Spend Less, Make More - Use Testing to Multiply Your Profits
I started my own advertising and publishing business when I was twenty years old.
That venture, and all my subsequent enterprises, began as nothing more than an idea and an intense desire to make something happen.
I have never had the benefit of working with a large amount of money.
I've had to start businesses with no cash, no credit, no customers, no connections, no computer.
If I can do it so can you.
Those experiences taught me to be very, very frugal with money.
I couldn't afford to make mistakes, to spend frivolously, or invest time, money, and energy into activities that did not get me a solid return on my investment.
I was compelled to explore alternative ways to get my message out to potential clients because I couldn't afford to run yellow pages advertising or newspaper ads.
I had to get creative and look for low-cost and no-cost ways to market myself.
A lot of the time that meant cold calling, knocking on doors, getting into the trenches, figuring out what worked and what didn't.
Success meant eating dinner that night.
Failure meant...
No! Failure was not an option.
I didn't have the luxury of quitting.
I was forced to learn how to make the most out of every advertising dollar I spent.
That meant evaluating an advertising mechanism the way you would evaluate a stock investment: how much should I invest, how soon will I get my money back, and what's the yield? That meant saying, "No" to what I call image ads, institutional ads, specialty advertising, and other passive forms of marketing designed to "just get your name out there.
" Direct response advertising became my weapon of choice because I discovered through testing that I could generate $3 for every $1 I spent.
That's a 300% return on my investment.
But I only came to that conclusion because I took time to test, measure, innovate, and improve different approaches to figure out which ones were profitable.
If you're not doing that with every single marketing effort you make then you're wasting an incredible amount of time and money.
Test, measure, innovate, improve, and repeat.
It's a good habit to get into, regardless of how much money you have or how large your advertising budget is.
To Illustrate This Powerful Concept, Let's Crunch Some Numbers...
The fact is it costs the same amount of money to build a website, or run an ad, or make a sales presentation regardless of how much revenue those actions generate.
Stated differently: $1,000 spent on web development, or placing ads, or sending out salespeople can generate $0, $1,000, $10,000, or $100,0000.
Same cost, but many different returns on the investment.
Some activities lose money, some breakeven, some are wildly successful.
How do you account for this? Two furniture stores run full-page ads in the local newspaper for $1,200.
The first store has a vague sense that their ad generated some business but they have no numbers to back it up.
The owner decides not to run the ad anymore because it's too "expensive.
The second store runs a full-page ad in the same newspaper but uses a direct-response technique to measure the results specifically to that ad.
As a result, they know they generated $125,000 in sales off of that one ad.
So they take those profits and run the same ad in 125 different newspapers where it produces equally amazing results to the tune of tens of millions of dollars.
Same initial investment but much greater return.
Victory goes to the ones who know their numbers.
The same principle is true with online marketing.
Two people run a pay-per-click campaign on Google for the exact same affiliate program.
The first person spends $500 on clicks that generate $100 in sales.
After losing $400 he gives up and swears no one is making money on the Internet.
The second person takes the exact same product, spends $500 on clicks, and with a highly effective marketing strategy parlays that initial investment into $10,000 a month in residual sales.
Once again, both had the same opportunity and the same initial investment, but the gal who knew her numbers came out the winner over the guy that didn't.
A restaurant runs an ad and attracts twenty new customers.
Just changing the headline of that ad could bring in forty, sixty, or two hundred new customers.
The ad costs the same regardless of how well it pulls, so why not get all you can get out of it? An insurance agent sends out flyers to homes in her immediate vicinity offering a competitive quote to prospects.
The results aren't worth getting excited about.
But tiny changes to the way she presents her offer could produce two, three, or four times the number of phone calls.
A non-profit organization sends out fund-raising letters soliciting donations for a special program.
The letter brings in a meager response of 1%.
A differently-worded letter mailed to the same list could produce 3%, 5%, or even a 10% response - or more.
Or, sending the exact same letter to a completely different list could produce an extraordinary return, depending on the demographics of that list.
A contractor spends all day running around giving free estimates.
He closes 1 out of 4 people he talks to.
That means 3 out of 4 did not buy and wasted his time, energy, and gas money.
But a slight modification to the way he handles the quote could close 2 out of 4, or 3 out of 4.
Just improving his closing ratio would double or triple his business.
And he could make that change today and know immediately if it worked better than his current approach.
I conducted a financial services business in which I called prospects on the phone and sent them information by fax.
I closed 25% of them over the phone.
Not bad.
Through testing I discovered I could close 75% of them with a face-to-face meeting, and the amount of the sale tended to be larger.
So then I had to decide if it was more profitable for me to engage 50 prospects on the phone and make 12 medium-sized sales a day or meet with 10 people and make 7 larger sales a day.
Those are nice options to contemplate.
Information like this is critical to the success of your endeavors.
When you know your numbers you have the privilege of making these kinds of informed decisions, not based on your gut or you emotions or your feelings, but based on facts.
You owe it to yourself to get the highest and best possible return out of every dollar you spend.
Even "non-profit" organizations have to make money to stay afloat.
No money, no mission.
It's as simple as that.
Let's be clear: if your business isn't making a profit then you don't have a business, you just have a very expensive, time-consuming hobby.
That venture, and all my subsequent enterprises, began as nothing more than an idea and an intense desire to make something happen.
I have never had the benefit of working with a large amount of money.
I've had to start businesses with no cash, no credit, no customers, no connections, no computer.
If I can do it so can you.
Those experiences taught me to be very, very frugal with money.
I couldn't afford to make mistakes, to spend frivolously, or invest time, money, and energy into activities that did not get me a solid return on my investment.
I was compelled to explore alternative ways to get my message out to potential clients because I couldn't afford to run yellow pages advertising or newspaper ads.
I had to get creative and look for low-cost and no-cost ways to market myself.
A lot of the time that meant cold calling, knocking on doors, getting into the trenches, figuring out what worked and what didn't.
Success meant eating dinner that night.
Failure meant...
No! Failure was not an option.
I didn't have the luxury of quitting.
I was forced to learn how to make the most out of every advertising dollar I spent.
That meant evaluating an advertising mechanism the way you would evaluate a stock investment: how much should I invest, how soon will I get my money back, and what's the yield? That meant saying, "No" to what I call image ads, institutional ads, specialty advertising, and other passive forms of marketing designed to "just get your name out there.
" Direct response advertising became my weapon of choice because I discovered through testing that I could generate $3 for every $1 I spent.
That's a 300% return on my investment.
But I only came to that conclusion because I took time to test, measure, innovate, and improve different approaches to figure out which ones were profitable.
If you're not doing that with every single marketing effort you make then you're wasting an incredible amount of time and money.
Test, measure, innovate, improve, and repeat.
It's a good habit to get into, regardless of how much money you have or how large your advertising budget is.
To Illustrate This Powerful Concept, Let's Crunch Some Numbers...
The fact is it costs the same amount of money to build a website, or run an ad, or make a sales presentation regardless of how much revenue those actions generate.
Stated differently: $1,000 spent on web development, or placing ads, or sending out salespeople can generate $0, $1,000, $10,000, or $100,0000.
Same cost, but many different returns on the investment.
Some activities lose money, some breakeven, some are wildly successful.
How do you account for this? Two furniture stores run full-page ads in the local newspaper for $1,200.
The first store has a vague sense that their ad generated some business but they have no numbers to back it up.
The owner decides not to run the ad anymore because it's too "expensive.
The second store runs a full-page ad in the same newspaper but uses a direct-response technique to measure the results specifically to that ad.
As a result, they know they generated $125,000 in sales off of that one ad.
So they take those profits and run the same ad in 125 different newspapers where it produces equally amazing results to the tune of tens of millions of dollars.
Same initial investment but much greater return.
Victory goes to the ones who know their numbers.
The same principle is true with online marketing.
Two people run a pay-per-click campaign on Google for the exact same affiliate program.
The first person spends $500 on clicks that generate $100 in sales.
After losing $400 he gives up and swears no one is making money on the Internet.
The second person takes the exact same product, spends $500 on clicks, and with a highly effective marketing strategy parlays that initial investment into $10,000 a month in residual sales.
Once again, both had the same opportunity and the same initial investment, but the gal who knew her numbers came out the winner over the guy that didn't.
A restaurant runs an ad and attracts twenty new customers.
Just changing the headline of that ad could bring in forty, sixty, or two hundred new customers.
The ad costs the same regardless of how well it pulls, so why not get all you can get out of it? An insurance agent sends out flyers to homes in her immediate vicinity offering a competitive quote to prospects.
The results aren't worth getting excited about.
But tiny changes to the way she presents her offer could produce two, three, or four times the number of phone calls.
A non-profit organization sends out fund-raising letters soliciting donations for a special program.
The letter brings in a meager response of 1%.
A differently-worded letter mailed to the same list could produce 3%, 5%, or even a 10% response - or more.
Or, sending the exact same letter to a completely different list could produce an extraordinary return, depending on the demographics of that list.
A contractor spends all day running around giving free estimates.
He closes 1 out of 4 people he talks to.
That means 3 out of 4 did not buy and wasted his time, energy, and gas money.
But a slight modification to the way he handles the quote could close 2 out of 4, or 3 out of 4.
Just improving his closing ratio would double or triple his business.
And he could make that change today and know immediately if it worked better than his current approach.
I conducted a financial services business in which I called prospects on the phone and sent them information by fax.
I closed 25% of them over the phone.
Not bad.
Through testing I discovered I could close 75% of them with a face-to-face meeting, and the amount of the sale tended to be larger.
So then I had to decide if it was more profitable for me to engage 50 prospects on the phone and make 12 medium-sized sales a day or meet with 10 people and make 7 larger sales a day.
Those are nice options to contemplate.
Information like this is critical to the success of your endeavors.
When you know your numbers you have the privilege of making these kinds of informed decisions, not based on your gut or you emotions or your feelings, but based on facts.
You owe it to yourself to get the highest and best possible return out of every dollar you spend.
Even "non-profit" organizations have to make money to stay afloat.
No money, no mission.
It's as simple as that.
Let's be clear: if your business isn't making a profit then you don't have a business, you just have a very expensive, time-consuming hobby.
