If your media buys are to be based on any single common denominator that monitors performance, it should be Cost Per Order (CPO).
In Direct Response Television, the bottom line is your CPO – how much it costs you to generate one
sale or one inquiry.
THE LOWER YOUR CPO, THE HIGHER YOUR PROFITS. Remember, with DRTV, Media Buying has nothing
to do with programming or demographics. It is strictly a numbers game. The fewer dollars you spend to
reach your viewer base, the better your CPO.
CPO SHOULD GENERALLY BE UNDER 50% OF SELLING PRICE. To determine your CPO, simply divide your
airtime cost by the number of orders you generated from that single airing of your infomercial. This
amount should be less that 50% of your selling price.
For Example, let’s suppose you spent $30,000 on airtime to show your infomercial. Out of that, you received
a total of 600 calls.
30,000 divided by 623 = 48
If each unit price is $100, you’re in good shape, because you have made more than 50% profit.
PERFORMANCE RATIO
Performance ratio is a percentage derived from dividing your CPO by your selling price, or by dividing
your total sales revenue by your total media cost.
Although the maximum CPO should be 50% of your selling price, few advertisers consider 50% to be
acceptable. Ideally, your CPO should be 1/5 your selling price, which means you should receive
$5 for every dollar you invest in media.
For example, if $1,000 worth of airtime produces 50 sales, your CPO is $20, which means it costs you
$20 in media time to sell one unit of your product.
- If your selling price is $40, your CPO is 50% of your selling price, a 1 to 2 ratio.
- If your selling price is $60, your CPO is 33% of your selling price, a 1 to 3 ratio.
- If your selling price is $100, your CPO is 20% of your selling price, a 1 to 5 ratio. This means that for every dollar you invest in media time, you’re getting $5 back.
MONITORING & EVALUATION
The success or failure of an infomercial can be determined by one or two airings. If the first airing
produces marginal results, you may want to give it a second shot for comparison. If the second airing
is equally disappointing, go back to the drawing board.
Immediately evaluate the performance of each airing the morning after. Although orders may continue
to straggle in two or three days after an infomercial is aired, each airing’s performance can be
largely determined by evaluating it within 12 hours.
REMEMBER: EACH AIRING MUST BE PROFITABLE. NO IFS, ANDS OR BUTS. YOUR ONLY OTHER
CONCERN SHOULD BE TO COMPARE THE CPO AND RATION OF ONE MEDIA BUY TO THE NEXT.
Infomercials are not like regular programs, which can build viewership with an increase in frequency.
If your infomercial does not deliver a profitable return after one or two airings, it probably never will.
Furthermore, if after one or two airings, your infomercial proves profitable, your next task is to develop
a media plan that will increase those profits. By selecting stations, time slots, and air dates that will
produce the lowest CPOs, you can dramatically increase your profit ratio.
Article by www.contentmart.com
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