The Business of Per Inquiry and Per Order
by John Schulte
What is PI (Per Inquiry) and PO (Per Order)
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
With a PI or PO advertising deal you donít 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 Ďleadí that would come in from
an ad. As an example, letís 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 Ďsaleí that comes from an ad. As an
example, letís 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 donít want to pay
too much, but at the same time you donít want offer so little that itís 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 donít 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.
Hereís 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
- Make sure you have staff to handle leads in a timely manner. You donít
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
- If you are having people call for a free info package, make sure you send
these mailings out right away. Donít sit on the inquiries.
If you have a product or service you think will work in a PI or PO deal,
contact John Schulte
email@example.com at the National Mail Order Association,
www.nmoa.org with what you