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Get Old Schooled: 5 Marketing Rules Every Young Entrepreneur Should Know

| March 8, 2012 | 20 Comments

We all know the world has changed.  Technology has brought more information into the palm of your hand today than could fill a room 30 years ago.  Marketing has certainly changed.  There are exponentially more media options and delivery channels than even 20 years ago.

However, one thing that hasn’t really changed is human nature, and that’s where I see young marketers making the same mistakes over and over.

Back in the day, which means about 1990 in case you’re wondering, direct marketing consisted of direct mail catalogs and letters, telemarketing, direct response TV (infomercials), and that’s about it.  Since then, we have seen the rise of email marketing, highly targeted online marketing, mobile marketing, and much more.

As direct marketers, we lived by some tried-and-true rules that were based on years of analysis and testing by some very sharp analysts.  These rules were all rooted in the understanding of human nature and purchase motivation.  Again, while the way we buy may have changed, the way we think has not.  We’re still motivated by the same desires, and we still react the same way as our parents and grandparents.  For example, think of your reaction when you first saw the 3-D animation in Avatar.  That’s the same reaction I had when I first saw the special effects of Star Wars back in the late 1970’s.

As I continue to work with new media channels and improved technology, I often run across classic mistakes and think about some of those “old school” rules.  Here are hare five of my favorites…

40/40/20

The “40/40/20 rule” explains what constitutes the response for a marketing campaign.  It breaks down like this:

  • 40% of the success of a campaign is due to the audience
  • 40% is due to the offer or product
  • 20% is due to the creative

This rule was popularized in the 1960’s by a direct mail guru named Ed Mayer.  While it may not be perfectly suited to every situation, this is one rule that I tend to bring up quite often.  You’ll notice that the majority of the success is due to sending the right message to the right person.  If you can find the people who are most interested in what you’re selling (at that time), the chances for success are much higher.  No secret there.

Creative is important.  Design, colors, fonts…all good.  But they do not make for successful campaigns.  Relevance is the key, which is why the big daily deal sites are spending big bucks trying to figure it out.  Actually, my sense is that they’ve already figured it out, but lack the inventory to act on it.

Be sure you understand exactly who your audience is, that you have permission to market to them , and that you can find them using today’s technology.  Then hit them with the right message at the right time.  Is it any wonder that remarketing has been such a success?  Kudos to the folks who popularized that tactic.

RFM

RFM stands for Recency (when was the last time they bought?), Frequency (how often have they bought?), Monetary Value (how much money have they spent?).  This is the traditional formula used to distinguish between customer segments.  Customers who have bought recently, buy often, and spend a lot are the top tier.  A simple way to measure RFM is to create five “buckets” for each variable and number them from 1 (lowest value) to 5 (highest value).  Then add the scores for each customer.  Your 15’s are the best customers.  Your 3’s are probably unprofitable.

This rule has stood the test of time because no matter what business you’re in, your customers are not all created equal.  It is important to segment your customers and prospects so you can provide more relevant messaging to them.  It’s amazing how many companies still blast out the same emails and text messages to their entire customer base.  The excuse is usually “lack of resources”, which usually means they’re not allocating their time according to the 40/40/20 rule.

80/20

The 80/20 rule is the oldest of our old school rules.  It’s also known as the Pareto Principle, because a dude named Vilfredo Pareto noticed back around 1900 that 80% of the land in Italy was owned by 20% of the population.  He then started seeing that the same held true in other countries.

Well, in business, we find the 80/20 rule all over.  In most businesses with repeat customers, you will find that about 80% of your sales (or profits) come from 20% of your customers.  You may also find that about 20% of your products make up about 80% of your sales.

You can apply this rule to online marketing as well.  In social media, if you did some research you will likely find that 80% of your posts (blog, Facebook, Twitter) are read by 20% of your audience and 80% of your replies are from 20% of your audience.

Have you ever noticed that the industry standard for email open rates is about 25%?  That means that roughly 80% of your emails are opened by 20% of your audience.  And the same holds true for click-thrus.

Use this rule to understand and identify the “minority that provides the majority”.  Nurture them and find others in the 80% who should be in the 20%.  Use it to continuously improve your site, your marketing, and your products.  Try to break the rule.  You won’t be able to, but you’ll improve your business results.

AIDA

This is another of my favorites.  AIDA stands for Attention, Interest, Desire, Action.  Attention is the creative message that first attracts the prospect (think AdWords).  Interest is where the prospect becomes engaged with your benefits and solutions.  Desire is when the prospect is convinced that your solution is the right one.  Action is when the prospect “makes a move” to initiate the purchase.

Remember that bit about human nature not changing?  This is it.  AIDA is the path that we all take when deciding to buy.  Depending on your business, it may take place in two seconds or two years.

The best user experience professionals understand AIDA whether they know the term or not.  At the risk of overusing acronyms, AIDA is in the DNA of UX.  Here’s a great article by Louis Lazaris about the use of AIDA in web design:

http://www.noupe.com/design/the-aida-marketing-model-in-web-design.html

$ > %

This final rule is something that has made old school direct marketers a lot of money over the years.  It states simply that all things being (relatively) equal, dollars off promotions will generate higher response and more profits than percent off promotions.  This gets a lot of head-nodding from people who have experience testing offers and promotions.

Again, this is a human nature thing, and the principle here is that people like simple, straightforward offers.  Consumers don’t like to have to think.  They especially don’t like to have to do math.  A dollar figure is a finite number that people can immediately understand and relate to.  Percent off promotions require some computations and sometimes have the scent of deceit.

So there you have it.  Five timeless rules that can help improve your marketing.  They will crop up from time to time, so remember them.  But more importantly, remember the spirit of these rules.  Remember that who you target and what you say is more important than how you say it.  Remember that all customers are not created equal and that the minority accounts for the majority.  Remember that there is a buying process that customers go through to buy your product.  And remember that people don’t like to think, so keep it simple.

Jay Weinberg is President of The JAY Group, a Chicago-based loyalty marketing firm that helps companies vastly improve their performance through business intelligence and smart marketing programs. Follow his company on Twitter @thejaygrp or contact him the old school way at jay@thejaygroup.com.

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Category: Finding Customers, Startup Advice

  • Audrey Schroder

    I have heard that specific dollar amount sales work better than percentage off sales. Why do you think companies continue to hold percentage off sales?

  • Stephen Curran

    I’ll throw another old school idea into the ring for discussion…

    The more response mechanisms the better.  We consistently see significantly higher engagement with direct response programs that have had multiple ways to respond.  For example, you have a print piece, provide a QR code, a text response mechanism, and if appropriate a print response meachnism as well. 

  • http://twitter.com/daveschauer Dave Schauer

    Nice one Jay!

  • http://www.thejaygroup.com/ Jay Weinberg

    Mostly because it’s easy for them, Audrey. If they are looking to have an across-the-board sale without any minimum spending limit, percent off is easy to manage. The rule is better applied to purchases where there is a fairly consistent purchase amount.

  • Anand Subramanian

    Good one Jay. Specially like the last one $ Vs %age. Agree that keeping it simple is the best way to go

  • Audrey Schroder

    That makes sense. Thanks for your response!

  • http://www.robertash.com/ Robert Ash

    Hi Stephen,
    Could you elaborate more on that, perhaps with a specific example? It sounds intriguing but I’m having a tough time visualizing what you mean.

  • http://www.robertash.com/ Robert Ash

    Hi Stephen,
    Could you elaborate more on that, perhaps with a specific example? It sounds intriguing but I’m having a tough time visualizing what you mean.

  • http://www.robertash.com/ Robert Ash

    Hi Stephen,
    Could you elaborate more on that, perhaps with a specific example? It sounds intriguing but I’m having a tough time visualizing what you mean.

  • http://www.thejaygroup.com/ Jay Weinberg

    Hi Robert.  Jay Weinberg, the article author here.  I’ll reply in case Stephen doesn’t get a chance to.  I’ll also nudge him to chime in (he’s a close colleague).

    The rule is: Allow people to respond the way they want.  For example, if you are a photographer sending a direct mail post card to a targeted audience, include a phone number, of course, so people can call to book you.  Also include your email address so they can contact you if they are “e-mail people” (like me).  Include your web address and social media tags.  For the uber-tech-savvy, include a QR Code on the card so they can click to see some of your sample work on their smart phone.  What he means by the “print response mechanism” is a mail-back form that is in the original mailed piece (not applicable for a simple post card). That’s for REAL old school folks like me and Stephen.

    Clearly all of these response devices together could be overwhelming. Be thoughtful but judicious.

  • http://www.thejaygroup.com/ Jay Weinberg

    From one old school guy to another, thanks Dave!

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  • Jodi Kaplan

    BRCs (business reply cards) for the win! (to combine old- and new- school expressions).  

  • Jodi Kaplan

    BRCs (business reply cards) for the win! (to combine old- and new- school expressions).  

  • KK Molugu

    I totally agree with ‘allowing people to respond the way they want’. 40/40/20 helps us to make products appeal to prospects and every bit of that is also aligning customer to take action. If we miss that ‘take action’, we lost it.

  • KK Molugu

    I would like to make one comment about $ > %age principle. I agree with take away the guessing/calculating portion and keep it simple for the customer when making purchase decision.

    I believe ‘bigger does matter’ in this situation and what I mean by that is; show the biggest number of the two ($ or %).
    - 25% off offer looks more appealing than a $1 off on a $4 product;
    - $1000 off on an $10,000 product looks better than 10% off. My 2 cents…

  • Audrey

    Yes! Excellent point KK.

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