I hate accounting – but I love tracking and measuring the responses to my ads.
From the day I started my businesses, I have kept detailed results of every ad and promotion I have run.
When a friend saw my tracking system, he claimed I was a frustrated accountant. (Since he was an accountant, I took it as a compliment.)
The only difference today is that they’re kept by computer rather than by hand – and they’re more detailed.
A simple start to tell whether your ad made a profit, just compare the profit on your sales from the ad (gross revenue, less the cost of the product and marginal costs like credit card commissions, postage, and so forth) to the cost of running the ad (including an allocation of the costs of creating and laying out the ad).
(You may also want to include the cost of the product or service. I’ll discuss this under Rule #3.)
By doing so, you can compare returns from different ads. As an example, I once ran an ad for the same product, a year apart. They both ran in the same publication. However, the second did better (372% of break-even compared to 286%) … even though the second insertion cost more than the first.
And since I’d run the first ad many times in that year, you would expect the second ad to do worse.
It didn’t, however, and here’s why.
One reason is the position of the first ad was “run of paper” which meant the ad manager could put it anywhere it fit.
The second ad was on the first page of the Business News section of the newspaper.
A far better position (see rule #5). But without a premium or loading for that position (rule #7).
When you are over 100% of break-even, what happens to your advertising budget? It becomes unlimited (with that offer in that medium, of course).
When your ad is aimed to generate inquiries, you need to calculate two key indicators:
• The cost per inquiry (number of inquirers divided by the cost of the ad); and, • The “conversion rate” (the percentage of inquiries that buy) plus, of course, the ultimate profit.
Once you know your conversion rate, you can project the profitability of your ad simply from the number of enquiries you have received.
For example, let’s say your profit per sale is $25. If your cost-per-inquiry is $5, your conversion rate must be 20% to break even. But if your average conversion rate is only 10%, you will know that this ad, in this publication, isn’t going to work.
But if your new ad produces a cost-per-inquiry of only $1, the ultimate profit-per-inquiry (with the same 10% conversion rate) will be $2.50, and you will know you will want to run this ad again.
If this is new to you, you will be wondering how to trace a specific sale to a specific ad. The answer is in my next article, titled, "Rule #2: Code Every Ad".
Rule #1: Increase Your Profits Measure your Results - To learn more about this author, visit Brad Sugars's Website.
Like this article? Share it with your friends
 |
Related Articles |
|
 Introduction 21 Ways to Increase the Power and Profit of Your Advertising without Spending an Extra Cent
|
| |
This is the introduction to a series of articles on "21 Ways to Increase the Power and Profit of Your Advertising without Spending an Extra Cent." As the title suggests, by following CEO and Author Brad Sugars'21 Ru...
|
|
Create Your 10x10 Marketing Program
|
| |
An effective principle to follow in creating a marketing program is “massive action equals massive results!” Too many businesses depend on too few marketing activities to develop leads, new customers, and repeat cu...
|
|
People Plus Systems Equals Great Sal
|
| |
When you ask many of the greatest salespeople in history what their secret is many would answer – personality. But when asked how to quantify and teach personality to others, these super salespeople are often stumpe...
|
|
What Drives Your Economic Engine
|
| |
Are you struggling to attract more new customers to your business? Do you see your competitors growing and wonder what they are doing to be so successful (even though you know their product or service isn’t nearly a...
|
|
Build Your P&L to Increase Sales
|
| |
Are you a small business owner to a Level C executive who looks to your P&L (Profit and Loss) statement each month? Are you happy with your business results? Then maybe it is time to think of your P&L a little diffe...
|
|
|
Brad Sugars
(Visit Brad's Website)
You'll love reading the articles here by
Brad Sugars, his advice is real world and
comes from having literally founded the
business coaching industry in 1993. Brad
is the Founder and CEO of ActionCOACH, the
World's #1 Business Coaching Company.
Having Coached literally tens of thousands
of business owners and executives you'll
find ActionCOACH and Brad Sugars will fill
your head with strategies and ideas on how
you can make your business work for you.
|
|
|
|
![[Get Copyright Permissions]](http://license.icopyright.net/images/icopy-w.gif){kind=small}
