From the December 2005 issue of our newsletter, Let's Grow.  For a FREE subscription, CLICK HERE.

How Your Gut Instinct Can Cost You Money

Many companies base their media buying on a “sense” of how their past advertising has performed.  Yet senses often mislead and can ultimately cost you money.  Here are just a few ways that happens.

The Phone Poll“If the phone starts ringing, we’ll know,” clients often tell me.  They don’t keep records of where responses come from, or if they do, 90% of them are listed as “unknown.”  When it comes time to make advertising decisions, they poll the people who answer the phones about which media did best.

The trouble is, the media with the biggest portion of the ad budget always wins this way.  Run the same ad in a publication with 2,000,000 circulation and another with 10,000, and the one with the larger circulation will always “do better” because it the phone will ring more often.  When companies eventually look at the hard numbers, they’re shocked at how much more profitable some of the smaller budget choices often are.

Drop-Down Menus.  Many companies track the source of web site visitors with a drop-down menu of options.  It’s a good start, but one to take with a grain of salt.  The problem is that, if it’s a required field, many people will simply click  the first choice on the list and move on.  Try shifting the order of the drop-down choices, and you may be surprised at how your results seem to shift.

For information on more accurate ways of tracking the original source of Internet responses, click here.

Heed Statistical Significance.  I’m currently reviewing results for some outdoor living products that sell for an average of $2,000.  The company has tested quite a bit of media, and in most cases, their breakeven point is less than 10 orders. 

Such small numbers don’t provide any statistical significance for making future decisions.  If one ad generated 6 orders and the other 3, we can’t assume that the first is twice as strong as the second.  Until we do more testing, we won’t really know for sure.  Aim for 50 responses from any test cell for a reasonable amount of statistical significance.

What the Numbers Can Tell You.  Many years ago as a junior account executive, I was asked to write my first results analysis.  I was mystified as to what to say.  If you make money, that’s good.  If you don’t, it’s not.  What was there to analyze?

Older and wiser, I now know that a careful review of the numbers can lead you to overlooked profits.  It gives you the knowledge you need to assess the relative performance of different media, ads, offers and seasonality.  It tells you how to allocate your media budget… which copy, design and offers to tweak… which list segments to mail to… what time of year to concentrate on… and much more.

In short, rigorous analysis gives you the roadmap to the best use of your resources.  Specific numbers can lead you to a pot of gold in a way that “gut feel” never will.

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