We all make mistakes in business. The important issue is that we learn from them and apply the lessons in both our online and off-line business activities. One of my most costly mistakes happened about twelve years ago in the off-line business world. However, the lessons I learnt are just as applicable online as they are off-line.

Having established a small mail order business part-time, I decided to expand the business using direct mail techniques. I had read all the books and attended a course and it seemed like the best approach to achieve my goals. After approaching various mailing list providers, I decided I had found the perfect list to reach my target market.

Pricing was obtained from the list owner and he was happy to provide me with small quantities of names initially so that I could test his list. These tests were successful enough for me to decide to undertake two large mail campaigns one after the other. I was very confident that I would be receiving countless orders and soon leaving my full-time job.

Disaster struck with the first mailing and the second mailing was too far progressed to stop. The initial sign was a significant increase in the dead letter rate. Then the quantity of orders was less than half what I expected. The second mailing had similar results. I was significantly out of pocket and I had to stay in my full-time job to repay the debts I had created.

Shortly thereafter, I began to read reports that the list owner was being investigated for fraud and other criminal charges. All in all, a sorry state of affairs.

The key lessons I learned from this experience were:

1. Always check the integrity of who you are doing business with – especially if you have not had previous dealings with them.
2. Never assume that limited test results will be duplicated in larger scale tests.
3. Never over-commit to promotional activity – it is better to grow slower than to lose your hard earned money.
4. The stated size and quality of a mailing list should be regarded with caution.
5. Ensure you have sufficient profit margin in your product to be able to survive should your response be very poor – especially in direct marketing activities.

Today, the lessons I learnt are applied to my online business activities in the following ways.

Solo mailings to lists of newsletter subscribers are done with caution. Some list owners will inflate their subscriber numbers to encourage advertisers to use their services. The first thing I do is subscribe to the newsletter to see the quality of content and what others are advertising via solo ads.

Then I run a classified ad in the newsletter to test the responsiveness of the subscribers. This also gives me an indication of whether the stated size of the list is true or not. I have had better response from a list of 20,000 than what I received from a list of over 200,000. Many factors can influence such a result.

While you should receive a far better response from solo ads than classified ads, it still pays to test wherever you can. If a classified ad in the newsletter did not result in responses, I would not advertise using the solo ads. However, I might test a few different classified ads to see if the initial results were correct before moving on to other possibilities.

It is worthwhile to “do the numbers” before spending on advertising. While many marketing experts talk about the ‘lifetime value of a customer’ concept, those whose business activities center on promoting the products of affiliate programs should regard this with caution. Instead, determine how many must be sold so that the commission you receive will cover the cost of your advertising.

The higher the percentage response to your offer you need to cover your advertising cost, the greater the chance you will make a loss. Do not rely on industry statistics or averages to make your decisions. Keep careful records of your activities so you know what works, what is to be avoided and what to expect from future promotional activities.

Finally, exercise caution when considering safe-lists and any type of email address lists that can be purchased. My experience is that there are NO truly safe-lists available other than having your own opt-in list. Any form of bulk email to people who have not agreed to receive your message will damage your business reputation and your prospects of making a decent living on the Internet.

By Kevin Sinclair, CPA, of Personal & Business Success Resources