I have a personal official secrets act that won’t let me mention details of weird business experiences for 10 years and I’ve been dying to talk about this one.

We were still in New York and a big ad agency needed help with a DM program for a national stock broker client. The client had already tried, and missed, attracting investors with $500,000 or more in liquid assets. The portfolio management service they were offering was fee- not commission-based. The fee was 1.5% a year.

That means the minimum annual revenue (1.5% of $500,000) was $7,500 per customer. We came up with a multi-panel test: lists of course, 5 letters, 5 different markets, premium/no premium (they’d never offered one), brochure/no brochure, stamp on BRE/indicia on BRE, etc. etc.

Pretty soon, we had enough results to analyze and they were great: 0.8% response with a 40% conversion for an overall 0.32% sign up.

Sound pretty low? Well, we’d mailed about 125,000 pieces. 0.32% of 125,000 is 400. 400 x $7,500 = $3,000,000. The total cost of the mailing, all in, was about $200,000.

ROI was more than good. Right. Off. The. Bat.

But wait. There’s more.

Even assuming 50% lapses a year – 400 to 200 to 100 – the revenue over three years would be $3,000,000 + $1,500,000 + $750,000 = $5,250,000! Minimum!

And this had been a test, a lot of tests all at once. Now we would build on winners and drop losers. We fiddled around analyzing test cell results, extrapolating this and that. If we stroked all the right factors and kept testing, we had a great shot at getting the response up to 3.7% and of converting 50%.

We had discovered a goldmine.
We put together a PowerPoint show and raced over to a scowling panel of clients who had no interest in anything we had to say. They’d been studying up and knew that the normal response rate was 1% to 2%. “You didn’t even get 1%. Thank you for trying.”

And don’t let the door hit you on the ass on the way out.

I burst out laughing on the way back to Manhattan. These people were supposed to be financial advisors.

Fact is, there is no such thing as an across-the-board normal response rate, especially when your target is very wealthy.

After you do the math, plain old-fashioned mail order math, you realize there is a response you must get to make a profit. And, depending on a lot of factors, it could be anything. The main points are dollars out, dollars in, improving every time you mail and, most of all, getting and keeping customers. Percentage is a handy quick tool but essentially irrelevant.

The most valuable thing you get from testing is knowledge and I am grateful to clients for providing the opportunities to learn.