The Direct-Marketing Difference: Getting Your Prospects to Do Something

Direct marketing differs from “brand” marketing, the kind we’re used to on TV and radio and newspapers, in several important ways. AdWords represents direct marketing at its purest, so it’s important to forget everything you thought you knew about advertising before throwing money at Google.

Direct marketers set one goal for their ads: to compel a measurable response in their prospects. Unlike brand marketers, you won’t spend money to give people warm and fuzzy feelings when they think about your furniture coasters or ringtones or South Carolina resort rentals. Instead, you run your ad to get hot prospects to your Web site. On the landing page (the first page your prospect sees after leaving Google), you direct your prospect to take some other measurable action — fill out a form, call a phone number, initiate a live chat, drop everything, race to the airport and hop on the first plane to Hilton Head, and so on.

On the Web, you can track each visitor from the AdWords click through each intermediate step straight through to the first sale and all subsequent sales. So at each step of the sales cycle, on each Web page, in each e-mail, with each ad, you ask your prospect to take a specific action right now.

Brand advertisers rarely have the luxury of asking for immediate action. The company that advertises home gyms during reruns of Gilligan’s Island has no illusion that 8,000 viewers are going to TiVO the rest of the episode and drive, tires squealing, to the nearest fitness store to purchase the GalactiMuscle 5000. They count on repetition to eventually lead to sales.

Contrast that approach with infomercials, which have one goal: to get you to pick up the phone NOW because they realize that once you get distracted, they’ve lost their chance of selling to you.

The Internet outdoes the immediacy and convenience of the infomercial by maintaining the same channel of communication. Instead of jumping from TV to phone, AdWords and your Web site function together as a seamless informationgathering experience.

Because your prospects are either doing what you want them to do or not, you can measure the effectiveness of each call to action. For example, let’s say you sell juggling equipment to left-handed people. You show your ad to 30,000 people in one week. Your ad attracts 450 prospects to your Web site, at an average CPC of $0.40. Your landing page offers a 5% off coupon in exchange for a valid e-mail address, and by the end of the week your mailing list has 90 leads — 20% of all visitors. You follow up with an e-mail offer that compels 10 sales totaling $600.00.

The following table shows an example of an AdWords ad campaign’s overall metrics.

Metric Total cost or percentage
Total advertising cost $180 (450 $0.40)
Sales total $600
Return on investment (ROI) 333% ($600 ÷ $180)
AdWords ad CTR 1.5% (450 ÷ 30,000)
Landing-page lead conversion 20% (90 ÷ 450)
E-mail sales conversion 11% (10 ÷ 90)
Cost per visitor $0.40
Average visitor value $1.33 ($600 ÷ 450)
Cost per lead $2.40 ($180 ÷ 75)
Average value of a lead $8.00 ($600 ÷ 75)
Cost per sale $18.00 ($180 ÷ 10)
Average value of a sale $60 ($600 ÷ 10)

What does this horrific flashback to SAT prep mean to your business? These numbers give you control over your advertising spending, allow you to predict cash flow (just play a game of Monopoly with my daughter if you don’t appreciate the value of positive cash flow!), and enable you to assess additional market opportunities by comparing them to this pipeline. (If you’re not rubbing your hands together and going, “Muahahaha” like a cartoon villain, I still have some explaining to do.)

In this hypothetical case, you have found a gumball machine that gives you $1.33 every time you drop 40 cents into the machine. You’ve set it up once, and it happens automatically as long as Google likes your credit card. ROI is a metric that simply converts your input amount to a single dollar, so you can easily compare ROI for different campaigns and markets. ROI answers the question, if you put a dollar into this machine, how much comes out? ROI of 333% means that you get $3.33 out for every dollar you put it. If you found a gumball machine that managed that trick, you’d never go back to slot machines again.

Now suppose the market becomes more competitive, and your CPC rises. If you were advertising in your local newspaper and the ad rep told you that prices were going up by 25%, what would you do? Would you keep advertising at the same level, or cut back, or stop showing your ads in that paper completely? Unless you’re measuring the ROI of your ads, you have no way to make a rational decision.

Say your AdWords CPC from the example shown in the preceding table increases by 25%. Now your cost per visitor is 50 cents. Do you keep advertising? Of course — you’re still paying less for a lead than the value of that lead — 83 cents less. Your ROI is down from 333%, to a still respectable 267% (total advertising cost is now 450 $0.50 = $225, and $600 ÷ $225 = 267%).

But wait — there’s more! (Did I mention how much I enjoy a good infomercial?) AdWords makes it simple not only to see your metrics, but also to improve your profitability by conducting tests. The ability to test different elements of your sales process is the next important element of direct marketing.

So far, I’ve only discussed inputs (how much you pay to advertise and how many Web site visitors) and outputs (how much you receive in sales). But it’s really the intermediate metrics (called throughputs by people like me who sometimes find it useful to pretend we went to business school) that give us an opportunity to make huge improvements in our profitability.

For example, imagine you improve the CTR of your ad from 1.5% to 2.2% without lowering the quality of your leads. Big whoop, right? An improvement of 0.7% — who cares? Actually, it’s an improvement of 68% — for the same $180 advertising spend, you now get 660 visitors instead of 450. If everything else stays the same, your visitor value of $1.33 means your sales increase to $880, for an ROI of 489%.

But wait — there’s more! What’s to stop you from improving your landing page by 20% by testing different versions? Instead of getting 20 leads out of 100, you’re now collecting 24. Six hundred sixty visitors now translate into 158 leads. If 11% of them make a purchase from your e-mail offer, that’s 17 sales. At an average of $60 per sale, you’ve now made $1020.

But wait — there’s more! How about testing your e-mail offer too? Let’s say you get a 36% improvement, and now 15% of e-mail recipients make a $60 purchase. That’s 23 sales at $60, for a new total of $1380.

Thanks to the miracle of compounding, the three improvements (68% 20%  36%) give you a total improvement of 230%. This isn’t pie-in-the-sky math either — when you test the elements of your sales process scientifically, it’s hard not to make significant improvements.

In case you got a little lost in the numbers in the previous section, I want to make sure you got the moral of that direct marketing story: It’s a process of multiple steps. Seth Godin (marketing guru and author) compares direct marketing to dating. You wouldn’t walk up to a stranger in a museum and propose marriage. (If you did, and you’re happily married 17 years later, please don’t take offense; I’m not talking about you.) In fact, there are a lot of things you wouldn’t suggest to a stranger in a museum that you might very well suggest to someone who knew you a little better. (If you’re not sure what these are, check out Dr. Ruth’s contribution to the For Dummies series.)

Direct marketing operates on the premise that you have to earn your prospects’ trust before they become your customers. As with dating, you demonstrate your trustworthiness and likeability by asking for small commitments with low-downside risk. Your ad, the first step in the AdWords dating game, makes a promise of some sort while posing no risk. Your visitor can click away from your Web site with no hassle or hard feelings. AdWords’ Editorial Guidelines commit you to playing nice on your landing page: an accurate display URL, no pop-ups, and a working Back button so your visitors can hightail it back to their search results if they don’t like your site.

Your landing page makes a second offer that involves getting permission from your prospects to communicate with them in the future. Here’s the deal you’re offering: “I’ll give you something of value if you let me contact you in the future. And any time you want me to stop contacting you, just let me know and I’ll stop. And I’ll never share your contact information with anybody else who might try to contact you.”

Sometimes you can go right for the sale on the landing page, and sometimes it’s better to focus on turning your visitor into a lead — someone with whom you can follow up later.

As your prospect gets to know you and trust you, you increase the value you provide while asking for larger and larger commitments. Depending on your business, your sales/dating process could consist of surveys, reports, free samples, try-before-you-buy promotions, teleseminars, e-mails, live chat, software downloads, and more. When you ask for the sale you are, in effect, proposing marriage — or a long-term relationship, anyway.

Direct marketing focuses on prospects — people who raise their hands and tell you they’re interested in what you’ve got. When someone clicks your AdWords ad, they’ve just identified themselves to you as someone worth developing a relationship with. Returning to the dating analogy, this is like a stranger smiling at you at the museum. You respond by striking up a conversation about the artwork you’re both looking at (“Do you think the green splotch in the upper-left-hand corner represents a rebirth of hope or an exploding drummer?”) If the two of you hit it off, you don’t want to leave the building without getting a phone number.

In dating, the phone number is the litmus test of interest. If you can’t get the phone number, or if you call it and discover you’ve really been given the number for the West Orange Morgue (now why are you assuming that actually happened to me?), you know that relationship has no future.

Your prospect has the online attention span of a guppy. When we go online, we typically multitask, we have multiple windows open, we’re checking e-mail, IMing, watching videos, listening to MP3s, and searching and browsing and surfing. Not to mention answering the phone, opening the mail, eating and drinking, and dealing with other people. How many times have you visited a Web page, gotten distracted, and never found it again? How many times have you bookmarked a Web page, intending to visit again, and haven’t gotten around to it?

Get the prospect’s e-mail address as soon as you can. Before they get distracted. Before they browse back to Google and click one of your competitors’ ads. Before they spill a cappuccino latte all over the keyboard. With their e-mail address and permission to follow up, you’ve done all you can to inoculate yourself from the short Internet attention span. You now have a chance of continuing the conversation until it leads to a sale.

How to Think Like Your Prospect

I began this article with a pathetic rant about my experiences as a Yellow Pages advertiser. Now let’s look at the Yellow Pages from the point of view of the user — the person searching for a solution to a problem. But I’m done whining, so I’m not going to complain about figuring out which heading to look under, deciding which listing to call, dealing with voice mail (no, really, I’m done whining). Instead, imagine a totally new experience: the Magic Yellow Pages.

In the Magic Yellow Pages, you don’t have to flip through hundreds of pages. In fact, the book doesn’t have any pages — just a blank cover. You write down what you’re looking for on the cover, and then — Poof! — the listings appear. The most relevant listings, according to the Magic Yellow Pages, appear on the cover. Subsequent pages contain more listings, in order of decreasing relevance.

But wait — there’s more! The listings in the Magic Yellow Pages don’t have phone numbers. Instead, touch the listing and you’re magically transported to the business itself. Don’t like what you see? Snap your fingers and you’re back in front of the Magic Yellow Pages, ready to touch another listing or type another query.

This is how AdWords functions from the point of view of your prospects: They have all the power. They conjure entire shopping centers full of competing shops by typing words — and they window-shop until they find what they want or give up.

Their search term represents an itch that they want to scratch at that very moment — some unsolved problem. They are looking for the shortest distance between their itch and a good scratch. Maybe they want information. Maybe they want a product. Maybe they want to be entertained. Maybe they want to be told that their problem isn’t so bad.

It’s your job to figure out what they really want, based on the keyword they type, and give it to them quicker and more obviously than your competitors. In the Magic Yellow Pages, the rules are, “Give the prospect what she wants and nobody gets hurt.” Winning the game of AdWords comes down to figuring out what your prospect — the person you can help — is thinking and feeling as they type their search. When you understand this, you bid on the right keywords, you show compelling ads, and you present clear and irresistible offers on your Web site.

 

 

 

 

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