I have yet to come across a business that tests their marketing campaigns. Here’s what I mean…
Let’s say you decided to send a sales letter to your target or niche market. You’ve bought a list that has 10,000 names on it. You’re certain that out of 10,000 you’re going to get many orders, so even though sending 10,000 letters costs you well over £5,000 (postage £2,000, the list £1,250, fulfilment (printing and packing) £2,000), you have to do very badly to NOT make a profit.
You then sit back and wait for your windfall. Unfortunately the response was just 0.1%. You received just 10 orders at £500 each, and each order has a 50% gross profit.
That means based on this first order you made a loss of £2,500
Now depending on the amount of profit you can extract from these new customers over the lifetime of their relationship with you (lifetime value) this could be either awful or very good for you.
However, I’ve seen several businesses go out of business using this approach because they were so sure their product or service would be sold by the bucket load, only to find that people simply weren’t interested. This approach is very risky and will never yield the sort of results you can expect when you start TESTING.
This is where it gets interesting…
When you test you automatically apply what I call ‘The Minimum Risk Formula.’ That means you limit your financial exposure whilst maximising your return (isn’t that what we all want?).
Using the same example above, here’s how it works…
Instead of mailing everyone on the list with one sales letter, you mail just 3,000 people. And instead of using one sales letter you send 1 version to 1,000 people (selected randomly), another version to the next 1,000 people, and a third version to the final 1,000 people.
You’ve now got 3 tests running against each other. The key is this…
Since you know that a headline change can increase response by 500% or more, you keep the same letter except the headline is different on each version. Here are the results…
Headline 1: 1,000 sent. Response 0.2% (2 sales at £500)
Headline 2: 1,000 sent. Response 1% (10 sales at £500)
Headline 3: 1,000 sent. Response 0.6% (6 sales at £500)
Now that looks better. Headline 2 returned 10 sales. This headline and letter now become your ‘control’ so you mail the last 7,000 names on the list and now here’s what you get…
Headline 2: 7,000 sent. Response 1% (70 sales at £500)
From the same list of 10,000 your testing enables you to generate 88 sales (2+10+6+70) generating a revenue of £44,000 and a profit of 22,000 against a loss of £2,500 (without testing).
Also let’s say that even after testing your figures looked awful – you made a loss. At least you can cut your losses right now. You’ll have saved 70% of the costs you would have spent if you’d mailed 10,000 people in the first place!
That’s what testing can do for you – it maximises your return and minimises your losses!