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Leverage Your Ad Budget for Greater Profits
By: Michael Cooney

"…I'd rather have an ad that caused readers to pick up the phone and BUY something!"

Leverage. It's a word you hear constantly in business circles. Those in business seek greater leverage in their expenditures. Investors want more leverage in their investments. Everyone wants more leverage. But how do you get it? Keep reading, and I'll show you one of the best ways to quickly gain more leverage. And it won’t cost you one extra dollar.

Leverage is a multiplier. If you try to move a thousand pound rock you'll just hurt your back. But if you use a fulcrum and lever of the right length, you can move that rock rather easily. Translating that to your advertising budget, then, you want something that will increase the effect and profitability of your investment.

Perhaps the most profitable form of leverage is advertising leverage. Here's what it means. Let's say you spend $100,000 a month on print advertising. With that expenditure, you bring in sales of $1,000,000 and gross profits of $200,000. Think of those numbers as your baseline.

Now, what if you could wave a magic wand and instead of bringing in $1,000,000 in sales, your same monthly ad budget brought in $2,000,000, with gross profits of $400,000? Remember, you still spent just $100,000 on your print ads. That didn't change. Only the sales and profits moved upwards.

Hard to imagine? For those in the know, it happens all the time. Sales increases of 20 to 50 percent are commonplace. A doubling of sales (100 percent increase) also happens regularly. Even larger increases than that are entirely possible. I know because I've done it, and so have many other Direct Response experts. And therein lies the "secret" if you will. You will not see those kinds of increases with ordinary institutional, or "image" advertising.

Measure results with Direct Response

The key issue here is traditional image advertising versus direct response advertising. Traditional advertising agencies often promote image advertising. We've all seen them -- full page ads featuring a beautiful photograph including the product, with little else. No informative text. No call to action. Sometimes no contact information. The phrases you hear from its promoters are "get attention" "increase exposure" "ad awareness" and other sweet nothings. I don't know about you, but I'd rather have an ad that caused readers to pick up the phone and BUY something!

The simple problem with image ads is that they typically don't have a mechanism in place for measuring results (let alone generating results!). Even if such an ad did give a boost to sales, the advertiser has no way to measure it. Did the increase really come from the new ad, or was it due to any of a dozen other variables? There's no way to tell.

With direct response the process is different. One benefit is to track results and measure the effectiveness of the ad. Typically, along with a product photo (although photos are not always needed) there is a compelling, targeted headline, plus enough text to bring the reader to a decision on whether the product is something he wants strongly enough to take further action. There is also complete information on how to take that action.

The purpose of a direct response ad is simply to motivate someone to take the next step you wish him to take. Call for an information package. Send in a reply card. Set up an appointment. Or in many cases, place an order for the product directly from that ad.

With direct response, you get to measure the results of one headline against another. One pitch against another. One price against another, and so on. This is what gives you leverage.

Using our earlier example of the $100,000 monthly print ad budget, we can see leverage in action. Assuming you are running direct response ads and can measure the results, you can begin testing the variables. Oftentimes, merely changing a headline can bring a 20 to 50 percent increase in results -- an extra $40,000 to $100,000 in added gross profit in our example. And, you haven't spent one extra dollar in advertising. You are merely using your existing budget, along with testing the variables.

It does take effort to track the results of different tests, and there is a science to testing properly. The point here is that you can generate tremendous leverage through your advertising budget without spending an extra penny. But the only way you can accomplish that, and learn what works and what doesn't, is by using direct response advertising combined with testing.

Michael Cooney, co-founder, Global Development, a marketing and advertising consulting group 818-522-1970 www.GlobalBrand.com

 






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