We all make mistakes in business. The important
issue is that we learn from them and apply the lessons in both
our online and off-line business activities. One of my most
costly mistakes happened about twelve years ago in the off-line
business world. However, the lessons I learnt are just as applicable
online as they are off-line.
Having established a small mail order business
part-time, I decided to expand the business using direct mail
techniques. I had read all the books and attended a course and
it seemed like the best approach to achieve my goals. After
approaching various mailing list providers, I decided I had
found the perfect list to reach my target market.
Pricing was obtained from the list owner and
he was happy to provide me with small quantities of names initially
so that I could test his list. These tests were successful enough
for me to decide to undertake two large mail campaigns one after
the other. I was very confident that I would be receiving countless
orders and soon leaving my full-time job.
Disaster struck with the first mailing and
the second mailing was too far progressed to stop. The initial
sign was a significant increase in the dead letter rate. Then
the quantity of orders was less than half what I expected. The
second mailing had similar results. I was significantly out
of pocket and I had to stay in my full-time job to repay the
debts I had created.
Shortly thereafter, I began to read reports
that the list owner was being investigated for fraud and other
criminal charges. All in all, a sorry state of affairs.
The key lessons I learnt from this experience
were:
a) Always check the integrity of who you are
doing business with – especially if you have not had previous
dealings with them.
b) Never assume that limited test results will
be duplicated in larger scale tests.
c) Never over-commit to promotional activity
– it is better to grow slower than to lose your hard earned
money.
d) The stated size and quality of a mailing
list should be regarded with caution.
e) Ensure you have sufficient profit margin
in your product to be able to survive should your response be
very poor – especially in direct marketing activities.
Today, the lessons I learnt are applied to
my online business activities in the following ways.
Solo mailings to lists of newsletter subscribers
are done with caution. Some list owners will inflate their subscriber
numbers to encourage advertisers to use their services. The
first thing I do is subscribe to the newsletter to see the quality
of content and what others are advertising via solo ads.
Then I run a classified ad in the newsletter
to test the responsiveness of the subscribers. This also gives
me an indication of whether the stated size of the list is true
or not. I have had better response from a list of 20,000 than
what I received from a list of over 200,000. Many factors can
influence such a result.
While you should receive a far better response
from solo ads than classified ads, it still pays to test wherever
you can. If a classified ad in the newsletter did not result
in responses, I would not advertise using the solo ads. However,
I might test a few different classified ads to see if the initial
results were correct before moving on to other possibilities.
It is worthwhile to “do the numbers”
before spending on advertising. While many marketing experts
talk about the ‘lifetime value of a customer’ concept,
those whose business activities centre on promoting the products
of affiliate programs should regard this with caution. Instead,
determine how many must be sold so that the commission you receive
will cover the cost of your advertising.
The higher the percentage response to your
offer you need to cover your advertising cost, the greater the
chance you will make a loss. Do not rely on industry statistics
or averages to make your decisions. Keep careful records of
your activities so you know what works, what is to be avoided
and what to expect from future promotional activities.
Finally, exercise caution when considering
safe-lists and any type of email address lists that can be purchased.
My experience is that there are NO truly safe-lists available
other than having your own opt-in list. Any form of bulk email
to people who have not agreed to receive your message will damage
your business reputation and your prospects of making a decent
living on the Internet.
