Pretend with me you’ve been conducting a direct mail campaign.
In testing your headline you’ve discovered that changing its focus from greed to fear increases the response rate from 1.5% to 1.85%.
Not bad. Three-tenths of a percent. That’s enough to get marketers excited.
“You’re kidding,” I can almost hear you say. “People get excited about a tiny fraction of better response?”
Well, yes. Yes, they do. You see, that tiny fraction amounts to a 23.3% improvement in top line sales. It has an even bigger impact on the bottom line.
First, Run the Numbers
For the sake of this example, let’s assume the following:
Your selling price is $74.95, and your gross margin is 65%.
The cost of postage (bulk mail) is $0.21 per letter.
You’re paying a list broker $40 per 1,000 names (4 cents each).
Add these individual sums, and the cost of promotion becomes $0.58 per lead.
You mailed 10,000 pieces with the first headline.
1.5% of the recipients of the letter purchased: a total of 150 sales. Each sale produced revenue of $74.95, for a total of $11,243.
You’re working with a 65% margin. Therefore, your gross profit is $7,308.
It cost $5,800 ($0.58 per lead times 10,000 leads) to make those 150 sales, which makes your net profit on this mailing $1,508.
Then You Tested Your New Headline.
You mailed 10,000 more pieces with the second headline.
This time, 1.85% of the recipients of your letter bought: a total of 185 sales. (This is the three-tenths sales lift we mentioned).
Each sale produced revenue of $74.95, for a total of $13,866.
You’re still working with a 65% margin, which makes your gross profit is $9,013.
The cost of promotion is the same $5,800.
Your net profit with the second headline is now $3,213.
When you run the numbers, this new headline has more than doubled your profit.
Testing Needs to be Mandatory
This is why you must test at every stage of the persuasion process. (It’s also why you must keep detailed records of your results).
Test your headline, test your offer, test the medium, test the frequency of repetition of your message. Test every variable.
When you find an outcome which works better than what you’ve been doing, make the new way your new standard. Then start testing against that.
It only makes sense that you use the most attractive bait when you’re fishing for customers.