Oscar Wilde defined a cynic as “a man knows the price of
everything and the value of nothing.”
His description applies to many Marketers as well. I often hear Brand
Managers complain about the COST of sampling programs. “Sampling is expensive”,
seems to be common knowledge.
It is not surprising when we can “seemingly” buy media at
vastly cheaper rates but we need to challenge ourselves to buy “outcomes” not
“output”. An “outcome” is clearly linked
to our marketing goals. “Outcomes” have a clear path to how we make money.
“Output” is often the way a vendor wants to sell it to us. A TV spot in Modern Family is “output”.
Someone being aware of your brand and its benefits is an “outcome” (Brand
Awareness).
A typical launch or relaunch brand scenario wants to “drive
awareness leading to trial”. I think it is instructive look at a few of the
tactical options in terms of the “outcome”, in this case, “trial achieved”. To
do that, we have to make a few wild assumptions, but it is still worth trying.
TV COMPARISON
A relatively “efficient” option to achieve trial is to buy a
primetime TV spot. It costs roughly $30 per thousand. We never see TV production included in the
cost but I am going to guess at an incremental 15%: $34 per thousand. Now, that
is the “opportunity to see”. There is no
guarantee that those thousand are actually paying attention to your ad, in fact
there is a good chance many are not. So,
I am going to add on “effective frequency”.
How many times do you need to show your ad before it sinks in? Based on
some recent research I am going to say five[i].
That takes into account: the creative, how people watch TV and overstatement in
the audience by the provider. That would bring your cost to $170 for a thousand
people who are aware. How many of those
Adults 18-54 are going to go and buy your brand? How about a generous estimate
of 1%? That would yield 10 Triers at $17 per person. Put another way, you would need 17%
conversion (awareness to trial) to get your cost down to $1 per Trier.
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Primetime CPM (Ontario)
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$30
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...add in creative of 15%
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$34
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Effective frequency 5x
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$170/thousand aware
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Conversion to trial @1%...
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$17/Trier
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...or conversion required for $1/Trier cost
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17%
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ONLINE COMPARISON
Another comparative is Pay Per Click online. To buy the keywords
“Best Shampoo” on Google adwords costs roughly $2.00 per click. What that buys
you is someone moving from the search page to your landing page. Your conversion would be a fraction of
that. When I looked, the brand buying
“best shampoo” was selling $25 bottles of organic super-premium shampoo. You
need a price and margins like that to pay $2 per click.
SAMPLING VALUE
There are a wide variety of sampling methods and their
associated costs. Excluding cost of goods, door-to-door distribution costs roughly
$0.70 per, whereas mailing to a database with a dedicated package could cost
$2.50 per. A good midpoint for comparison is online request-based sampling in a
co-op mailer. It costs roughly $1 per person to put a sample directly in the
hands of someone in your target group.
Of course, some programs opt for field marketing which
almost always blends sampling, communication and the value of live contact
which generally makes a considerable impression. That impression should impact
your conversion rates. It is usually
easy to calculate a cost per “touch” in field marketing but you have to
consider the value of the sample plus the communication plus the “engagement
level”.
In any of these sampling tactics, if your product performs
well, it’s a short walk to some very good conversion-to-purchase rates. At
costs of 70 cents to a few dollars, depending on your margins, they can yield a
favourable ROI.
It may just be rough assumptions, but it is easy to see that
comparing promotional tactics like sampling with mass media on a cost per
thousand (CPM) is not very insightful.
If the value is in achieving Trial then the tactics that appear
expensive at first glance may easily be the best value when the analysis is
done.
[i]
See Igor Makienko’s, “Effective frequency estimates in local media planning
practice” in the Journal of Targeting, Measurement and Analysis for Marketing
(2012), vol 20
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