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Direct Response Marketing

Media Zone: Per-Call, Per-Lead, Per-Sale — Which is Most Effective?

5 Feb, 2010 By: Peter Feinstein Response

What might sound good to advertisers doesn’t excite media outlets.

Peter FeinsteinI was deep in conversation with a prospective client when he asked me a question only two other prospects/clients had asked me in the past decade: “Would media outlets prefer to receive a higher bounty for a sale or a lower payout on a lead?”

The answer: media outlets always prefer to be paid on leads, or better yet, on calls. They don’t like being held responsible for a call center or Web page’s ability to close a sale. While they’re fine with being held accountable for the number of calls or leads, they despise advertisers who want to pay them per sale.

When we approach our media partners with a per-call/lead/sale deal, they know that they are going to be paid a specified amount per whatever it is we’ve told them. So, whatever that ‘per’ is, the outlet’s only concern is how many it is going to generate. While clients think it’s cool to pay a media outlet $100 per sale, the media think, “I’m probably not going to see much out of this, so I’m not going to give them very many runs.”

When the sales report on the following Monday shows only two sales, and we, in turn, report that to our media partners, they tell us outright: “Yeah, that offer was lame. We’re not going to run that offer any more.” Now multiply that scenario by 100 media outlets and you can see how quickly a per-sale program can fail.

Here’s the dynamic in full flow:

  1. We give the per-sale offer to 100 media outlets, paying $100 per sale.
  2. They run the offer sparingly, because they don’t think the call center can close many sales.
  3. We get the sales report on Monday, and it shows that there were only five sales — one each from five different media outlets.
  4. We now have five media outlets that managed to eek out some revenue, while 95 get nothing.
  5. As soon as we report those results, 80 of the outlets cancel the client’s runs, leaving us with 20.
  6. The next week the same thing happens, but there are only three sales.
  7. When we report the results, 17 of the remaining outlets cancel. So we cancel.
  8. We give the client back his or her unused deposit, and everyone walks away a loser: the client spent a bucket-load of money on sales systems, call-center scripting and more; we expended effort trying to get the media to do something they weren’t that thrilled with; and the media participated only half-heartedly.

A Winning Scenario
By contrast, when we do a per-call or per-lead program, the dynamic is nearly 180 degrees different:

  1. We give 100 media outlets a program that pays them $15 per call.
  2. The media decide to give it a lot of runs figuring it’ll be easy to make the phone ring and get paid.
  3. We get our call report the following Monday morning and see that we generated 600 calls.
  4. Of the 100 media outlets, 92 made money — and they’re excited about running the ad even more the next week. We tell the eight that didn’t get any calls that if they give the commercial a few more runs, they’ll make money. They say OK.
  5. We have 100-percent participation for a second week, and this time we generate more than 1,100 calls and make money for every media outlet.
  6. Here’s the kicker: since the client’s call center answered so many calls, the operators got a ton of on-the-job training and closed more sales; their conversion ratio went up by 2 percent, which made the client more sales than expected.
  7. Since the client made more money, it gave us another $1 per call to pay to the media — which allowed us to pay more to our current outlets and attract new, bigger outlets.
  8. The following week we nearly double our numbers and the campaign goes on for more than seven years like that. Everyone makes money!

This is an actual scenario — the kind of thing smart agencies use to build business and, more importantly, clients’ and media partners’ businesses.

If your business is looking to do a performance-based program, don’t be so quick to fall into the per-sale trap. Talk with someone who can guide you through the benefits and pitfalls — so you don’t end up making a business-ending series of mistakes.

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