2005 - 10-27-05

I remember years ago being in Phoenix shooting an infomercial starring me and Don Drysdale (the ex-Dodger pitcher) which was being produced by Dan Kennedy. Guthy-Renker was in the same studio when I was there. They were having a problem with an infomercial selling cosmetics starring Victoria Principal. No matter what they tried, all they could do (at best) was make the infomercial break even. All they were doing was "trading dollars". Then I suggested they try the 30-day hold. They did. The infomercial became wildly profitable and it ran (I believe) for something like 7-years.

I have written two major campaigns relatively recently. One of these campaigns makes a tidy but not spectacular profit when the client uses the 30-day hold. Without the 30-day hold, the promotion is not profitable whatsoever.

I have a relationship with another client who is mailing thousands and thousands of sales letters. These letters would be quite profitable WITHOUT the 30-day hold. However, WITH the 30-day hold, the profits are spectacular!

Let me give you some numbers to chew on.

Let's say you spend $1,000 to pay for your advertising. Let's say you are mailing all the letters you can mail for $1,000 or spending $1,000 to run newspaper ads or maybe spending $1,000 to buy Google ad words. Let's say for every $1,000 you spend, you bring back $2,000. Let's say your refund rate is 10%.

So we have a $2,000 gross... minus $200 in refunds... and minus $1,000 for the costs of advertising. What you have left then is an $800 contribution to overhead. Not bad.

Now let's add the 30-day hold into that same equation. Here's what will typically happen: You will TRIPLE your response rate. And you will DOUBLE your refund rate. Let's look at the figures again.