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The Do-It-Yourself Marketing-Effort Analysis

Sortable spreadsheet allows CEO to assess sales performance and response to ads and direct mail.
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Ron Sturgeon knows exactly where his best customers are and which of his direct-mail pieces and magazine ads have had the most impact

Most of my competitors think their customer is anyone who has a car," says Ron Sturgeon, chief executive of AAA Small Auto World. But because he's been tracking sales for five years, Sturgeon isn't so vague. He knows which car dealers, garages, and repair shops buy his salvaged parts, where they are, which ads they've responded to, and how much he paid to get them to phone him.

Sturgeon started tracking sales when his company was three years old. He wanted to begin a nationwide direct-mail campaign from his home base, in Fort Worth, Tex. But in 1988, when AAA had sales of $4 million, the complete list of 350,000 garages and body shops in the United States was far beyond his means. He purchased the lists of 10 states, planning to add 10 states a year.

He kept inflating the advertising budget to keep pace with his growing database. But sales stopped responding proportionately, and Sturgeon started worrying.

Expansion was the mother of invention. Sturgeon had to make his mailings a lot more profitable. By 1991 he had accumulated the entire up-to-date list of 350,000 names. But even with in-house production, a single comprehensive mailing would have cost $100,000.

He turned to his computer to narrow his focus. In 1987 Sturgeon had purchased a Digital minicomputer system to run industry-specific database software that monitored inventory, pricing, and sales. Two years later, with a PC and Lotus 1-2-3, his controller designed a spreadsheet that incorporates call-origin-information that MCI provides at no charge. He integrates that with the database's product-sales information. The sortable spreadsheet lets Sturgeon review sales performance by state, type of customer, amount of sale, and ad or direct-mail piece.

If his monthly report told him that 60 phone queries from Utah yielded only one sale, he'd divert marketing money to states with a closing rate better than 60 to one. "We skip a bad state and mail an extra time to a state with a 10-to-one rate," Sturgeon explains.

"In the beginning we thought the states closest to us would have the best closing rate," he says. But a year of tracking showed the best states were scattered across the country. Retail outlets in high-response states make up about half of Sturgeon's mailing list, so concentrating his marketing money on those areas earned a substantial improvement in sales.

He applied the same methodology to measuring response to the ads themselves. For the past two years he's assigned a separate 800 number to each ad and direct-mail piece. MCI records all incoming calls by 800 line as well as by state of origin, and Sturgeon adds those monthly results to the spreadsheet.

Sturgeon can assess every promotion's impact, gauging peak response and residual effects. Many magazines guarantee large numbers of "pass-along" readers, who keep magazines in circulation long past the cover date, but Sturgeon has spotted readership declines before the publishers themselves even sensed trouble.

Because he so accurately predicts customer response, Sturgeon can apply a law of returns to justify marketing expenditures. Direct-mail pieces should not cost more than $1 per phone query. Magazine ads are worth $1.50 per call because they reach wider markets than focused direct mail does.

By tracking ad responses, monitoring phone-call-to-sale ratios, and staggering mailings, the $8-million company has trimmed 40% from its marketing budget, while its sales have grown by 10% a year and its profits have held steady in a beleaguered industry. Sturgeon says, "If you can't measure your marketing, you have to question if it's worth doing at all."

(On page 3, Ron Sturgeon analyzes his call-summary report.)

CALL SUMMARY REPORT DEC '93

MURPHY'S SALVAGE BMW LAW

STATES DIRECTORY(2) POSTER ROUNDEL ZONE 9,3, .

3/92 7/92 10/27 1,5,2,4 TOTAL NET SALES PER

433-3789 247-9514 433-3766 343-9342 CALLS(6) INVOICES SALES CALL

AK ALASKA 7 0 $0.00 $0.00

AL ALABAMA 2 2 20 174 7 $4,675.00 $26.87

AR ARKANSAS 4 4 14 234 15 $7,135.00 $30.49

AZ ARIZONA 1 37 61 1 $125.00 $2.05

CA CALIFORNIA 2 20 328 621 24 $20,485.00 32.99

CM COMPASS(1) 0 2 $700.00

CN CANADA 0 2 $330.00

CO COLORADO 1 5 5 90 7 $4,790.00 $53.22

CT CONNECTICUT 2 4 81 3 $3,740.00 $46.17

DA DALLAS 0 118 $37,652.00

DE DELAWARE 18 1 $110.00 $6.11

DC WASH 1 $0.00

E7(1) 0 198 $20,283.00

FL FLORIDA 3 1 16 12 300 6 $2,640.00 $8.80

FT FORT WORTH 0 119 $43,250.00

GA GEORGIA 11 7 94 6 $10,210.00 $108.62

HI HAWAII 4 9 1 $56.00 $6.22 (8)

IA IOWA 18 93 3 $1,150.00 $12.37

ID IDAHO 1 15 1 $200.00 $13.33

IL ILLINOIS 2 1 6 50 172 10 $7,135.00 $41.48

IN INDIANA 1 1 5 85 6 $8,720.00 $102.59

IT INTERNATIONAL 6 2 $350.00 $58.33

KO KOLT(1) 0 3 $310.00

KS KANSAS 1 4 81 7 $2,042.00 $25.21

KY KENTUCKY 2 12 142 5 $7,660.00 $53.94

LA LOUSIANA 9 2 6 7 363 23 $8,565.00 $23.60

MA MASSACHUSETTS 4 4 109 6 $5,375.00 $49.31

MD MARYLAND 5 60 1 $50.00 $0.83

ME MAINE 1 1 10 2 $8,900.00 $890.00

MI MICHIGAN 1 16 7 98 7 $3,955.00 $40.36

MN MINNESOTA 1 7 13 94 2 $1,450.00 $15.43

MO MISSOURI 1 3 8 149 4 $2,175.00 $14.60

MS MISSISSIPPI 17 157 4 $1,495.00 $9.52

MT MONTANA 1 5 8 1 $110.00 $13.75

MX MEXICO 0

NC N.CAROLINA 3 12 166 8 $2,446.00 $14.73

ND N. DAKOTA 1 5 $0.00

NE NEBRASKA 7 26 3 $3,250.00 $125.00

NH NEW HAMPSHIRE 2 13 $0.00

NJ NEW JERSEY 1 9 23 126 6 $1,095.00 $8.69

NM NEW MEXICO 1 3 1 36 116 4 $535.00 $4.61

NV NEVADA 1 17 38 $0.00

NY NEW YORK 1 1 32 10 250 11 $4,430.00 $17.72

OH OHIO 4 15 333 9 $1,660.00 $4.98

OK OKLAHOMA 16 3 2 6 310 12 $6,485.00 $20.92 (8)

ON ORION(1) 2 31 $10,433.00

OR OREGON 21 48 4 $3,400.00 $70.83

PA PENNSYLVANIA 2 5 14 139 7 $1,840.00 $13.24

RI RHODE ISLAND 6 3 34 $0.00

SC S. CAROLINA 4 1 46 1 $675.00 $14.67

SD SOUTH DAKOTA 13 2 $460.00 $35.38

TN TENNESSE 1 13 151 5 $1,350.00 $8.94

TX TEXAS 29 25 26 38 1,650 97 $47,803.00 $28.97

UT UTAH 1 27 59 $0.00

VA VIRGINIA 4 11 10 124 2 $475.00 $3.83

VT VERMONT 1 18 $0.00

WA WASHINGTON 2 3 1 15 146 7 $2,810.00 $19.25

WI WISCONSIN 6 10 56 5 $685.00 $12.23

WV WEST VIRGINIA 1 5 5 33 1 $250.00 $7.58

WY WYOMING 1 4 1 $125.00 $31.25

TOTAL CALLS 78 47 (3) 237 864 0 7238 813 $306,030.00

2860 3531

COST OF ADVERTISING(4) $600.00 $15,000.00 $358.00 No Old 800# (10) 4323 Mci Invoices 342

Total Ad Cost $3,164.00 Net Sales $193,402.00

COST PER CALL(5) $0.21 $4.25 $1.51 $0.95 Close Rate 4.73% (8)

Adj Cost/Call $0.73 % Of Total Sales 63.20% (9)

Ron Sturgeon analyzes his call-summary report:

1. About 5% of our business is from the Dallas/Fort Worth area. We use "E7" to isolate those retail results, so our local success doesn't skew the Texas figures. Orion, Compass, and Kolt are national computer networks that wrecking yards use to find the salvaged parts that we and our competitors stock. Those aren't our best customers, so we track their performance separately.

2. The columns list the number of phone calls we've gotten from each state in response to the direct-mail piece or ad we're tracking.

3. We've received 47 calls this month in response to a BMW poster, and 3,531 to date. There isn't much change from last month, so we know the mailing is still working. But when it drops to 43, and then 39, we'll think about another mailing.

4. This is the cost that's been accrued this month. Promos like "BMW poster" and "salvage directory" were paid for in earlier months, and that cost isn't listed. But our computer knows that cost, and every month, it recalculates the cost per call.

5. After analyzing the cost per call as well as the cost per sale, we found the results ranked the magazines the same either way. The cost per call is easier to track, and all we need is a ranking.

6. The closing rate for a particular ad is hard to measure, but the geographic closing rate is obvious -- we got eight calls from Montana and we wrote one invoice. That's 8 to one, a very good closing rate.

7. I like to see a call-to-invoice ratio of 10 to one or better, but I look at this column also. Hawaii has a 9-to-one closing rate, but the average sale is only $6.22. Oklahoma's closing rate is 26 to one, but the average sale is $20.92. So we'll keep marketing there because the average invoice is higher.

8. This total closing-rate number shows the percentage of calls that result in actual sales. We get it by dividing 342 "MCI invoices," which are long-distance calls that result in sales, by 7,238, the total number of long-distance calls. This number is less important to me than the state-by-state rates are. It includes calls that we aren't even tracking on this report, so it encompasses such a big sample that it's good only for looking at trends. If it's 4.73 one month, then 4.63, and then 4.54, I know my overall plan isn't working.

9. The 4,323 calls tracked on this report represent 63.2% of this month's total sales. The other 36.8% are from walk-in retail sales, calls to our local number, and calls to 800 numbers that we aren't tracking this month.

10. We've subtracted calls to 800 numbers that we aren't tracking now to get 4,323. We have about 20 toll-free numbers that we assign to ads as we need them. At any point, 4 to 8 of our 800 numbers are not in use. Calls to those numbers would artificially reduce the total cost per call.




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