You’ve seen ’em. Those companies who offer to do battle with the IRS if you owe large income tax debt. The credit counseling companies. The medical discount programs. Those who will refinance your mortgage or your structured settlement?
How can they afford the sheer number of ads they’re running? Is business really that good?
Perhaps. On the other hand, maybe they have a different deal. No, not a better price, but an arrangement under which they don’t pay for advertising that doesn’t deliver directly attributable sales.
The arrangement known as “Per Inquiry,” or “PI.” You may also hear it described as “Cost Per Lead.” In the U.K. it’s called “Cost Per Action.” On the World Wide Web it’s known as “Pay Per Click.”
How Does PI Work?
The advertiser and the broadcaster agree to turn some of the broadcaster’s unsold ad time into PI ads for the advertiser. The advertiser does not pay for the size of the ad, nor for the number of ads run, but only a pre-calculated percentage of the actual sales produced by that ad. No more. No less.
The ads contain toll-free phone numbers unique to each broadcaster, which ring into a call center. Experienced telemarketers convert the calls to sales, and report the number of sales to the advertiser and the station.
This can be a great deal for the advertiser.
Why Doesn’t Everyone Use PI?
Television stations, radio stations, and newspapers are looking to sell their time or space for the highest price the market will bear. Most broadcasters won’t accept PI at all, which eliminates the option for most advertisers.
Those who do consider PI will grudgingly accept it as better than nothing, but only at the last possible minute, after they’ve offered fire sale prices to their regular advertisers, after they’ve offered remnant prices to the standby advertisers, if there’s no other way for the broadcaster to turn the unsold time into cash.
That last possible minute schedule will vary from week to week, which makes it hard to achieve enough repetition to help people to remember your product, and imagine themselves using it. Will even the least popular broadcast outlet run a PI ad with enough frequency to make the phone ring? A new direct response campaign will need two or three times the number of ad exposures required for a long term branding campaign.
Another frequency problem becomes obvious when one realizes that PI requires quick response. If they can’t see a payoff this week, broadcasters won’t continue to run the ads next week.
It All Comes Down to Reduction of Risk.
If one is willing to overlook the cost of lost opportunity, performance based advertising is largely zero risk for the advertiser. For the broadcaster though, there’s a serious probability that the ads will never produce any revenue.