Making Money With Super Models
In this issue:
- A gorgeous model of how to make millions with direct marketing …
- Why making sure your lead generation campaigns never make you money could be the best thing you ever do for your business …
- The direct response business model major mailers follow to generate maximum customers and profits ….
- And much, MUCH MORE!
Dear Business Builder,
Direct response marketing is the marketing model that gives you the fastest, most effective way to attract more customers and sell more things to them.
And today we’re going to look at a couple of Super Models of the business.
Let’s take a famous example, Gary Halbert’s ‘Coat of Arms’ letter that spawned an enormously profitable business and was mailed somewhere in the neighborhood of 600,000,000 times.
That’s equivalent to mailing a letter to every man, woman and child in the entire United States, twice.
And when you read the letter, you’d almost never believe it because it’s not high energy … it doesn’t even have a headline or subheads … no complex closing strategy … or price justification.. and doesn’t pile on the copywriting ‘bells and whistles.’
Here’s how the one page letter starts:
‘Did you know that your family name was recorded with a coat-of-arms in ancient heraldic archives more than seven centuries ago?
‘My husband and I discovered this while doing some research for some friends of ours who have the same last name as you do. We’ve had an artist re-create the coat-of-arms exactly as described in the ancient records. This drawing, along with other information about the name, has been printed into an attractive one-page report.’
The idea was pure genius and created a gorgeous example of a perfect direct response business model.
- THE PROSPECT UNIVERSE WAS GINORMOUS! They were actually able to mail to names in the PHONE BOOK! That’s unheard of in direct mail because without a tightly targeted list you’d lose your shirt in printing and postage costs because your response rate would suck.
- THE OFFER WAS IRRESISTABLE! Send in $2 for a special report about your family name and beautiful reproduction of your family’s coat-of-arms. That’s a slam dunk offer!
In an interview in Time magazine Dennis Haslinger, Gary’s partner in Halbert’s Inc. (the company formed around Gary’s idea), explained what they were really selling:
‘We sell instant ego. People get their shields because they are turned off by being a social security number. They want to remind themselves that they are something special.’
- A KILLER BACK END! They weren’t making their money on $2 reports – I’m sure that probably just covered their cost to get a new customer. The real money in direct response is in the SECOND SALE and the third, fourth and fifth sale to your existing customers.
Halbert’s Inc., had an array of products to offer you with your family crest – including a $350 deluxe wall plaque called ‘Cathedral Oak’ that was 22 inches high and mounted on hand-carved wood. (I wonder how many fireplaces in America sports one of these beauties. I know Clayton and Wendy have one.)
It’s a beautiful business model and one common to traditional offline direct marketers.
The Direct Marketing Newsletter Business Model
in a Nutshell:
Here’s how the same basic model works for newsletters like the health or financial newsletters from major mailers like Agora Publishing or Phillips Publishing.
The bones of your business model are:
- You work to break even on promotions designed to bring in new subscribers; basically get all your money back and a get new paying subscribers in the process.
- You give your new customers the chance to renew their subscription right away or very early on in the relationship – this gives you immediate revenues. You even have a ‘bump’ or ‘up sell’ offer for them when they order – a 2 year subscription price instead of 1 for instance.
- Then you start offering higher price back-end products – these are your real profit centers because you already have a highly qualified, paying customer to sell similar products to. And since you’re promoting to a much more targeted list, you’re Return on Investment is much higher.
- Near the end of a subscription term you try to get customers to renew their subscriptions all over again.
And you’re constantly repeating this process of getting a new customer, getting him to renew and trying to sell higher priced back-end products to him.
Direct marketers have developed slight variations of this for different industries and media. But the fundamentals are the same across the board.
Because you want to build a list of qualified customers … get revenue from them as fast as possible … and keep them buying as many products as possible for as long as possible.
The Purpose of Direct Response Customer Acquisition
is NOT to make a profit
It’s totally counter-intuitive that you wouldn’t want to make a profit on your promotions, but that’s exactly how many direct response businesses operate.
Think about the ‘Coat-of-Arms’ example, I’m willing to bet dollars-to-doughnuts the $2 they made on each report was just enough to cover printing and postage costs for enough letters to get one new customer.
By offering a valuable report for a measly $2 they vastly increased the number of people who responded to their promotion.
If they charged $39, sure they would have made a profit on some customers but the response rate would have gone way down … the universe of prospects they could mail to would have been cut into a fraction of what it was … and they wouldn’t have nearly as many customers to sell all their backend products to.
In fact, you probably want to LOSE money
on your new customer promotions
That goes against the grain but it’s something Clayton is very emphatic about. And quite a few of the more sophisticated direct marketers do just that.
Because by being willing to mail to lists that only return say 80% of their money on their new customer promotions, they get more new customers.
And if you’ve built a strong back-end sales model, it becomes worth it to you to lose money on the first sale because you get it back on the second, third and fourth sale.
The truth is; Clayton won’t even bother taking on clients that aren’t willing to mail to break even or a loss on the front end promotions because it limits their growth so much.
And remember, it pays to make people feel special
You really do have to marvel at Gary’s ‘Coat of Arms’ business. It tapped into a common emotional core of mass amounts of people.
And has a simple purity to it that is the hallmark of genius. By making it so cheap to respond and appealing to such a wide audience they were able to generate massive amounts of new customers to sell to.
And you see a slight variation of that proven model in the newsletter business.
So the simple plan of attack if you want to follow these models is:
- Acquire the most new customers as possible by promoting your acquisition campaigns to break even or at a loss.
If possible use a low cost special report to generate the most customers …
- Have bump or up-sell at the time of order to help generate additional revenue …
- Sell your customers a series of higher priced products and services to generate profits …
- Wash, rinse, repeat …
I hear Clayton quote the legendary president of Phillips Publishing, Bob King, a lot:
“What we do is provide people with benefits in ways
they are willing to pay for.”
And if you can create or deliver a product in a way that makes people feel special and important – you've probably got a blockbuster on your hands.
Hope that helps.
To your faster success,
John Newtson
Editor, Life in the Fast Lane
THE TOTAL PACKAGE
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Join the Discussion!
Let us know what you think. Or ask us anything. Or offer your own sage advice.
The only rule: RESPECT THIS HOUSE! Postings that contain abusive language and/or personal attacks will be cheerfully VAPORIZED. One cross word and – POOF! – your well-thought-out post will be gone in a puff of smoke.
– Clayton
Comment by Chick — April 28, 2007 @ 7:58 am
Good Day John,
And the light came on. Awhile ago I read Confession of a Marketing Chauvinsit Pig # 6 by Clayton Makepeace.
He said, \” If you make money on a customer acquisition, your fired.\”
I didn\’t really understand at the time while he didn\’t want to make money. But after your great article, I understood and when back and reread it. This time it made excellent sense.
Thank you,
Chick