FRAM SYSTEMS ^blog

ROI What’s Your Return

In the famous movie “The Godfather”, we see Don Vito making quite a few ‘deals’ doing a favor today with an eye towards future rewards. In one famous scene we see Don Corleone promises Bonasera, the undertaker  that “if by chance an honest man like yourself should make enemies then they would become my enemies. And the, they would fear you”. That’s his service, protection from his enemies, but for that he extracts a price. “Someday, and that day may never come, I’ll call upon you to do a service for me”. That’s his price and an investment in the future although its value can’t be readily calculated.

Like Don Corleone you also expect something, something positive and measurable from your investments? If you’re like most business people with funds to invest you want that  hard earned money getting the highest, safest return possible. And like most investors, you’re probably invested in stocks, bonds or mutual funds, maybe real estate or precious metals.  Maybe you’re a real risk taker and you invest in options or futures.

What kind of return can you reasonably expect to make? 5 %? 10%? 15%?  Maybe. And if you’re really lucky… maybe 20 or 25%.  You may even realize a 100% return occasionally. And that’s only the upside.

Now everyone realizes that along with those numbers, comes a certain amount of risk. You could very easily lose some or all of it in the process. With a margin call you could even wind up losing much more than your original investment.

But do you also realize that an effective marketing campaign has the potential of generating up to 5,000% or more in profits?

For example, let’s say you spend $100 on an ad or a campaign and it returns $1,000 in profits, you’ve just earned 10 times your Return On Investment. That’s a astonishing 1,000% return. What that same $100 ad were to return $5,000 in profits?  You’d have a an incredible 5,000% return.

OK, you’re likely thinking, “How realistic is it to invest $100 and get a $1,000 or a $5,000 return? I mean, does it ever really happen? And if it does, is it the exception rather than the rule?”

Good questions. All of them. And the answer is… Yes, it is realistic. Yes it does happen. And yes, it is the exception, rather than the rule.

Here’s an excellent example…

Not too many years ago a friend of mine bought a car. It wasn’t just any car but a 1960 Austin Healy Sprite. If you don’t know the Sprite it was a sought after British sports car. Because the car was owned by the widow of the original owner, my friend paid her what he considered a generous $7,500 for the car which hadn’t been driven for almost twenty years and looked in fairly poor shape. As it turned out the car was dirty but was completely original and had only 6,200 miles and was actually in overall good shape. Even the leather seat were in wonderful condition. Over the next year he invested and additional $2,300 in fixing up the vehicle making his total investment $9,800. He drove the Sprite for a few months and then saw another car he wanted, only he didn’t have the cash so he brought the car to a local specialty car dealer where was offered a whopping, or so he thought, $25,000. Wow, he told me, “I just doubled my money and I had this awesome car for almost a year”. I suggested that advertise the car in a couple of automotive publications. So he placed 2 classified ads for the Sprite, each in well known automotive magazines. One ad cost $120, the other only $68. At my suggestion, both ads said “no reasonable offer refused”. With in a week of the first ad running, the one that he’d paid $68 for, he received a call from a man from Oregon, the other side of the country from him offering $60,000 contingent upon inspection by a look agent. My friend told me he had to ask the buyer 3 times if he what he heard was $60,000. When all was said and done, he sold the car for $58,900 and realized just 500% return on his investment in the Sprite and a 26,100% return on the $188 he invested in advertising.

Again, this kind of result does not happen everyday, but don’t let the fact that this is the exception, rather than the rule, dissuade or discourage you. It doesn’t have to be that way.

The reason it is, is that…

Most business owners simply don’t know how to construct an effective marketing campaign, ad or promotion that will product the optimum results.

Look, the newspaper, the magazine, the TV or radio station, or the mail carrier doesn’t care what’s on your ad or in your sales letter.  They’re going to deliver the message, whatever it is, to the intended recipient. And if you get one response, 100 responses or even 1,000 responses, the costs involved all the same.

So it’s not how much you spend on the ad that counts. Nor is the media you choose that  determines your response rate although choosing effective media is important.

More than anything, it’s what you do or say in your ad or letter and how you say it that builds  trust and credibility with the reader, and the offer you make, that will determine the response you get.

If that’s the case then why not make the very best offer to those who you’ve already developed a high level of trust and credibility with and maximize your return on your investment? What I’m talking about here are your current and past customers. They’ve already done business with you and are familiar with you, your  operation and the value your business provides. It’s just up to you to make them  a compelling offer, an “offer the can’t refuse”.

In my next post we’ll look at “The Good, The Bad and The Ugly” of offers.