The Upcoming Fork in Business Boulevard

Posted by on January 27, 2014

Beagle_Wittgenstein_530Type “business plan” into Google and you’ll see an impressive array of articles from BusinessWeek, The Wall Street Journal, Inc., Forbes, Entrepreneur and

Everyone has a business plan.
Almost no one has an advertising plan.
And we are coming to a critical fork in the road.

I want you to choose your fork consciously rather than unconsciously. And choose you most definitely will.

I’m talking about your choice between brand-building and direct response advertising.

When you sell a product or service with a long purchase cycle – something purchased only once every several years – your business will be best served by brand building. Do everything in your power to become the company that people will think of first and feel the best about when they finally need what you sell. Good brand-building also stimulates word-of-mouth, the original “viral.” But brand building requires patience, confidence and courage.

If you sell a product or service with a short purchase cycle – something that most people will purchase every few days, weeks or months – your business will be best served by direct-response ads. Create an extremely attractive, limited-time offer, then add an additional incentive for those who act now. Then add a third incentive. This is called “benefit stacking” and it makes a massive difference. Direct-response ads are exciting but to be really successful you need a big-gap offer.

The goal is to create a big gap between the perceived value and the asking price. The more impressive that gap, the more attractive your direct-response offer. Big-gap offers are most easily made when the public has no ability to shop and compare.

Companies that make money with big-gap offers are the ones that can sell products with a perceived value that is at least 10 times their actual cost. I’m betting you don’t have that kind of profit margin. Am I right?

Write a direct-response ad for a product with a widely known price and the public won’t be impressed unless you’re selling that product below your cost. This is known as a “loss leader.” The idea behind a loss leader is that it can drive customers into your store who might make additional purchases while they’re there. Grocery stores have used this technique since the dawn of time.

Direct response is not a style of ad writing. It is a style of offer packaging.

Businesses with short purchase cycles can jump from offer to offer, item to item, incentive to incentive indefinitely. But may God have mercy on the ad writer who is expected to generate immediate response for a product or service with a long purchase cycle.

There are times when it’s possible to run a direct-response offer within a brand-building ad campaign for a product or service that has a long purchase cycle. An example of this would be for a jewelry store to make an enticing offer to finance engagement rings right before Valentines Day. Add the additional incentives of a romantic dinner and a limousine filled with 12 dozen roses and you might see a bump in engagement ring sales.

Google’s ability to identify customers who are immediately in the market for products and services with long purchase cycles has all but eliminated the Yellow Pages and it is rapidly eroding the public’s need for in-store “experts” as well. Google’s unique ability to do this has caused many business owners to believe they have a right to expect immediate results from traditional mass media.

Business owner, the fork in the road is before you: brand building or direct response.

If you sell a product or service that at least 50 percent of the public will purchase within the next 12 months, you might do well to consider running direct response ads in mass media. But please be careful to make a highly impressive offer or you’ll be horribly disappointed.

If you sell a product or service with a long purchase cycle – roofing, HVAC, jewelry, boats, major appliances, etc. – you must use extreme caution when applying direct response techniques or you’ll just be teaching your customers to wait for your next “sale.”

Or you could just bet the farm on your ability to stay at the top of Google search results.

I’ll be intrigued to see what you choose.

Roy H. Williams

One Response to The Upcoming Fork in Business Boulevard

  1. Jeff Behan

    Roy – what about a product or service that people buy only once? For example – orthodontics. I believe the best way for an orthodontist to grow is to “be the brand everyone wants” but I’ve seen a move toward direct response in this category and am curious what you think about that.

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