This article will help you erase this problem forever, and at the same time triple or quadruple your local direct sales. At the end of the article you’ll find a link that contains gross margins of profit for 80 different product/service categories.
Cancellations based on false expectations about advertising results needlessly occur every single day. The decision maker for a manufactured housing lot falsely assumed that spending $2,000 on your station should generate six new sales, when in reality he needed .17 new sales. Yes, that’s POINT 17 new sales. Here’s what I mean. Let’s say a new doublewide costs $60,000. The client’s gross margin of profit (what’s left over after the cost of the home) is at least twenty percent. That would be a $12,000 return on the $2,000 advertising investment. Yes, and that $12,000 would be less than one twentieth of the cost of one new home.
Incredible. And the client didn’t think he got his moneys worth? At 515% return on his advertising investment, I would certainly think that he did. So whose fault is that his expectations were so inaccurate? Well, you could try to blame the client, but if you are the one doing the selling, you’d have to look in the mirror when assigning blame.
Understanding and discussing average sales and gross margins of profit are critical to managing the client’s expectations about results. But it’s also important to know these things if you want ammunition for asking for more money, possibly tripling or quadrupling what the client thinks he should be budgeting for your station.
Here’s what you get from selling smarter and discussing return on investment with every single local direct client.
· You are managing the client's expectations about results on your station. Remember that the client's perception means everything. If you do not explain ROI, then the client has no effective way to calculate an effective response to his advertising campaign. If you do not ask the client what his average sale and profit margin are and then compute the calculated risk, the client might have unrealistic expectations. If you do not educate him, he might think that eighty people should be lined up at his door spending $100 each, when in reality he only needs three new customers to break even. By educating your clients properly, you will manage your client relationship instead of your client managing you. You'll have fewer nasty phone calls where the client says, "Cancel my advertising. It's not working." This "tail wagging the dog" syndrome causes a lot of unnecessary grief for media salespeople. However, when you know what you're doing, you have more credibility and the client is more likely to listen to you, trust you and confide in you, as they would listen to, trust and confide in their accountant, doctor or lawyer.
· You could double or triple the amount of money your client "perceives" he should be spending on your station. By properly educating the client, he will better understand how to realistically measure the effectiveness of his campaign. When the client understands this kind of logic, he might decide that instead of breaking even with just twenty customers, he might go for forty or sixty and double or triple the amount of money he is spending with you. An "uneducated" client probably has no logical basis for the amount of money he is spending. To him, advertising on your station is perceived more as a crapshoot than a logical calculated risk. "Uneducated" media salespeople usually do not have any logical basis for the budget they are asking for. In fact, most broadcast salespeople just pull a number out of thin air.
· You'll sell more local direct whether you're number one or number twenty. One of my favorite client objections is, "Well you're not number one." When I hear that I like to say, "What a coincidence. You're not number one in your product or service category, either and I don't have to be number one in mine. I still represent thousands of pairs of eyeballs, ears, and legs with wallets. Why wouldn't you want to reach these potential customers? Let's look at these Mediator numbers. See? We only have to reach (X ) new customers and you break even. It looks like a good calculated risk to me." Then, by explaining return on investment, your market rank really doesn't matter any more.
· You'll sell more long-term contracts. When you properly explain return on investment to a client, advertising on your station looks much less like a crap shoot and much more like a good calculated risk. When the client has confidence in your ability to deliver realistic campaign goals, he is less likely to balk at signing an annual contract on your station.
Here’s a bonus…a link that explains more about ROI and even has a chart with 80 product/service category gross margins of profit. http://www.paulweyland.com/gross_profit_margins.pdf
Once you start selling this way, you’ll never go back to the old way, unless you enjoy poverty, humiliation and chronic disappointment. Know the truth and the truth will make you free…and make you lots of money. Learn more about gross margins of profit on my website, www.paulweyland.com . Go to Software, click on Mediator and download the free help file.