Marketing Case Studies

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Case Study from Our Files
The $8,000 Marketing Mistake
by Joe Gracia

Note: The names of the people and businesses in our case studies have been changed to ensure the privacy of the people involved, but the details, recommendations and results are based on actual events from our files.

My wife, Maria and I, hear unfortunate stories every day of business owners who have paid hundreds, even thousands of dollars on radio, TV, newspaper or direct mail advertising, etc. and didn't make one dime on their investment. Many of them don't even get an inquiry phone call. They'll never see that money again.

We received a call a while back from a young man--we'll say his name was Sam.

Sam told us about his great idea for a novelty item which he believed would be the next "pet rock." As soon as I heard "novelty item," I knew he was in trouble.

First of all, 90% of all new product ideas fail, and novelty items are one of the most difficult products to make money on--especially a novelty, practical joke item like he described to us.

He was obviously very enthusiastic and excited about his idea.

In order to evaluate his chances for success, I asked him the two simple questions I always ask.

Question 1. What specific tests have you done to prove that large numbers of people want this product and are willing to pay you for it?


Question 2. What is your strategy for attracting large numbers of prospects to your business and converting a consistent percentage of them into paying customers?

Asking your friends and family for marketing advice
is a sure way to the poor house

His answer to the first question was, "All my friends have told me they love the idea! If they think it's a winner, how can it lose?"

Ouch. Strike one. Asking your family and friends what they think of your new idea for a product or service is like asking them what they think of your newborn baby.

Can you imagine any of your friends saying, "Your baby is ugly."?

No way. Most friends are going to tell you what they think you want to hear. They'll be happy to tell you how beautiful your baby is; how wonderful your idea is . . . unless, of course, you ask them to buy one. Then it becomes a different ball game.

Without testing your product idea,
your chances of success are pretty slim

Sam had done no testing to see if there was an actual demand for his new novelty product. He simply assumed there was since his friends gave him an unqualified thumbs up.

There are a number of ways to test your product or service idea to determine the level of interest in it.

One of the more common ways to test is to offer a free or reduced price sample where you require your prospects to take some action to obtain your sample, like filling out a contest entry form, redeeming a coupon, or calling to request it.

Most of the people who actually take the time and effort to request the sample should have a genuine interest in your product. If no one responds to your free or reduced price offer, then how many people do you think will respond for full price?

This is the strategy consumer product manufacturers use when they distribute coupons for their products. If few people use the coupons for a new product, they now know that the interest for the new product is low, and won't waste their money on further sales efforts without further product improvements and more testing.

Simply handing out free samples is never a valid test since many people will just take your free sample whether they are really interested or not.

Without an effective marketing strategy,
you've lost the game before you've even begun

Sam's answer to my second question was the final nail in his marketing coffin. "What is your plan for attracting the right prospects to your business and then converting them into paying customers?" In other words, "What is your marketing strategy?"

I knew the answer before I even asked. If a person doesn't know about testing a product idea before introducing it, then there is a slim chance that they even know that they need a marketing strategy.

"I'm not sure I know what you mean. Do you mean how am I going to advertise it?" he asked.

Oh boy, he's already talking about spending money on advertising when he doesn't even know if there is a market for it, and he doesn't have a clue about an effective marketing strategy to attract prospects and convert them into paying customers. This always means lost money without much chance for success.

Eight thousand dollars down the drain
"I've already got the advertising taken care of," he said. "I had the local hard rock radio station make me a hot radio spot and they're gonna start running it on Monday!"

I hesitated to ask, but had to, "How much did you pay for that?"

"Eight thousand dollars!" he replied proudly. He went on to tell me that he had borrowed the money from his girlfriend and a few of his family members. He promised them a large share of the profits which he assured them would be rolling in within a week or two after the radio spots ran. After all, how could it lose?

I shared some marketing basics like testing and having a strategy, with Sam, and then asked if he had time to either cancel or put a hold on his upcoming radio campaign so he could test the interest level for his idea first.

He said, he didn't think so, and didn't want to delay it anyway. He was convinced that he had a winner and was impatient to get going with it. He didn't feel testing was necessary since all his friends told him he had a great idea.

There was no persuading him to hold off and reconsider. I didn't have the heart to tell him that he had just thrown every penny of his investors' money down the drain.

An expensive marketing lesson
A few months later we learned that Sam had, indeed, lost every cent that was spent on the radio campaign, and he didn't receive one single order.

The only calls he received were from his friends who told him, "Great radio spots, dude!" I'm sure he also received a few calls from his girlfriend and family members wanting to know when the money was going to start rolling in.

Hopefully, Sam learned a few things from this very expensive marketing lesson.

Case Study Review

Marketing Problem #1
Asking friends for marketing advice is financially foolish:

Effective marketing is based on well-established principles and systems that need to be learned and properly applied to be successful. The chances of a friend having this specific marketing expertise and a specific track record to prove it are slim.

Just as it would be dangerous to go to a friend or a family member for medical advice, unless they were a qualified medical practitioner, you should never trust the survival or health of your company to unqualified guesses or opinions. Don't do it.

Marketing Solution #1
Test the level of interest in your new product or service before you begin spending:

Opinions won't tell you if you have a viable product, only numbers will. You acquire the numbers you need by simple marketing tests.

There are dozens of ways to test a new product or service idea. Offer free samples, or reduced price samples. Offer a free brochure, info-sheet or e-mail about your new product. Offer a free demonstration. Offer coupons or a gift certificate for the samples. Make sure that you make it clear to people that there is no obligation to buy.

The idea is to give people who have an interest in your new product the opportunity to learn more about your product or service without an up front commitment to buy right now. Few people are willing to buy a new product or service from a stranger.

With a few simple tests, you will know whether there is a high interest, medium interest or no interest in your new idea. Better to find out before you have spent your life savings, not after.

Marketing Problem #2
Not having an effective marketing strategy:

Most people never give a thought to their marketing strategy. They just start spending money on advertising and hope for the best. This approach is like hopping into your car and driving in circles. You'll spend lots of time, effort and gas money, but you'll end up getting no where.

Marketing Solution #2
Have an effective marketing strategy before you begin:

If you don't know exactly how you are going to attract prospects to your business or how you are going to convert them into paying customers, then it's not going to happen.

Growing a business is not a matter of guessing, wishing, or luck. It's a matter of effective planning and proper implementation of your plans. Once you have a clear goal and an effective system for reaching that goal, your success is practically guaranteed.


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