with you and bring your campaign into profit.
How to Break Even
Profits are made from multiple sales to each customer. If the amount of your cold sale is less than the amount you spend on media, it’s OK.
You just need to make repeated offers to your customers to reach break even point. Some customers will need to see the same offer multiple times before they’ll buy, while others will say yes to multiple different offers if you have enough.
Make sure you test different offers, track all your numbers and calculate how many days it takes you to break even on your media spend. It may take 90 days or more before the amount your customers spend exceed the amount you spent to acquire them.
Once you have a campaign that consistently breaks even, you can be aggressive with your media spend and be confident that you’ll see that money come back to you.
Direct Marketers Have No Budgets!
What’s your marketing budget? $500 a month or $2,000 a month?
The correct answer is, as much as possible!
When you can break even, and you know that every dollar you spend on media buys will come back to you, there’s no need to limit yourself.
Today, spending just $50 a day on media buys might be too much for you to afford. But if you can break even on your direct marketing, there’ll come a day when you can comfortably spend a million dollars a month on media buys. Why wouldn’t you spend a million dollars if you can get two million dollars back?
But it’s all about breaking even. If you spend $50 a day and never see it come back, you’ll go out of business fast.
That’s it for the theory of direct marketing. The next tutorial is on media buying, where we explore how to do it for real.