“A businessman is a hybrid of a dancer and a calculator.” – Paul Valery
What’s the most important piece of office equipment any marketer can own?
It’s not a color printer… or even a PC.
It’s a pocket calculator.
Costs only a few bucks to buy one, yet many marketers I speak to seem either not to own one… or, if do they own one, they don’t use it.
Here’s what leads me to this conclusion…
At least once a week, I get a call or e-mail that goes something like this:
“Bob, my name is John Q. Public. I’ve self-published a terrific book, and I want you to write a direct-mail package to help me sell it. What do you charge?”
After I ask a few questions, I find out what I need to know…
The book has a cover price of $15… John printed 3,000 copies at a short-run book printer for $3 a copy… and, therefore, his net per copy is $12 each.
I tell John to forget it, because he’ll never make money selling that book with a direct-mail campaign.
John is shocked. He spent nine grand of his kid’s college fund printing those 3,000 books. They are cluttering his spare bedroom. His wife wants them out of the house.
Bookstores have no interest in carrying John’s self-published book. Newspapers aren’t reviewing it. He was counting on direct mail to make him rich and famous. And here I am, crushing his hopes and dreams.
“Why can’t you write a direct-mail package to sell this book?” John wants to know.
“Do the math,” I urge John.
I get out a calculator and do it for him. And here’s what we find…
His net revenue is just $12 per book.
To do a small test of a traditional direct-mail package – outer envelope, sales letter, flier, order form, reply envelope – could cost him $600 per thousand or more.
Let’s say he tests a thousand pieces. At a cost of $600, he needs to sell 50 books just to break even. That’s a response rate of five percent – very difficult to achieve with a rented mailing list.
To double his money on the mailing and make a profit of $600 on every thousand pieces mailed, he’d have to sell 100 books. That’d mean a 10 percent response to his mailer – almost impossible.
I explain all this to John. He becomes more depressed with every word. I’m not telling him what he wants to hear.
“Don’t worry,” I tell John. “There are dozens of marketing consultants and copywriters out there who will tell you it can work – and they’ll be happy to take your money and write a promotion for you.”
But that doesn’t matter. Because the numbers say that, no matter how great the direct-mail copy is, the promotion won’t make money.
John didn’t need me to tell him that. He could have determined it for himself by using the most powerful tool a marketer can own: a pocket calculator.
The problem with many marketers – especially entrepreneurs – is that they are “idea people,” dreamers who think big. Unfortunately, the idea of marketing is not just to innovate… or be creative… or have great ideas… or create really nifty products and services.
It’s to sell your products and services at a profit.
And to be an effective marketer, you have to know a few numbers – like product pricing… cost of goods… profit margins… typical response rates… cost per thousand.
You then get out your calculator. And, based on those numbers, you can quickly determine whether your idea can fly – or is doomed to lose money.
(By the way, while it’s not difficult to calculate the response rate needed to break even on your direct-mail campaign, I don’t have space to show you the simple formulas here. So I’ve created a free online calculator you can use at dmresponsecalculator.com.)
In John’s case, even if his book sold for $40, I still would have discouraged him. That’s because the profits in direct marketing are mostly in the “back end” – repeat sales to customers who buy an initial product from you.
But as a self-publisher who has only one product – his single self-published book – John has no back end. And, therefore, no viable business.[Ed. Note: Get Bob Bly’s insights into marketing your business quickly, cheaply, and easily with ETR’s Direct Marketing Masters Edition.]