Feedback Form
Home Features Mastermind Forums About Advertise Blog Network Contact Be An Author

Rule 3 Clarify Your Objective

Rule 3 Clarify Your Objective

Why are you advertising?

This may sound like a silly question, but answering it – and really thinking about it – is especially important.

A clear objective keeps you focused. Your intention drives your results. The purpose of your advertising defines the offer, the headline, the copy, and the medium – in fact, everything about the ad.

If your intention is to “keep your name before the public” or “build your image” your ads will probably be long, vague, and run in places you (or your friends) think … maybe …. Are read by the people you want to reach.

In reality, you have no idea whether you ads are achieving your purpose. A properly conducted Gallup Poll-style survey might show that your ads are doing worse than nothing at all: they’re actually turning potential customers away!

In any case, I’m going to assume you have enough respect for your own money to not even contemplate these types of ads.

How defining your purpose can save you a bundle of money…

Only when you define your purpose do you have something to measure.

When you define your purpose, code your ads, and record your results, you’ll immediately learn which ads and which media work – and which don’t.

I installed this kind of measurement system in a client’s business. The result: 90% of this guy’s advertising was a complete master of many. 90% of the sales were coming from 10% of the ads.

By “goosing up” the ads, we doubled this business’ responses – and slashed its ad spending 90%.

That’s the kind of effect you can get from following these rules.

Profit NOW – or, LATER … sometimes later is better for you…

Ads that work well are intended to make you money; the only question is: how, specifically. Your business falls into one of two categories. Either:

1. You make a profit directly – sales from the ad more than cover the ad’s cost plus the cost of the product; or:
2. You make a profit later – by creating a new customer who comes back again and again.

The best of all possible worlds is to get yourself into both categories, so you can create a new customer at a profit. And get him or her to come back again and again.

You can do this by knowing what your profit is. -and where and when you make it.

However, some businesses are inevitably in the second category. For example, there’s no way the Coca-Cola Company can ever create a new customer at a profit. The profit margin on one can of Coke is too small.

Coke can only generate a return on its advertising by creating a regular customer so that a year, or even two years later, he or she begins to generate profits for the company.

Which category are you in right now? The answer is not written in stone. By following the rules in this Report, you’ll gain enough information about your ads to move yourself into the first category. This will probably involve writing entirely new ads – and that process is beyond the scope of this Report.

But you’ll be motivated to do that – to experiment with new approaches, new offers, and new healings – once you can measure the results of your ads.

There’s a rule of thumb in the direct mail industry that states: ‘to make a profit in the mail your retail price has to be five times the cost of your product’.

So here are two questions you should know the answers to:

1. What is your profit margin on a new customer’s first purchase …?

Unless you’re in the business of one-off sales – that means: you have nothing else to sell to a new customer – you should answer this question on a marginal cost basis.

Say you have a restaurant. A new customer walks in the door. Your profit on his purchase is the amount of money he spends less the cost of the raw materials involved in preparing his meal.

Should you allocate some percentage of overheads to your cost of advertising…?

Well, whether this new customer walks in or not, you’ve got to pay the waiters, the chef, the electricity and the rent anyway. You’re going to spend that money regardless.

So the only marginal cost – additional money you have to spend to meet this new customer’s needs – is your cost of the food and drinks he consumes.

Say your average customer spends $20, and your cost of the food and drinks is four or five dollars. That means you can spend $15 to attract a new customer – and you have a new customer for free!

The only exception would be if this new customer walks in on a Friday or Saturday night when you’re full – and you have to turn away a regular customer as a result. That means you have no additional profit up front.

(So: create an offer to bring in new customers on slow nights.)

2. What is the life-time value, to you, of gaining a new customer?

The first sale is only the beginning of a new relationship.

Say – continuing with this restaurant example – your average customer comes back once a month with (on average) one and a half friends, and spends $20 per head. Your average sale is $50. Your marginal cost profit is $40.

But now you have to account for overheads. Say that’s $20. So your net profit is $20 per customer per month. Or $240 per year.

If 20% of your regular customers leave town every year, the life-time value of each new customer is $825 (calculated for 10 years, using a discount rate of 10% to get the present value of that future stream of profits.)

That means if you spend $824 to get a new customer, you’d make a profit of $1 over a 10-year period.

I admit I have not included the cost of financing that amount for 9.9 years. And I am not suggesting that you want to wait 9.9 years to get your money back!

But once you have calculated these numbers, you are in a position to measure the results of your advertising.

At this point, you can decide how much you wish to spend to gain a new customer.





Rule 3 Clarify Your Objective - To learn more about this author, visit Brad Sugars's Website.

Like this article? Share it with your friends

Article Feedback
 Article Feedback No article feedback found.
  Leave Your Feedback
article feedback

Article Feedback
Dave Kurlan
Dave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website


To learn more about the Evan Elite Author Program please contact us.

About The Author


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.

Brad Sugars is a Gold author on EvanCarmichael.com
About The Author

View Author Blog
View Author Blog

View Author Video
View Author Video

Free Downloads


Brad Sugars's

Complete
List Of
Business-Coach
Articles

Name
Email
Author's Free Downloads
Host Beneficiary Icon Host Beneficiary
Instant Classified Advertising Icon Instant Classified Advertising
Press Advertising Icon Press Advertising
Testing and Measuring Icon Testing and Measuring
Instant Flyers Icon Instant Flyers
Instant Press Release Icon Instant Press Release
Loyalty Strategies Icon Loyalty Strategies
Referral Strategies Icon Referral Strategies
Instant Business Letter Icon Instant Business Letter
Strategic Alliance Icon Strategic Alliance
Instant Yellow Pages Icon Instant Yellow Pages
Sale Systems Icon Sale Systems
Instant Quotes Icon Instant Quotes
Radio Campaigns Icon Radio Campaigns
Instant Scripts Icon Instant Scripts
Instant Direct Mail Icon Instant Direct Mail
Closed Door Sales Icon Closed Door Sales
Instant Brochures Icon Instant Brochures
Instant Newsletters Icon Instant Newsletters

More Brad Sugars
Rule 5 Pay for Position
Rule 3 Clarify Your Objective
Rule 9 Never Ever Use All Caps
Rule 8 Boost Response by Changing the Type
Rule 21 Listen to the Market
Introduction 21 Ways to Increase the Power and Profit of Your Advertising without Spending an Extra Cent
Rule 13 Tell Your Story with SubHeadlines
Rule 16 Make Your Advertisement Look like Editorial Content
Rule 14 Every Picture Demands a Caption
Rule 19 Watch What DirectResponse Advertisers Are Doing and Plagiarize
Free Downloads


 
 
 


Evan Elite Authors
Cheryl Matthynssens  
George Ludwig  
Jeff Foster  
Evan Elite Authors

Become An Author
Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details.
Become An Author

Evan's Latest Video
Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media
Evan's Latest Video

Business Opportunities
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"

How to Start An Online Business

Click Here To Learn More
Business Opportunities



Evan's Newsletter
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
Name:
Email:
Evan`s Newsletter

Free Downloads
Online Marketing Tools Icon Online Marketing Tools
Winning Sales Letter Icon Winning Sales Letter
Instant Classified Advertising Icon Instant Classified Advertising
JV Considerations Icon JV Considerations
7 Strategies to Take Action Icon 7 Strategies to Take Action
Free Downloads - Complete List

Entrepreneur Tools and Guides
Top 50 Productivity Blogs To Watch In 2008
Top 50 Productivity Blogs
Top Blogs To Watch In 2008
 
Top 50 Blogs For Startups To Watch In 2008
Top 50 Blogs For Startups
Top Blogs To Watch In 2008
 
Entrepreneur Tools and Guides

SEO For Africa
SEO For Africa
Helen Imanhe Benin City, Nigeria,
Helen Imanhe
Benin City, Nigeria
SEO For Africa

If I Were A Startup...
Razor Suleman, $143k to $5.4 Mil in 5 years
Razor Suleman
$143k to $5.4 Mil in 5 years
Travis Hartley, 426% Growth in 2 Years
Travis Hartley
426% Growth in 2 Years
If I Were A Startup... - Complete List

Famous Entrepreneurs
Hugh Hefner, Playboy
Hugh Hefner
Playboy
William Harley Arthur Davidson, Harley-Davidson
Famous Entrepreneurs - Complete List

Entrepreneur Advice
Donald J. Trump, Trump University
Donald J. Trump
Trump University
Timothy Ferriss, 4 Hour Work Week
Timothy Ferriss
4 Hour Work Week
Entrepreneur Advice - Complete List

Popular Articles
(Premium Authors)

     Team Motivation Principles: Debunk the Crazy Propaganda that All CEOs are Greedy!
By Jessica Ollenburg
     Start them Young to Help them Succeed in the Workplace
By Jessica Ollenburg
     Self-Starters Can Make Terrible Managers
By Jessica Ollenburg

Have A Suggestion?
Toronto Salsa Classes / Toronto Salsa Lessons Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
Have A Suggestion?

More Evan Carmichael
More Information