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The True Value of Constant Testing

The True Value of Constant Testing

Despite everyone in direct marketing playing lip service to the value of testing, I am often amazed at how little people are actually testing.

Sure it costs some money but if you have a hit rate of 1 in 3 why do 3 tests a year when you could do 12 or more?

Take a look at two companies who find success in 1 in 3 tests that give them a 5% lift in turnover every time they hit a winner.
 
Both start with:

Turnover - £1,000,000
Cost of Sales – £200,000
Marketing Cost - £200,000
Overhead - £400,000
Net Profit - £200,000
 
Company A 3 tests a year would look like this after 10 years (ignoring inflation)

Turnover - £1,628,000
Cost of Sales – £326,000
Marketing Cost - £200,000
Overhead - £612,000
Net Profit - £490,000
 
Company B 12 tests a year would look like this after 10 years (ignoring inflation)
Turnover - £6,192,000
Cost of Sales – £1,238,000
Marketing Cost - £200,000
Overhead - £2,477,000
Net Profit - £2,277,000
 
A very simple example, I know, but just by increasing the tests by a factor of 4 the profits are quadrupled.

I hope this will encourage you to test more. And remember it’s not always new client acquisition you need to be testing. It’s also client retention and up-sell strategies too. Add to that product/service tweaks, cost reduction, price testing and customer service changes and you should have plenty to test.

Still stuck on what to do? We’re always keen to help, call the office and book a call with me. I’ll call you back and give you some more ideas.

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