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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.
Published June 1994
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BUY A REPRINTRon 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
