In John Coe’s Day 1 afternoon intensive he summed up at the end with a quick story about Texas Instruments. It illustrates the importance of taking a few minutes to calculate the break-even cost of your promo campaigns.
John explains he was called in a few years ago by a TI marketer asking him to critique “a self-mailer that failed.” This mailer had gone out to a clean list of 5000 current SMB customers to promote a chip upgrade. The revenue per sale was projected at $100K on average. Margins were around $75K each. The campaign cost was $35K.
John asked the marketer: “How many sales does it take to pay for the campaign?” Half of one sale. That’s all he needed to break even. When asked why he had spent only $35K on this program, John was told the product manager set the budget based on what they had spent the previous year.
The lesson: If they had budgeted for a more expensive campaign, their agency could have created something with greater impact, which very likely would have generated more sales.
After all, it’s not easy to sell a $100K product with a self mailer. And a fairly painless break-even analysis would have told them before they launched the campaign that what they were planning was going to miss the mark.
