"The definition of insanity is doing the same thing over and over and over and over again, but expecting a different result. " ~ Albert Einstein
At the recent iMedia Summit in Scottsdale, I helped moderate a breakout session on "reinventing direct marketing on the Web." As I listened to more than 80 agency and media executives share insights and opinions, I started to feel the warmth of understanding, the deep calm of real human connection. It turns out that I...well...it seems that I REALLY LOVE DIRECT RESPONSE ADVERTISING AFTER ALL!
Yes folks, DR is an honorable profession with a rich and storied past that I'd never taken the time to fully appreciate. In our workshop, a dozen agency professionals rightly pointed out that DR is an important part of the television-advertising marketplace. They stand at the ready to buy up unsold inventory at 11th hour distressed rates. So why can't this model work online as well?
Why not indeed! It's time that all of us on the seller side of the business got over our DR phobia and confronted our prejudices. Instead of celebrating DR advertisers for their plucky support of our fledgling medium, many of us - myself included - have figuratively bitten the hand that's fed us. So here I stand, eyes cast downward, to say to all the world: "DR is OK!"
It's the per-inquiry advertising that's such a big scam.
If your entire career has been spent in Internet sales, you're probably more familiar with per-inquiry's online incarnations; cost-per-click, cost-per-action and cost-per-acquisition pricing. While I believe firmly in the future of Direct Response in our medium, I'm equally convinced that its potential will never be realized until both buyers and sellers walk away from the per-inquiry pricing myth. Here are a few reasons why, followed by a proposed solution.
- ONE SIDE ALWAYS KEEPS THE BOOKS. Because of the nature of third party ad serving, only one party gets to see the actual return on investment and drive the optimization of the plan. If it's the other side, then you're probably getting hosed. It simply makes no business sense to get paid (or to pay) on numbers that you don't control.
- TIME IS MONEY. Since the numbers in most per-inquiry or hybrid deals are controlled by the agency or the client, any seller who takes PI business has to spend loads of time "living with the deal." This starts with long, drawn out negotiations and indoctrination on the advertiser's business model and the metrics of the deal. And PI deals are anything but turnkey: they can taka ton of time and service after the deal is closed. I don't know a single sales organization that has as many people as it did two years ago - or any agencies for that matter. So who's going burn all this midnight oil? Who wants to?
- CPM WORKS FOR THOSE WHO CAN TRULY OPTIMIZE. The most sophisticated direct response advertisers - those who are really measuring web-based ROI - very often eschew per-inquiry pricing deals. They can accurately predict the return on a given buy, so they're comfortable buying on the basis of a discounted CPM. They know - based on optimization capabilities -- that if they pay a dollar they'll extract $2 worth of new leads or sales from it. So if this is true, then it stands to reason that many of the customers pushing for cost-per-click or cost-per-sale pricing are those who are least prepared to truly optimize the buy in the first place. They are simply reassigning the risk they are unprepared to mitigate themselves.
Let's all assume - for the sake of argument - that henceforth per-inquiry advertising no longer exists online. (I set aside Google and some of the search and paid listings players as I think that's a fundamentally different business.) From this point forward, all online advertising is sold on a CPM basis. Assumption Two: Every site will have a heavily discounted "remnant rate" that will be available to DR advertisers under certain conditions: the buy must run within X days of purchase; it is non-cancelable and non-assignable; there is an agreed upon set of agency clients that can take this space; etc.
Instead of the long, quasi-religious arguments about "branding v. direct response" and the ponderous mulling of numbers, buyers and sellers can engage in a quick and effective price negotiation. Sellers can simply establish a minimum remnant-pricing threshold for run-of-site or specific section buys. Direct Response buyers will quickly understand what discounted rates they can get on various sites. They can also go into the buy by stating their own "maximum" remnant rate. If a seller's minimum is $1.50 and a buyer's maximum is $1.25, there's either some quick horse-trading over terms or there is no deal.
What I'm proposing is already in practice in many sales organizations. They simply say no to all per-inquiry pricing and teach their sales teams to walk away from cost-per-click and cost-per-action deals. But this isn't just about saying no. I advocate a robust, back room DR marketplace that really serves the needs of both buyer and seller. Both agencies and sites should be motivated to realize this vision, since inefficiency in the buy-sell process is no good for either side. But for this scenario to become real, reputable Direct Response agencies have to get out of the per-inquiry business altogether and help sellers establish a working remnant marketplace.
To allow per-inquiry deals to continue to squander our time and sap the creativity and motivation of our best people...now THAT would be the definition of insanity.
Send your comments and questions directly to Doug Weaver
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