Thursday, January 25, 2007

Cost.....

"Put that back,' Beth said as she sorted through a bin of apples.

"Why" I asked.

"That's more expensive than the one I'm buying," she replied,

I looked at my price. It was lower. I looked at my package. It was
bigger. I was stumped.

Let me digress a moment. I may have mentioned before that --
on rare occasions --Beth lets me go grocery shopping with her.
But it seems that I truly test her nerves when she does. Usually,
I'm in a hurry to get out of the store and I practice hunting vs.
her gathering.

"The package looks bigger," Beth said. "But read it. It's 5 oz. less
that the one in the cart. It cost more per ounce. And it's not as
effective. You have to use twice as much to get the same result."

"Oh," I said, setting the package down among the lemons and
heading out to hunt for some Moose Tracks ice cream.

Actually, outside of the grocery store, I'm quite good at practicing
what Beth was preaching.

In advertising media planning, for instance.

When you are selecting media, you are balancing a variety of
details to find the most cost-effective vehicle to communicate your
sales message based on three things: CPM, Reach, and Frequency.

CPM stands for Cost Per Thousand. (O.K. so media planners aren't
good at creating acronyms!) Just as Beth looks at cost per ounce,
when choosing media we look at cost per thousand people reached..
But don't be fooled into just dividing the cost by the circulation. You
want to divide the cost by the number of people in your target market
you reach. And the narrower your definition of your target market,
the more meaningful will be your analysis.

Here's an example I've used in seminars: I once had a client that sold
a piece of automotive service equipment. First we had to define who
would buy the machine -- technicians or shop owners. By virtue of
the price and size, it was obviously shop owners. Then we had to
determine what shop owners were most likely to buy it. We agreed
that independent shop owners had more flexibility to make their own
choices than chains and franchises. Then we looked at the list of custo-
mers to see if there were any more criteria we could use to further
define our best prospect. They had three of less service bays. So we
ran the numbers and found one trade journal that reached the most
independent owners with three or less service bays most cost
effectively. One stood out far and above the rest. That was the one
we selected and it worked great.

If it had been a close race, I would have looked into what I call the
"impact factor". As Beth mentioned above if you have to use twice as
much to get the same result, then you are not really getting a deal. So
I use my experience in the field to determine what publication is best
at achieving certain goals for past clients: generating leads, creating
brand awareness, generating online chatter, building back channel
communications, adding distributors, etc. I also tend to look at where
the competition is advertising -- and where it isn't. Sometimes the
best strategy is to take the competition head-on. Other times it is to
use a vehicle where the competition is conspicuously absent.

Next time, I'll discuss reach.

Meantime, Beth asked me to pick up toilet paper on my way home.
(How to determine effectiveness of that?)

- Phil Sasso

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