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Join Our Research Team at DMA 2014
Jan 26, 2004
Case Study

Online CPA Ads Sell More Books Than DRTV for Matthew Lesko

SUMMARY: Over the past 20 years Matthew Lesko's become infamous on TV as that guy in the crazy question-mark suit yelling excitedly about all the free money the US government is giving away to help you start a business, pay for college, etc. All you have to do is buy his books to learn more.

He's tested other marketing channels -- especially postal DM -- without significant success … until now. Turns out online CPA advertising is the killer app. Find how what works, and how to copy Lesko's success:
"Matthew's built a publishing empire around the question mark suit," says Information USA (aka Lesko.com) VP Marketing Kim McCoy.

"He wears it everywhere, if I meet him at Starbucks, if he goes to his kids' soccer games…" And of course he wears it in dozens of DRTV (direct response television) ads running year 'round on American late night and cable TV.

The premise is simple -- Lesko's research team compiles books on all the US government grants available for a particular consumer niche, such as people who want money for college. Then they run TV ads featuring Lesko in his suit joyously yelling about 'Free Money!', and the orders come rolling in.

It's worked so well that the company’s been profitable since 1983, publishing more than 150 different titles.

Lesko's marketing team had one frustration though -- they couldn’t make any medium besides TV really pay off. They've tested postal mail, and broke even at best. Telemarketing worked, with an average 2.5% conversion rate, but only to current customer lists.

Most indicators showed the Web wouldn't work either. As of early 2002, fewer than 5% of Lesko's TV-generated sales arrived online vs inbound phone. Plus, Lesko's first online customer acquisition campaigns, run on a CPM basis, did very badly. "We bombed," says McCoy.

CAMPAIGN

Determined to make the Web work, McCoy decided to test the media buying tactic that worked best for her with TV -- CPA (paying for ads based on books sold, versus CPM, a flat payment per thousand for the media itself.)

It's not easy to sell the best media outlets on this idea - but McCoy figured if she had managed to persuade networks such as TBS to roll out on CPA, she could convince the online world to test it too. She used a seven-part attack plan:

Step #1. Send potential partners heaps of information

You can't just ask for CPA deals and expect top publishers (defined as branded organizations with opt-in lists and/or sites) to agree. "Most said, 'Heck no, I'm not going to do it'," explains McCoy. "They all wanted to sell us names."

She started by researching the universe of potential partners and sending each a series of postal mailings -- including videos of Lesko's TV commercials, sample books, the formal press kit, even fortune cookies containing the fortune "Let's make money, call Kim McCoy!"

The goal was to not only raise prospective partner's awareness of Lesko, but also to fill them with conviction that these were really great products with great people behind them.

Step #2. Get on a plane

"Most people make the mistake of doing everything online," notes McCoy. "Some partners we called on the phone, but a lot of times I would get on a plane and make a personal appearance. If I've met with a person directly, it's a lot harder for them to look me in the face and say 'No I don't want to work with you.'

"You become a real person who showed up interested in their company, and you want to find out how to make money together."

Two keys to making the meeting work -- you must be genuinely interested in learning more about the prospective partner's company, rather than just pitching your deal. Plus, you must be willing to be flexible. It's about working together, not cookie-cutter offers.

Step #3. Pick partnerships carefully

One of the best ways to avoid doing business with spammers and con artists who unfortunately still dominate much of the CPA email and pop-up scene is to listen to the types of questions potential partners ask.

"If they are too eager about 'When will you get us money? or they say things like 'I need money wired in 24 hours', it's a red flag." While everyone cares about money, the best prospects should also be asking lots of questions about marketing creative and the products themselves.

Companies with strong name-brands -- such as Coolsavings.com -- are good prospects because they care as much about building and maintaining their brand as they do yours. They're as concerned about their list health and longevity as they are with today's cash flow.

Step #4. Be ready to offer cash up front, and pay promptly

To get important deals started, McCoy learned she must be willing to put cash up front as a guarantee. The amount generally equaled what an effective CPM would be for a one-time use of the publisher's media. McCoy simply asked that the publisher run the campaign until they'd made enough sales to cover the advance, or they refund it if they halted the campaign for any reason.

The higher the initial payout, the less willing McCoy was to offer a refund -- if you're asking for $10k up front, you must guarantee that you'll sell enough books to cover that amount from your commissions.

Lesko's tech staff set up an extranet where all publisher partners could check their sales in real time whenever they wanted to. Plus the accounting department assigned one named staffer to be in charge of all online publisher accounts.

Accounting was as a flexible as possible -- partners were allowed to dictate whether they wanted to be paid weekly, fortnightly, or monthly. And, accounting understood that cutting checks on time was of primary importance. "Word gets around if you don’t pay on time. In CPA your reputation is everything."

Step #5. Truly partner on creative

McCoy had learned that certain elements tended to work best in mailings to her house list -- most especially a photo of Lesko wearing a huge grin and the question mark suit.

"What makes it work is the entertainment factor -- what's going to briefly catch that person's attention. The word 'Free' or 'Money for you' works. They think, 'How is this going to help me?' They have two seconds to look at this and click."

However, she was determined to keep an open mind and let partners dictate the types of creative they wanted. "They know their people, we have no idea. Usually we give them carte blanche, after we look at it first to make sure nothing is falsely selling the book as something it's not."

McCoy also kept partners informed about the ever-changing email filter world, especially what subject lines would work best with content filters.

Step #6. Keep in continual communication

If someone says 'No' the first time, "keep asking respectfully," says McCoy. Don't just give up on a prospective partner.

Once they said yes, McCoy tried to schedule weekly conference calls with key top partners and routine catch-up calls with folks on the B list. The goal was to stay top-of-mind with them.

"I can't say enough about how important it is to keep the publisher involved in what you're doing. Just call to say 'hello, how are you doing?' A lot have said, 'I completely forgot about you, let's do a campaign again."

Step #7. Tweak your landing pages for maximum results

Partners are only going to be happy if their clicks convert into sales, so McCoy invested in a series of a/b split landing page tests to see what would work the best. One key test -- could she raise the average order by upselling to two books instead of just one?



RESULTS

"The disparity of CPM vs CPA campaign results was huge, even to some of the same companies, and I have no idea why," says McCoy. "Perhaps they could be thinking, 'These idiots are giving a $19 payout per book, we'll really make it work.'"

In fact, despite a slow beginning when McCoy first started approaching potential CPA partners in early 2002, over the past few months "the volume we're selling online is far surpassing the dollars amount we're selling on TV."

She's careful to note that she suspects Lesko's heavy TV presence definitely contributes to online success because the brand -- and crazy suit -- are so instantly familiar to many Americans. Plus, she adds, "Nothing on the Internet seems to last, I could be knocking on publishers' doors a year from now saying, 'Let's go back to the CPM model.'"

More stats:

- 20% of Lesko's total 2003 company revenues were driven by online CPA deals, compared to virtually nothing two years ago.
McCoy expects that number to continue rising, although, "If you had told me that a year ago, I wouldn't have believed it."

- Conversion rates (percent of clicks who buy from the landing page) on CPA deals range dramatically depending on list quality. The highest convert at 15%, but the average is 4-5%.

- Landing pages that offer a choice of two books or attempted to upsell to another book, invariably did worse than landing pages with one clear offer. McCoy is now testing the upsell only after the initial sale has already been completed.

- Over the past two years, Lesko's TV campaign responses have shifted from less than 5% ordering online, to an average of 25% online orders now with the remainder calling a toll-free number.

Final note: What about Can-Spam? McCoy's answer brings a fresh note of reality to the fears many emailers have been battling recently.

"No matter how hard you try, there is bound to be some unintentional violation in your marketing. So, you have to be respectful of the problems that come your way and quickly respond to complaints, and find ways to make it right at that moment. Otherwise you live in fear and your marketing suffers."

McCoy's customer service team are trained to respond quickly with personal apologies to any consumer spam complaints. "We email that we are SO sorry." Partners who generate repeated complaints are dropped.

The good news is, by being careful about partnerships, over the past year the Company has received only about two dozen spam complaints. McCoy notes that although many of these were extremely "nasty" notes, all except one were appeased by a sincere personal apology. "People in this country just really want to be heard."

Useful Links related to this article:

How to Succeed in CPA Advertising and Convert 30% of Samplers to Buyers - the TrimLife Story (there is a fee for this Case Study):
http://library.marketingsherpa.com/barrier.cfm?ContentI
=2208


Lesko's home page
http://www.lesko.com

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