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Need help with cost/results analysis for product sampling (direct mail/direct in-home, and on-line sampling programs)

I'm / We're looking for some expert advice or information/data resources around product sampling for consumer packaged goods (health, beauty, skin care, fragrance) - we have a new platform for driving in-home trial of samples but need to understand the costs and the metrics (KPI's/ROI) of other programs such as in-store, live events (concerts, trade shows, sports event etc), direct mail / direct in-home, and on-line sampling programs.

Filed under: Marketing Strategy: Pricing Strategy, Pricing Analysis

3 answers • 7 years ago

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Kirk G answered:

These are tough questions. It may be possible to hire third party marketing companies that would be able to do some testing for you to give you the metrics, but most likely the best option would be to do the testing in house. I think that you would need to set up a few of these alternative sampling methods and go out and do some A/B testing and see which have the highest ROI. It would be important to pick some metrics that you could use to measure that which would be uniform for each location so that there is no variance between what is being measured. For example if foot traffic to your booth is a goal then figuring out the best way to measure that or if actual sales is a goal that is much more easy because you can just weigh the cost of the event against the revenue generated at each location. Feel free to contact me for more in depth conversation about this. You can find me at gscsconsulting@gmail.com or at my website www.gscsconsulting.com

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Steven M. Sowma, Ph.D. answered:

As a new member of Clarify, I liked your questions given their challenging nature. Indeed, as indemnified in the previous answer, choosing the proper promotional media is a tough decision. As well pointed out, the most straight forward way to determine which methods work best would be to use some form of A/B testing and estimate the total costs against the subsequent revenue generated by each specific marketing effort. Taking the time to develop detailed mock budgets along with various speculated levels of revenue would give a good feel about potential ROI’s as well as the financial risks associated with each potential success given the upfront costs.

However, simply looking at the overall costs’ verses generated sales for each promotional method/tactic is something that should occur only after you’ve made efforts to extensively understand your target markets. In short, other factors such as the specific message and planned targeting will impact promotional efficiency as much or more than any other factors. Accordingly, you’ll first want to determine the best general markets, and then you’d want to discern the best sub-markets within each general target market based on consumer factors such as consumption levels, profitability, or ease of reach.

Moreover, you’ll want to figure out where consumers are in the consumer decision making process as well as their buying behaviors. The more you understand comparatively more sophisticated variables beyond simple demographics, such as lifestyle factors or psychographics and so on, you’ll also better understand the best branding angle, messaging objectives, unique value and selling points, a specific call to action, etc. Variables such as the time of year and buying contexts can greatly influence channel and media efficiency as well. Similarly, and equally important, given this knowledge, you can begin to determine realistic goals and objectives; is it creating awareness, promoting first-time/repeat consumption, sale goals, site traffic and the like? In isolation, key indicators like ROI don’t convey why something works or how to improve it, nor do they thoughtfully inform goals and objectives other than at the crudest of financial levels.

In sum, gaining all of the a fore-noted knowledge will allow you to not only better discern which promotional methods would inherently be more efficient given your target markets, but the specific channels selections within a given medium where applicable as well (i.e. such as specific website affiliations, search terms, Radio channels, targeted mailing list variables?). Knowledge in total about targeting, behavior and the potentially most efficient media will give you the best chances for success as compared to simply looking at the outright costs of each potential marketing medium in a vacuum.

Not knowing the specific nature of your operation and resources, it’s hard to give tailored feedback, but there are some general concepts that may help in guiding you. For example, samples via direct mail are usually pretty expensive per contact and can be highly wasteful/inefficient without precise targeting. Conversely, if done properly, direct mail can be critical to establishing “awareness” and promoting actual consumption experiences. These same tenets are true with event marketing, but with the benefits of having consumers self-select themselves. The potential pitfall here is how to handle/reduce false or inaccurate consumer information as a part of the promotional interaction; everyone wants something for free, but they may not be willing to part with personal information, obviously reducing the efficiency of this type of campaign effort. Proper targeting and anticipated walk-by traffic thereof as well as concepts such as appropriate brand alignment with a given event will drive promotional efficiency.

As far as online marketing is concerned, building trust is critical. Consider the repeated range of news stories concerning your industry such as bait and switch tactics or involuntary subscription-based free sample scams, fake endorsements and so forth; this problem is even further exacerbated with an unknown brand. Whether it’s real user endorsements, affiliations (i.e. the BBB, or trust/site verification providers), or site design elements and stated standards, enhancing trust can make or break a new brand and website, dramatically impacting efficiency. Also, you didn’t mention it, but consider everything from social media efforts to professional websites (such as LinkedIn) to boost site traffic/marketing efforts and increase perceived credibility and marketing reach; they're low-cost methods to boot. Efforts such as creating informative YouTube videos can go a long way in organically driving site traffic via self-selecting consumers.

The effectiveness of in-home means really depends on the nature of the interactions, which I'm uncertain of in this case. If we’re talking about something comparable to cold calls/door-to-door sales, that would be an uphill battle given consumer resistance and the negative associated baggage. with this sales method However instead, if you’re talking about in-home sales/demonstration parties, that can be effective and gives you a grass roots base that can be expanded on through added benefits such as positive WOM. A big key here will be sufficiently incentivizing hosts and presenters and still making a profit.

Anyway, these are some initial thoughts. Thanks for taking the time to read through my response. I’d of course be happy to discuss these topics further if you’re interested.

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JC Quek, Business Transformer and Shepherd answered:

It can be a big exercise, I had been helping clients in these 20 years. Complicate if we are looking at holistic performance measurement system for critical analysis to match against:
1. business values/ investment returns/ wealth - corporate level
2. budget/ goals/ commitments - business level
3. activities/ productivities/ effectiveness - operational level
... more details
so, I normally recommend people to set KPIs and place them is a business dashboard (with graphs, charts, KPIs) and breakdown for more fine indicators for operational management.

1. To start off, use what you already have so that business can move on.
2. KPIs design first (balance scorecard may apply in some organisation, but few more categories like market condition and technology impact should include for your kind of business).
3. all important indicators associated with each KPI to be arranged and formulated so that the analysis will be more meaningful.
4. check on feasibility in producing these data (as automated as possible)
5. Design the business dashboard + plan IT initiatives for information production.
6. It's all yours now ...

hope this help

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