What is PI (Per Inquiry) and PO (Per Order) Advertising?

Most people are familiar with buying an ad in a newspaper or magazine. In a nutshell you get a rate card from the publication; the rate card contains the ad sizes you can buy and how much they cost. You then decide how much you can afford to spend, create an ad, send it in to the publication with your payment, and hope the ad does the job you wanted it to do.

If the ad does not work, your investment does not pay off and you lose money. If the ad does work, then you make money on your advertising investment.

With a PI or PO advertising deal you don’t pay for the advertisement up front, you pay only for the results from the ad.

With a PI deal you would pay for each call or ‘lead’ that would come in from an ad. As an example, let’s say you sell farm tractors; there is no way to sell such an expensive item right from an ad, so your ad would be part of a two-step sales process and geared to make a farmer call you for more information about your tractors. You would pay for each call that came in from the ad you ran under the PI deal.

With a PO deal you would pay for each ‘sale’ that comes from an ad. As an example, let’s say you sell a CD set of Country Western music. This is something that can be explained and sold directly from the ad. Your ad gives all the information needed for a consumer to make a purchasing decision, and they call and order the product. You pay for each of these orders that come in from the ad.

As you can see the publication takes on most of the financial risk for the success or failure of an advertisement. If the ad works, everybody makes money, if the ad does not work, the publication does not collect much.

In each of these examples the amount you pay is predetermined before the ad is run. You sign an agreement, provide the advertisement in the size that has been accepted by the publication, and pay for the results.

Not long ago PI and PO advertising was a very rare thing. But do to all the people spending money on the web in hopes of capturing customers, many publications have seen their advertising revenue decline, in turn making some of them consider working with PI/PO deals.

How PI (Per Inquiry) and PO (Per Order) Advertising Works, and Making it Work for You.

As a marketer you can see that this type of advertising deal can be very desirable thing when you can get it.

The first thing you have to understand is that every square inch in a publication is a valuable piece of real-estate that costs the publication money. So they have a right to be picky on what deals they will accept, and not everyone with something to sell will be able to strike a deal.

To make this type of deal with the publication the amount you can pay for each lead or sale must be appealing to the publication, so you need to know how much you can afford to pay for a lead or a sale. You don’t want to pay too much, but at the same time you don’t want offer so little that it’s an unreasonable risk for the publication. You want to have a win-win situation.

The more you know about your current advertising costs, conversion rates, cost per lead, long term customer value, etc., the easier it is to determine a reasonable amount you can pay. This is especially important when working with a PI (per inquiry) deal. You should know what your current cost per lead is, what your average conversion rate is, and ideally the average long term value of a new customer.

If you are running a PO (per order) advertisement selling a product direct from the ad, you don’t need to be quite so detailed in your formula, but you do need to know what your sales costs are so you know what you have to work with for paying the publication. These sales costs would include, wholesale cost of item, call center costs, fulfillment costs, delivery costs, royalties, premiums, etc., and what is left is what you have to work with to pay the publication.

NOTE: If you are new to direct marketing, keep in mind that many companies break-even or lose money when acquiring a new customer and make money on future sales. This is where knowing the average long term value of a customer comes in handy.

Here’s what you will need.

For PO and PI advertising deals to work, responses need to be track-able. You will need a call center to take calls; this can be in-house or outsourced. The agent that handles your deal with a publication will assign a toll free number to your business phone and this number will appear in your advertisements. This keeps track of all calls that come from your ad so the publication knows what they are owed. Sometimes you can make a web ordering option as well using a unique URL or landing page in the ad.

Other things that will be needed to make a PI/PO deal work is: your product or service will need to be able to be sold nationally, it will need an appealing payout to publications, you will be asked to provide a small security deposit for the toll free telephone costs, and you will need to have professional direct response advertisements available. Finally, you will need to be credit worthy.

Other notes on PI/PO deals:

- The publications dictate (by most part) when your ads will run.
- Lead times for magazines is about 3 months, so your ads will not run immediately.
- Make sure you have staff to handle leads in a timely manner. You don’t want to be paying for leads from a successful ad and not be able to follow up in a timely manner. This wastes money and makes you look bad to potential clients.
- If you are having people call for a free info package, make sure you send these mailings out right away. Don’t sit on the inquiries.

If you have a product or service you think will work in a PI or PO deal, contact John Schulte schulte@nmoa.org at the National Mail Order Association, www.nmoa.org with what you have.