THE NEXT GENERATION BUYS A HOME

We determined the town we wanted to live in by:

• Using the Internet to research schools in the areas we were interested in, and then visiting the ones that looked promising.

• Researching the neighborhood amenities of our target areas. This meant scouring the Internet for parks, shopping, cultural opportunities, and restaurants.

• Driving around the various towns.

• Speaking to friends about what they liked in those towns.

Once we determined the town we wanted to live in, it was time to focus on a specific community. We did this by:

• Going online and plugging in the zip code of each community, along with criteria for the kind of house we wanted.

• Watching local television advertisements for new homes.

• Listening to the radio to find out about local events in the various neighborhoods.

It wasn’t until we’d narrowed down our search to three neighborhoods that I even called a real estate agent. And I found her by:

• Asking friends and colleagues for referrals (word of mouth).

• Researching online to find out which agents had sold the most homes in the communities I was interested in. (I figured they knew those neighborhoods inside and out.)

• Reading the local newspaper.

After selecting Barb as our agent, we worked with her to draw up a list of homes we might want to see. From that, Barb got a good sense of our expectations. After doing some of her own research, she narrowed down our list to several options. We were able to view all of them online. With two of them, we took “virtual” tours.

Exactly 19 days after we started our research, we made an offer on our home.

THE MULTI-CHANNEL APPROACH

For my parents and my husband and me, buying a home was the biggest, most important purchase of our lives. It took my parents 11 months. My husband and I did it in less than three weeks.

The ultimate outcome was the same. We found a dream house in which we could raise our families. But the channels we took to get there were entirely different.

Because my husband and I were house-hunting at the beginning of the Internet Age, we were able to take a multi-channel approach to making our life-changing purchase.

Our multi-channel approach didn’t end when we selected the home we wanted to buy. We used it for almost all aspects of the home-buying process, including finding the right mortgage company, insurance plan, moving company, and furniture.

But unlike the house search, we weren’t doing all the work ourselves to get the information we needed. All sorts of companies were finding us. Furniture companies were e-mailing us about furniture sales. Mortgage companies were sending us mortgage offers in the mail. Insurance agencies were calling us about insurance. And moving companies were hoping to get our attention by placing big ads in our local newspaper.

All these marketing efforts—including the strongest sales pitches—were welcomed by us because we were emotionally, financially, and rationally predisposed to buy what those companies were selling. We were the perfect customers for most of them. We were motivated. We had money. We were prepared to buy. And receiving information about products and services we needed through so many channels made it easier and quicker for us to compare options and make decisions.

The businesses that did the most business with us were those that were relentless, contacting us through various marketing channels. They were smart enough to realize that if we weren’t responsive to a space ad or postal sales letter, we might react to an e-mail promotion. And if an e-mail promotion didn’t work, they could get through to us via the Internet when we did a search by typing in certain keywords. And if that failed, they could try to contact us by phone.

Your best customers are those who are motivated, financially capable of buying from you, and prepared to buy. If you don’t locate and convert those customers through a multi-channel, direct-response advertising campaign, then you are leaving dollars—perhaps millions of dollars—on the table.

There is no reason to do that in this day and age, when there are so many ways to get access to the ideal buyers for your product or service. This book will teach you about the many channels you can use to reach your customers.

CHAPTER ONE

MARKETING IN THE TWENTY-FIRST CENTURY

How Quickly Things Have Changed

Sherwin Cody had a problem. He was a low-paid English teacher, but he harbored a secret desire to become a wealthy man.

Teaching people how to speak English, Cody knew, wasn’t likely to make him lots of money. Yet he found a way to do just that.

Cody’s first step was to write down everything he knew in a book called The Art of Writing and Speaking the English Language. To sell the book, he hired a copywriter named Maxwell Sackheim. After discussing various approaches, Cody and Sackheim decided they would market the book by taking out display ads in magazines and newspapers.

They tossed around dozens of possible advertising angles. They finally settled on one that became one of the most successful marketing promotions of all time. If you are a student of marketing history, you will recognize it. The headline reads DO YOU MAKE THESE MISTAKES IN ENGLISH? The ad made both Cody and Sackheim wealthy. More important, it launched them on dual careers in an industry that was just being born. The industry was direct-response marketing. The year was 1919.

Writing about direct response in the early 1900s, Cody observed that, with the advent of paved roads and a rail system, businesspeople had the ability to sell their products nationwide and deliver them quickly. And because direct-response ads in national publications could reach so many potential customers for those products across the country, it had a big advantage over local marketing by retailers, which had been the main form of advertising in the nineteenth century. As a result, he predicted, direct response would dominate marketing in the twentieth century.

He was right. During every decade of the twentieth century, direct-response marketing grew at double-digit rates. Today, at an estimated $2 trillion a year in the United States alone,¹ it is the largest single form of advertising by a mile. Countless fortunes have been made by small and large businesses that took advantage of it. And it is still extremely viable today.

Sherwin Cody went on to publish more than 200 books before he died in 1959. He made fortunes for himself and many others. And he did it by mastering the fastest-growing advertising trend of his century.

THE WAY THE WORLD OF MARKETING LOOKS TODAY

A similar opportunity exists for marketers today. As we look forward into the twenty-first century, 100 years after the birth of direct marketing, we can see another huge trend that has taken shape and is moving fast.

That trend is multi-channel marketing—an integrated form of advertising that takes advantage of everything we learned about direct marketing in the twentieth century, plus some astonishing new things we have been learning since the rise of Internet marketing in the 1990s.

Multi-channel marketing is based on new, twenty-first century technology that has radically reduced the costs of communicating with prospective buyers and existing customers. In 1980, for example, it cost about 50 cents to send a direct-response sales letter through the mail to a customer. Today, that same transaction, via the Internet, costs less than a penny.

WHY DIRECT MARKETING IS STILL KING

Direct marketing continues to be a growth industry because it offers so many advantages to entrepreneurs: low cost of entry, plenty of niche markets, and the ability to accurately measure the impact of their marketing efforts on sales.

To appreciate the size of the industry, it helps to understand its scope. It includes radio, television, magazine and newspaper ads, catalogs, sales letters sent through the mail, and now, in addition, advertising via the Internet.

Through direct marketing, sales are made by evoking a direct response from the customer. That response ranges from making a purchase to returning a free-trial postcard to making a phone call to providing information on the advertiser’s web site.

The Internet has completely and permanently changed the way that marketing—and business—works.

Everything moves faster and farther. And everything is interconnected—companies with their customers, customers with the media, the media with companies, and customers with other customers.

To ignore these changes is utter foolishness. To understand and embrace them is the way to succeed in business today.

This book is about that new trend in advertising—a trend that will continue to grow at double-digit rates for decades and decades. If you embrace multi-channel marketing, you will see improvements in your business almost immediately. And those improvements will continue at lightning speed, transforming your business into something much greater than it is now. How big and how fast it grows is up to you.

The trend is huge. The time is right. Your future is unlimited.

WELCOME TO ADVERTISING IN THE TWENTY-FIRST CENTURY: THE AGE OF MULTI-CHANNEL MARKETING

To appreciate what can happen to your company when you implement a multi-channel marketing approach, let’s look at how it changed the

business we work for: Agora, Inc., a private publishing company based in Baltimore, Maryland.

A BRIEF HISTORY OF A BRIEF EVOLUTION

During the 1990s, there was a great deal of debate among direct marketers about how much impact the Internet would have on the industry.

Some argued that it would change the way that marketing worked—eliminating the selling part of the commercial transaction, because consumers would use the Internet to research and purchase exactly what they needed. “Pull” marketing (web site advertising) would flourish. “Push” marketing (direct-response advertising) would disappear.

Lots of brave predictions were made, but the truth is that nobody had any idea what was going to happen. The Internet, as an advertising medium, was in its infancy. Between 1995 and 2000, nearly $60 billion was invested in Internet companies.^∗ Just about every marketing idea that could be imagined was tested during that period. And most of them—as futuristic ideas tend to do—failed miserably.

But some techniques and strategies did work. And some businesses did grow. Amazon.com and Buy.com, for example, grew rapidly because they managed to establish themselves as effective “pull” web sites. Others, such as Google, Microsoft’s MSN, and Yahoo, grew from servicing both web advertising and web research. And still others grew because they refused to listen to the doomsayers who had predicted the demise of direct marketing. The Internet, it turned out, was the ideal medium for direct response.

Looking back at this very short 10-year history, we can see that most of the early strategies and ventures imploded and then were replaced by other, more effective, strategies, leading to the growth of a new generation of Internet-savvy direct-response marketers.

With lightning speed, the industry had reorganized itself and was growing again. There was, it turned out, a whole new world of opportunity out there.

^∗Bruce Kogut, The Global Internet Economy (Cambridge: MIT Press, 2003). Figure 3.2 p. 90.

In 1998, Agora was a 20-year-old business that sold information products—mostly books and newsletters—by mailing out sales letters to lists of prospects. Its revenues were in the $90 million range. Its product lines included investment, business, and health advice. Its audience was end users—individual investors, entrepreneurs, and people interested in natural health.

Motivated by all the excitement about the Internet, marketing directors at Agora began experimenting with web sites and the methods that were being trumpeted at the time to drive prospects to those sites.

The success of those early efforts was disappointing. Money was spent and site visitors came, but revenues didn’t rise and profits went down.

Never comfortable with the new concept of pull advertising, Bill Bonner, Agora’s founder, initiated an old-fashioned push program that was based on the company’s expertise: direct-mail marketing. And it worked well. Buyers who responded to the direct-response advertisements that were posted on Agora’s investment web sites were given a free e-newsletter, The Daily Reckoning. They read it. They liked it. And they began buying the information products that were advertised on its pages.

As soon as this approach started showing increased sales, other Agora divisions quickly followed suit. Early to Rise (ETR), the business that employs the authors of this book, was initiated in 1999 (although it didn’t start publishing its Early to Rise ezine until 2000). It sells information products in its business- and success-oriented web sites, and sends purchasers an e-newsletter that provides pragmatic advice on wealth-building, health issues, and entrepreneurship.

Within two years, no fewer than a dozen Agora publishing divisions were using this same marketing method. The growth of sales was encouraging. But what really excited everyone was the spending pattern of the new Agora buyers.

LEARNING WHAT MAKES INTERNET CUSTOMERS “DIFFERENT”

In the past, Agora customers would spend the most money on purchases they made in the first few weeks and months after their introduction to the offers. We saw this as a normal response from information enthusiasts. They started strongly, were deeply involved in a particular subject, and then moved on to other interests. There is even a term for this pattern: the “buying frenzy.”

To take advantage of the buying frenzy, Agora marketers loaded up the direct-mail advertising sent to new buyers in the early weeks of the relationship, when their impulse to buy again was at its most intense. As customers “aged” on the “house files,” fewer mail pieces were sent. After a year or two, only “reactivation” packages, aimed at restarting the relationship, were sent. If customers didn’t respond to those efforts, they were “dropped.”

The new Internet buyers had a very different pattern. They began making purchases tentatively, and then bought more frequently and invested more money with Agora as time went by. The top of their buying arc was no longer within an initial several weeks, but instead in the time period of six months to a year. And then they continued to buy from us for months and months afterward. They were more loyal, more motivated, and much more valuable over time. It was a pleasing development. It encouraged us to start more online marketing programs and roll out the ones we’d been doing more aggressively.

We eventually figured out that our new buyers were buying more from us for two reasons:

1. The large amount of valuable free information we offered

2. The increased frequency of the sales messages we were sending them

In his best-selling book The Long Tail, Chris Anderson talks about how the minimal cost of storing and delivering digital information products via the Internet made information publishing extremely profitable. Instead of carrying an inventory of several thousand books, for example, an Internet bookseller such as Amazon could carry several hundred thousand. Customers could browse through a much larger catalog. And they could buy more . . . which extended the tail of buying, thus increasing sales.

That was true for Agora, but the increased loyalty of customers who bought from us via the Internet was the result of another drastic cost reduction: The cost of communicating with our customers had dropped from 50 cents (what it had cost us to send them mailings) to a fraction of a penny. Instead of sending mailings to a customer 25 times a year, he or she could be contacted by e-mail hundreds of times!

We were communicating with our customers more frequently and in more depth than ever before. We were asking them questions, teaching them about our products, and offering to help them solve their problems and achieve their goals. All this “talking” created a stronger bond. And this change was paying dividends . . . substantial dividends.

The lifetime value of customers for our investment advisory products, for example, increased almost tenfold in 10 years, in some cases, from $50 per person to almost $500. This allowed us to invest more heavily in new promotions. Because when lifetime value goes up, the cost of acquiring new customers can go up too.

EXPANDING FROM ONE MARKETING CHANNEL TO TWO ... THREE ... AND A DOZEN

Customer loyalty and increased sales were among the first big changes we noticed. Something else was going on, however, and it meant a widely expanded way to acquire customers and increase their lifetime value.

What we noticed was that our direct-mail marketing efforts were improving at the same time. At first, this seemed counterintuitive; then we realized that our Internet marketing efforts were being seen by many of the same people who were receiving our sales letters in the mail. Increased exposure gave us greater credibility . . . and greater credibility was leading to better sales.

Our new channel of marketing was boosting our old one. Agora had changed from a one-channel marketing business to one that had two channels.

We began mentioning our web site in our direct-mail efforts, and also sending direct-mail promotions to Internet buyers who gave us their postal addresses. Again, responses increased. We asked ourselves: “What other marketing channels can we put into play?”

The next channel we tried was telemarketing. Though Agora had never had much success selling by telephone, some early efforts by The Oxford Club, one of Agora’s most profitable divisions, had done well. So, based on their experience, we gave it a shot. And, as it turned out, customers who had been reading our e-mails and getting our promotions in the mail were open to receiving phone calls from us. Within two years, we had a substantial telemarketing department, handling customer service inquiries and selling high-priced products at a rate that astonished almost everyone.

Today, Agora divisions employ no fewer than 12 marketing channels to acquire new customers and communicate with existing ones. We are using all of the proven Internet channels, including search engine optimization (SEO) and pay-per-click (PPC) advertising. And we are successfully employing channels that we had failed to make work in the past.

Direct-response television and radio advertising is starting to work for Agora. And we are learning about Internet video marketing as well. Event marketing used to be a very minor, ancillary channel for us. Now it is responsible for revenues in excess of $10 million a year, and is growing fast.

THERE’S NO TURNING BACK

We believe that marketing in the twenty-first century is different from and better than it was in the twentieth century. Businesses that take advantage of these changes can expect to grow more quickly and more profitably than ever before.

The landscape of twenty-first century marketing is dominated by the Internet. But the Internet includes at least a dozen viable channels, many of which can be exploited by marketers who have traditionally kept to a single channel in the past.

The Internet has made it possible for local companies to market nationally, and for national companies to sell to the whole, wide world. The radically cheaper cost of digital storage and delivery has permanently altered almost every business in the information industry, from record and book sellers to legal services to investment advice, medical research, and entertainment. The ease and low cost of investigating businesses and products through Google and other search engines has made customers feel more comfortable about doing business online. Bad businesses are easier to identify and avoid. Good businesses get free publicity as a result of discussions about them and their products among their customers and prospective customers.

Today, the old argument, alluded to earlier, about pull (traditional direct response) versus push (Internet) marketing is moot. Most smart marketers do both. The pull vehicles are becoming more sophisticated and more prominent. The successful ones are attracting huge numbers of prospects, multiples of what they could manage 10 or 20 years ago. The push vehicles—in particular, e-mail marketing—have radically deepened the relationship between marketers and their customers. This is probably the most significant change we’ve witnessed, because it has increased the customer’s lifetime value so dramatically.

To achieve your company’s maximum potential, it is no longer enough to be good at just one type of marketing. Yes, you need to continue to do what you are already doing. But you must also expand into several additional channels, especially on the Internet. When you do, you will see how it all works together, giving a boost to every effort you make to reach your buyers.

And that brings us to the title of this book: Changing the Channel: 12 Easy Ways to Make Millions for Your Business.

In the chapters that follow, we will explore 12 marketing channels that you should consider for your business. We will deal at some length with direct-mail marketing, because it is so fundamental to its Internet twin, direct e-mail marketing. We will also cover social media, public relations, radio and television advertising, direct space ads, event marketing, telesales, telemarketing, joint ventures, and affiliate marketing.

In our discussions, we will include a simple explanation of how each channel works and give you an idea of its unique possibilities, as well as the challenges you will face should you choose to venture into it.

We will talk about how to analyze test results and roll out with successful campaigns. We will explain our preference for marketing campaigns that begin by picking the low-hanging fruit, while never forgetting to market most often and most strongly to those loyal customers who buy almost any product you offer them.

You will learn how to use low-cost or free media channels. And you’ll discover the secrets of making Web-based products successful.

We will make an argument for making your “front-end” customer acquisition promotions outstanding—even if the cost is very high. And we’ll tell you why you can spend less on promotions for “back-end” products—even though they are generally much more profitable.

You will learn why it is easier than ever before to get higher retention rates, and how successful marketing companies today are doubling theirs. We will show you how to build customer relationships by using direct mail, e-mail, and other media. And we’ll help you avoid the temptation of trying to sell your customers every time you contact them—a mistake that will hurt you in the long run.

You will learn how to retain more customers by learning more about them, including suggestions for tracking customer buying-habits with a database that covers all marketing channels. We’ll advise you on how to use the information you collect to segment your house list, and then send those segments offers that will appeal directly to each of them. And we will prove to you that many customers need to see the same offer from several channels before they will buy, which is why it is important to maintain a consistent sales message.

You will not learn everything you need to know about every one of the 12 channels that we cover in this book. But you will have a very good introduction to each—with advice about where to go for further advice and information—so that you can make millions for your business.

Well-known marketing expert Jay Abraham points out that there are essentially three ways to grow any business:

1. You can increase the number of customers.

2. You can increase the number of purchases they make.

3. You can increase the average amount they spend on each purchase.

Multi-channel marketing will make it possible for you to achieve all three of those objectives in a dramatic way. If you start exploring different channels as soon as you finish this book, you will see how powerful this approach can be in a relatively short time. In fact, by this time next year, you will have a much bigger and better business, and you will be on your way to making millions or even billions for your business.

CHAPTER TWO

“DRM” AND “MCM”

The Two Most Important Acronyms
in Advertising Today

For a business to be successful in the twenty-first century, it must be a direct marketer.

Martin Edelston doesn’t have to be convinced of that. When Edelston began his business over 35 years ago, he wanted to sell his books through a variety of media, but a lack of cash flow prevented him from doing it all at once. He produced inserts and sent limited direct mail when he could afford it; built up the brand; and gradually added other channels to his marketing platform, including, over the past few years, direct-response television and such Internet-based programs as pay-per-click (PPC) advertising and SEO marketing. He also made a huge commitment to database marketing techniques to increase efficiency.

Today, Martin Edelston’s Boardroom, Inc., is an industry leader with more than $100 million in yearly sales and approximately 85 employees.

“A big part of our success,” Edelston says, “comes from our growing expertise in direct-response marketing and the addition of new channels of marketing to our traditional repertoire.”

Retailers like Wal-Mart, IKEA, and J.Crew reach customers with print catalogs, TV advertising, online ads, and web sites. Insurance companies use telemarketing, TV and radio ads, various online channels, direct mail, and print ads. Car dealerships can be found online, in newspapers, through direct mail, and on TV.

To be sure, there are still many successful businesses that practice only one type of marketing. But it is our belief that those companies are an endangered species. Relying on one marketing method to build your business today is like swimming upstream with one hand tied behind your back. It can be done, but it is very difficult . . . and completely unnecessary.

To be at the top of your game, you need to continue to do what you do so well—the kind of marketing that is now working for you—but you must gradually add new arrows to your quiver. Like Boardroom, Inc., you will notice a sudden and substantial improvement in sales and profits if you do.

The mistake of sticking to one channel is not made by only old-school advertisers. Many new entrepreneurs believe they can start and build a business with one advertising method. A few years ago, for example, pop-up ads on the Internet were the way to go. And, in fact, they were making tons of money for companies large and small, persuading many to base their marketing entirely on pop-up ads. Some even abandoned other marketing channels to focus exclusively on pop-ups because the money was so easy.

BOB BLY’S STORY

Bob Bly is the go-to copywriter in the direct-response industry. He’s worked with more than 100 clients, including AARP, Harvard Business Review, and McGraw-Hill, among many others. He’s also an author and frequently booked speaker on the topics of copywriting and marketing. He specializes in creating powerful, effective landing pages (the landing page is the page a person lands on after clicking on an online advertisement) for many clients with online businesses.

Like most people, Bly’s first exposure to direct marketing was as a customer. But he wasn’t the type of customer most companies want.

“I was a big responder to direct-response offers when I was a teenager. I didn’t know it at the time, but I was a premium bandit. That’s the term direct marketers use for customers who respond to all the offers with free bonus gifts (premiums) and then don’t buy the product. I would send for all this great stuff, and then I would just write ‘cancel’ on my invoice. God knows why I needed six leather-bound copies of Moby-Dick,” recounted Bly, laughing.

Bly graduated with a degree in chemistry, but his first jobs out of college involved writing and marketing for manufacturing companies. A couple of years later, he had the opportunity to oversee a direct-mail campaign to generate leads for a new product. It was a big success, and he was hooked. He soon struck out on his own and started his career as a freelance copywriter and marketing consultant.

Bly says that although the Internet has changed marketing dramatically, it is still fundamentally the same. Direct-marketing principles apply across all channels, no matter what technology is used.

Marketers forget this at their peril, says Bly. In the rush to get online, many companies forget about the tried and true methods for making money.

“Here is the most common, number-one mistake: letting people leave your web site or landing page—if they don’t buy—without at least capturing their e-mail address. It’s as if they opened your direct-mail sales letter, read it, and then threw it away,” says Bly.

Bly also takes issue with many “marketing gurus” who look to the future and see the death of traditional direct marketing in the next couple of decades. These so-called experts believe that marketers should just have “conversations” with their potential customers via the Internet.