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Rule #1: Increase Your Profits Measure your Results

Written by: Brad Sugars

Article Overview: This is the first rule in a series of articles by Brad Sugars on “21 Ways to Increase the Power and Profit of Your Advertising – without Spending an Extra Cent.” Learn about the crucial process of testing and measuring your advertising in order to maximize results.

Rule #1: Increase Your Profits Measure your Results

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".

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Article Tags: accountant, accounting, budget, business news, commissions, compliment, conversion rate, credit card, gross revenue, inquirers, inquiries, inquiry number, insertion, marginal costs



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