Anatomy of a Major Marketing Blunder
Let’s Take a Look at What Happened and How This Marketing Blunder Could Have Been Prevented
Based on the title of this post, “Anatomy of a Major Marketing Blunder” you know where this post is going. One time, not long ago, there was a small business owner we’ll call Tom, who after 25 years in the home building business, retired and planned to live on his savings and social security. However, after a number of years in retirement, he got bored and decided to startup a new business.
One day he came up with what he thought was a brilliant idea. He decided to launch a company that sold pre-packaged building materials on a nationwide basis using newspaper advertisements as his marketing medium. His plan was to place ads in newspapers and magazines which looked just like the ones he had seen in Popular Mechanics that had run for years. The only difference would be his company’s contact information at the bottom of the ad.
He labored over the numbers and figured that if his ads could generate just seven sales out of every 10,000 ads placed, net profits would quadruple the ad cost. Only four sales out of 10,000 and he would break even. If the competitor in Popular Mechanics could do it, why couldn’t he?
Based on the strength of numbers and his reputation in the building industry, he raised over $250,000 from local investors to launch the first product, kitchen cabinets in a box. His first ad cost over $75,000 for complete coverage in the Atlanta Journal and Constitution. His ad was to be placed inside of the Parade magazine which is included in the paper and was delivered to several million homes; he thought he couldn’t miss. Soon loads of cash would come rolling in and he’d be able to pay great dividends to his investors and put a pile of cash in his bank account. However, Tom was not familiar with results-based advertising.
Unfortunately, to make a sad story short, the product tanked. Tom tried a different product the second time, and still another the next time. Finally, after he burned through all of the funds he had raised, he was forced to file for bankruptcy. Needless to say, his investors were not happy. How could this have happened? All he needed was a measly seven sales from every of 10,000 ads.
What Tom should have done is rather than blasting the entire investment on a few unproven ideas, he should have taken the time to run some tests in similar newspapers and magazines with smaller circulations. These relatively inexpensive tests would have told him which ad concepts worked, which price points pulled the most orders, which layout, what kinds of terms his customers found most convenient, and everything else he needed to know before embarking on a massive campaign.
The moral of the story: It’s insanely better to find out what works and what doesn’t when there’s only $5,000 vs. $75,000 at stake. Testing ensures you never make a marketing blunder ever again.