5 Commandments for Info Marketing Startups
“RIP Steve Irw”…
“RIP Steve Irwin”…
I was standing on Fitzroy Street in Melbourne, Australia… watching a skywriter pencil this phrase in the heavens. It was September 6, 2006 and Steve Irwin, the Crocodile Hunter, died two days before.
I’d just left a multi-million dollar Baltimore based business, part of The Agora network, for a new venture in the Agora network down under… Port Phillip Publishing. I was employee number 3 in this startup… and boy did I have my work cut out for me.
Our office at the time was in a small space located in an old hat factory in the Elwood suburb of Melbourne. We were steps away from a little Jamaican café called Babble on Bablyon… every now and then the smell of jerk chicken would waft through an open window. On my first day, I sat down with another American transplant who was editor in chief and copywriter at the time, Dan Denning.
Me: How many email addresses do we have?
Dan : 46
Me: How many paid subscribers?
Dan : None so far
Me: Alright… lets do this!
I am not sure if I ever told him this, but Dan was one of the reasons I moved my wife and infant daughter to Melbourne. He was, and still is, one of the best writers and relationship builders I know. The other motivating factor to move halfway around the world was the challenge of working with a startup… taking everything I’d learned working in a larger organization and building a business out of it.
I’ve been directly involved with two startups in The Agora network… Port Phillip Publishing, as the Marketing Director, and Agora Integrated Marketing, as Managing Director. You learn very quickly that regardless of your role, you will be wearing 20 different hats at any given point in time. In my 17 years with the Agora network I’ve generated hundreds of millions of dollars in revenue… and I’ve plunged my fair share of toilets as well.
Regardless of what hat you are wearing, revenue generator or toilet plunger, there are 5 key marketing concepts you need to focus on in your startup direct response business… everything else is just noise. I spend a great deal of time on the road evaluating the marketing efforts of new businesses in the Agora network. It usually always comes back to the Big Five. Today, I’d like to share them with you.
How to Succeed in Direct Response Marketing
1. Don’t rush to be first to market. A friend and copywriter, Thom Hickling, would often say, “they don’t call it copywriting for nuthin’”. Thom was half serious. Most of the best packages in the world are modeled on a half a dozen great leads. The same concept holds true for info marketing… why reinvent the wheel? Study the market and publications… study the offers and the successful packages (adbeat.com is a great tool for this). Good analysis beforehand prevents you from rebuilding the wheel… instead it helps you build a slightly better wheel. Some of my most successful campaigns have capitalized on the failures of my competitors.
2. Know your key numbers and watch them closely. All of your decisions will be based on these metrics. In a large business, there is some room for error… in a startup, there is very little.
a. Monthly Marketing Budget. Even if you are breaking even on your marketing efforts right up front, there should be a cap on your monthly spend. Initial success doesn’t always pan out once refund rates are factored in.
b. Allowable Acquisition Cost and Actual Cost Per Acquisition. How much can you afford to spend on a lead? How much can you afford to spend to acquire a customer? These metrics are typically defined based on historical metrics as a business grows. In the absence of historical data, you sometimes you have to make an educated guess based on comparable businesses. A good rule of thumb, however, is to spend no more than 100 – 140% of your publication price.
For ease of math, lets assume we have a $100 front end newsletter.
For one step marketing (paid acquisition), it’s easy… lets say I spend $1,000 to get 10 customers… therefore my cost per acquisition is $100. I’ve broken even on my marketing spend.
For two step marketing the metrics should be looked at in almost the same way. The cost of the leads is really irrelevant… we should instead be looking at the cost of the paid subscribers generated from the leads. For example, lets assume we acquired 1,000 email addresses at a CPL of $5 for a total spend of $5,000. 3% of the leads convert to paid subscribers over the first 90 days. We spent $5,000 to get 30 subscribers… a CPA of $165. 90 day old leads are relatively mature, but still have a bit of time to fully monetize. I would expect in another 60 days we would break even on this marketing effort.
As you can see, a bit more thought needs to go into two step marketing, and a bit higher risk tolerance. But the numbers ultimately tie back to the same core metric… cost per paid acquisition.
c. Attrition. Easy… what’s your refund rate? This varies wildly by market and by product. In general, a low priced, front end publication shouldn’t have a refund rate that exceeds 20% and a higher priced backend publication shouldn’t exceed 50%.
3. Tracking, Tracking, Tracking. You CANNOT make intelligent decisions regarding marketing spend without being able to monitor ROI by campaign, within a channel, over time. This ties back into the discussion of key metrics.
For example, I should absolutely know how much I spent for leads in a specific Adwords campaign and I should be able to track their monetization for years to come. This allows me to define Lifetime Value.
4. Test, Test, Test. Direct response marketing is a business of testing. You cannot test without a goal. You cannot improve upon that goal without tracking (point #3).
Three key testing concepts we live and breathe by in the Agora network are:
a. One Step Removed: Never test something that is more than one step away from what you know works. When we went from long form html promos to Video Sales Letters, the format changed, but everything else stayed the same. When we test a business in a new market, we try to replicate successful businesses and products from other markets. In this case the market changes, but everything else stays the same.
Why do we do this? If we change more than one thing, how do we know what made the test succeed, or fail.
b. Accelerated Failure: Fail fast, fail inexpensively and learn something from your failure. After that, test away from the failure using the knowledge you gained.
c. Test Big. In my early days of direct response marketing, one of my mentors, Mark Ford, taught me one simple rule… if you don’t believe a test will move the needle by 50%, don’t do it. While the needle didn’t always move 50%, this rule forced me to think big when it came to testing. Color changes don’t revolutionize a business… but offer changes can.
5. Marketing Transparency
I latestly had a conversation discussing the question, “How much do publishers really know about the marketing?” In a mature business, the answer is, very little. At that stage of the business their time is generally better spent on product development and long term strategy. They have acquisition goals that they give to their marketing heads and expect results… generally there is no deep dive into how the marketing goals were achieved as long as they were, in fact, achieved.
This is absolutely NOT the case in a startup. Small teams are inherently nimble. Copy / editorial and marketing need to be able to turn on dime in response to market changes, new ideas, new formats and new channels.
The individuals in the startup trifecta of Copywriter / Editor / Marketer don’t need to be cross trained, so much as cross aware. Communication isn’t an issue at this stage of the business… but an awareness of opportunities in every role is key to fast growth.
I’ll give you an example. Dan, the editor I mentioned earlier, gave a presentation at a mining / resources conference in Singapore in 2007. When he got back to Australia he asked me if we could turn his PowerPoint into a video and he could do a voice over. Dan understood that: 1) it was technically possible, 2) the promo could be pushed out as a link just like any other promo and 3) it would have greatly accelerated the speed to market versus having a copywriter transform the presentation into a written package.
I will put it on the record here and now, Dan came up with the idea for the first Video Sales Letter… in 2007, well before it revolutionized the direct response industry. Too bad I put the kibosh on the idea. Sorry Dan… I owe you a beer for that.
There you have it… the five key things I look for in a successful startup.
Brian York, AIM