2005 - 10-27-05

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.

We now have a $6,000 gross... minus $1,200 in refunds... and minus $1,000 for the costs of advertising. What you have left then is a $3,800 contribution to overhead. Now I'm not positive about this... but... Sir Gary of Halbert believes...

It Is Better To Have $3,800

Than It Is To Have $800

The math doesn't always work like this. Sometimes adding the 30-day hold will more than triple your gross sales... and not increase your refunds. Sometimes adding the 30-day hold will just double your gross sales... and double your refunds.