Know-How Exchange : Strategy

Stacy,

Effectiveness of marketing is measured in return of investment (ROI). Period. Quality is "efficiency." That means that for every customer you reach, you have a very high conversion rate. Great! Nice factor to have. However, ROI is PROFIT resulting from the investment divided by the investment. If you reach 10 customers and every one of them converts for $1000 profit and your services cost $5000, the ROI is 2. If I go in and offer a package that nets 1000 customers at 20% conversion of $1000 each and at a cost of $5000, the ROI is 4. I win.

The five factors involved in calculating ROI are: 1) Profit per conversion, 2) conversion rate, 3) number of prospects reached, 4) profit realized per conversion, and 5) cost.

If you can make up for your lack of reach (#3 above) through higher conversion rate, higher conversion profit, or lower cost, then you have it covered. If not, you're inferior to the competitive method.

I hope this helps.

Wayde

Dear Stacy,

You asked "Can Quality Outweigh Reach?".

Well, think about it. People don't buy reach, they buy value.
And by applying this yourself, you'll be buying value with your marketing dollars.

Wayde is a savvy guy. Listen to what he has to say, then apply it.

Too many advertisers confuse reach with salience.

You can reach hundreds of thousands of people, day in day out, but if your message does not tie in with their specific need or problem, you're wasting your time and your money.

The act of having salience in one's ads, that is, the art of being strikingly conspicuous, ties in with Seth Godin's urging businesses to be remarkable, that is, having one's product being worthy of being remarked on by other people.

I hope this helps.

Gary Bloomer
Wilmington, DE, USA

Stacey:

To build on Wayde’s points – in calculating ROI you should also factor in the LTV/CLV (long-term or customer lifetime value) of the respondents. Even if some don’t pay back in the short term, they may over time. Also factor in ROO (return on objectives) – If you’re building awareness, preference and purchase intent, you’ll reap additional longer-term value from your marketing investment.

Sounds like you’re doing a good job of converting the customers you do reach, and adding some nice value to the relationship equation. Might look to determine what characteristics make a buyer convert beyond demographics (what are the conditions/customer variables that correlate to making a lead into a sale) and try to do more prospecting/acquisition of other similar leads.

Analyze the customer databases and mine the current customers for more information, etc. Also, use viral/social networking from existing customers to drive more business (friend/business referrals, etc. like through pass-along incentives) – that will go a long way to extending the ‘life’, value and ROI of your existing programs.

Good luck!
-Steve

Wow, what powerful reponses thus far. Stacey, my impression from your question is that you are concerned these midsize and larger companies you seek might not be willing to pay for your service, because you believe they will consider your 1000-volume distribution to be too small to do them any good. Unless you already have collected supporting data, this is quite an assumption, and you would hate to censor yourself with it before visiting some of these larger companies.

If you happen be close enough to some friends or acuaintances at companies similar to those you wish to attract, then take them to lunch (individually, of course) to visit about what you are doing and see what kinds of concerns and questions arise as they provide feedback. This information can help you anticipate objections and thus enhance your new sales presentation effectively. You may find the 1000-volume reach isn't as big an issue as imagined.

Speaking of sales presentation: When you are out trying to sell these larger companies on the idea of paying for placement/inclusion among welcome gifts, you may find yourself needing to stress the personal touch your service provides, as well as to rely heavily on redemption rates and customer recall you have already documented. To sweeten the pot for larger companies, your presentation might also need to include testimonials from existing clients who can cite sales growth directly attributable to your program.

And you might look at introducing a new level of participation for larger companies that want to make a bigger splash--perhaps their funds could go for a premium addition to the welcome gifts that is clearly supplied by Company X.

If you have a web presence at all, you can develop new ways for these larger companies to realize greater exposure via the Web, if such a goal is of importance to them.

Again, all these kinds of changes on your part should be directed by your research of what larger companies really want to achieve utilizing a service such as yours.

Meanwhile, using the ROI feedback from previous responses, it certainly wouldn't hurt to investigate the feasibility of expanding your distribution beyond 1000, maybe just up to 1200 for starters. At a 30% redemption rate, any of your clients (regardless of size) should benefit from such expansion.

--- Paul