DOWNLINE Downline - Adverts - Sanity Check


 

 

Your websites listed here.
 
 





DOWNLINE
  Adverts - Sanity Check   Best
Practice
 

Sanity Check

OK.  You've now worked out what adverts to place where, and what to do with the responses.  However, it's possible to design an advertising campaign that successfully sells products to customers - but ends up costing you money!  So, before you leap into action, take a short breather and conduct a sanity check on your plans.

One Step Campaign
Two Step Campaign

Return to Adverts Main Page

One Step Campaign

For a One Step campaign the sanity check is fairly straightforward.  You just have to calculate what's called the Breakeven Response Rate.

Fill in the assumptions boxes below with the best estimates you can make.  

Number of readers   A
Percentage of readers who might
be interested in the product

B
Average order value   C
Rate of sales commission
/ gross profit on sales

D
Cost of advert   E

Now calculate the results figures below using the formulas next to the boxes.

Number of interested readers   W=AxB
Average commission / profit per order   X=CxD
Number of orders to break even   Y=EX
Breakeven response rate

Z=YW

To make a profit your campaign must achieve a response rate higher than the breakeven rate.  If your response rate turns out lower you'll lose money - even though you've made some sales and earned commission.

Advertising response rates are typically pretty low.  Two percent is doing well - and you could win marketing industry accolades for five percent!  If your breakeven figure is above two percent you are probably going to lose money.  So re-think your campaign plan.  Once you've run a few campaigns you'll have a better idea of the rates to expect for your product.

Top of Page
Return to Adverts Main Page

Two Step Campaign

For a Two Step campaign the sanity check gets a bit more complicated.  You have to build a simple business model and explore what happens if you make different assumptions about your customers' responses to your campaign.

Fill in the assumptions boxes below with the best estimates you can make.  

Number of readers   A
Percentage of readers who might
 be interested in the product 

B
Percentage of interested readers
who respond to the advert

 % 

C
Percentage of respondents
who place an order

D
Average order value   E
Rate of sales commission
/ gross profit on sales

F
Cost of the advert   G
Cost of answering one customer call
(at least a small charge for your time)
  H
Cost of one brochure
(including any "freebies")
  I
Cost of posting one brochure etc   J

Now calculate the results figures below using the formulas next to the boxes.

Number of interested readers   R=AxB
Number of responses to the advert   S=CxR
Number of orders   T=DxS
Total value of orders   U=ExT
Sales commission / Profit on sales   V=FxU
Cost of handling one response   W=H+I+J
Total cost of handling responses   X=SxW
Total campaign costs   Y=G+X
Profit / (Loss)

 

Z=V-Y

The Profit / (Loss) figure is usually very sensitive to the assumptions you make about reader response rates and ordering rates.  Try out different figures in these boxes to find out how far out you can be before a successful campaign turns into a disaster.  You may like to set up this business model as a computer spreadsheet.

Advertising response rates are typically pretty low.  Two percent is doing well - and you could win marketing industry accolades for five percent!  Ordering rates are higher and depend on the attractiveness of the product and brochure - rather than your advert.  Twenty percent would be good.  Fifty percent is achievable with the right campaign.  Once you've run a few campaigns you'll have a better idea of the rates to expect for your product.

If you're close to the breakeven threshold - or can only make a profit under unlikely assumptions - go back and re-think your campaign plan.

Top of Page
Return to Adverts Main Page

Party Plan

Door-To-Door

Mailshots

Leaflets

Adverts

 

 

 Shop

 

 Shop

 

 Shop