When is Crappy Advertising Actually MORE Profitable?

Q: When is crappy advertising the MOST profitable route you can take?


A: When it’s working–AND–you have bigger fish to fry!

Today’s insight is for the more sophisticated marketer…

(At least I like to think it is because I didn’t realize this until I had already burned through a LOT of cash, and the alternative is that I’m just an idiot!)

You see, when I first started building my own advertising systems, I really thought it was possible to have a perfectly optimized system.

I figured I knew how to split test, and I understood what consumers responded to in advertising…

So all I needed to do was aggressively split test every last part of my system until it was a perfectly tuned machine, making more money than anyone else’s machine on the market, and thereby becoming an unlimited traffic magnet. (Because due to the “Unlimited Traffic Theorem”,  if I’m making $3 per visitor and you’re only making $1 per visitor, I can pay you $1.50 per visitor and eliminate your reason for competing… you should just start sending all your traffic to me!)

Here’s what I didn’t take into account…

RESOURCES AND OPPORTUNITIES IN THE REAL WORLD OF BUSINESS!

I really started understanding this when I started Rocket Clicks with Jeff Hughes about 4 years ago. (As a side note, time goes SO fast and I’m SO fricking old!  I wish I could remember which comedian said this first but when I look at my receding hairline I think “that’s not a forehead, that’s a fivehead!)

Anyway, way back in 2008 I was talking to all these entrepreneurs, constantly astounded at how much money they were making with relatively crappy advertising, seriously under-optimized AdWords accounts, and landing pages which had conversion leaks in them the size of Kentucky!

When I interviewed these people about their business, I was kind of shocked to find out that it wasn’t that they didn’t KNOW there was a problem…

They all kind of “hung their heads in shame” (metaphorically over our GoToMeeting conferences), dropped their voices and said “I know, I feel so guilty but I’ve been so busy with other things I just can’t get to it!”

But the more people I interviewed, the more I started to realize these people weren’t stupid by a long shot…

In fact, they were making BETTER prioritization decisions in their business than I was.  Because the kinds of things they were attending to were making them a whole lot more money than doubling their conversion on the front end would… at least at the moment.

How could that possibly be?  Let me give you a few examples:

Consider someone selling a supplement for prostate health with a just barely profitable front end.  Maybe they’re spending $2 per click and making back $2.10, all things considered.  Now, suppose they’re a one man shop, and so far they’re able to sell 10,000 customers per month.  Might sound like a lot, but because of the margins it’s just $1000 profit.  Certainly not enough to hire a PPC agency or conversion expert.  And worse yet, he’s at the mercy of ONE supplier with limited capacity.  So even if he COULD ramp up his sales, the supplier can’t keep up!    And he’s got customer service problems (e.g. he can’t afford to hire a team but he can’t afford not to!) so refunds are climbing.  What do to?

With seriously limited time and resources, this person’s got several options for where to put his time and resources.  He could:

  • Work on striking deals with other supplement companies to eliminate the vulnerability in the business…
  • He could work on back end products to sell to his buyers to seriously increase his margins…
  • He could build a stick sequence via direct mail to get existing customers on the continuity to stay longer…
  • He could spend a month building a better customer service system…
  • Or he could dig into AdWords, learn optimization techniques, test and optimize his landing page, in hopes of making an extra 20% to 30% on the front end.

Now, it’s not that there’s no money in the optimization…

And it should be done EVENTUALLY…

But the hard reality is that the other problems really take precedence given his capital resources and available time.    Because what good will the extra 20% to 30% be if his supplier drops out of the game, can’t keep up with capacity, or if he loses his merchant account due to too many chargebacks (from lousy customer service?)

This is why all businesses develop a long list of “guilty projects” which they KNOW would make them more money if they could only find the time and resources to do it.

And sure, you can make joint venture arrangements to solve a lot of these problems, but you can’t choose these partners randomly… finding JVs itself takes time and effort. (You’ve also gotta vet the prospective partners or you could be making more trouble than it’s worth… trust me, I learned the hard way!)

JUST BECAUSE YOU CAN FIX SOMETHING DOESN’T MEAN YOU SHOULD.

The reality of business is that it’s a constant game of priorities.

“What is the highest and best use of your time and resources this week?”

As much as I hate to say it, sometimes optimizing this or that part of your advertising system just isn’t the answer.

And even when it is, it’s rare that you have the time and resources to optimize the WHOLE THING.  Rather, you usually need to pick the point of greatest leverage where you’ve got the greatest potential for increasing your profit volume…

Like your highest end product…

Or often it IS the front end, because that increases the value of the whole system.  (Hint: most people totally ignore their email follow up system when it comes to optimization… but you can often quadruple your site traffic with a well optimized long follow up system without spending another penny on traffic!)

But there’s a bright side…

Because when you KNOW and UNDERSTAND this essential business reality…

You also know that everyone else is going through it too…

And that the best we can ever do is  (as Stephen Covey taught me) is to “organize and execute around priorities”

So throw away the “guilt” from that “guilty project list” you’ve got building in Outlook…

And just put your head down and ask yourself “What’s Next?”

Dr. G 🙂

PS – we’ve got some new options and services I’d like you to check out:



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