Per Inquiry and Guaranteed Payout Advertising

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by Randall P. Whatley

Per Inquiry advertising is commonly referred to as "PI." Broadcast stations run PI ads for a fee based on the number of calls that are generated through a dedicated toll-free number that is exclusive to each station or network. An independent telemarketing company tracks the calls and prepares reports to document the call activity for billing and shipping purposes.

Per Inquiry is a desirable advertising alternative for undercapitalized advertisers and those who want to test an ad before risking capital on an expanded advertising schedule.

However, PI campaigns are not without risk. Advertisers can pay up to 50% of their sales revenue to the stations/networks, time brokers, and independent telemarketing firms who are involved in the PI advertising process.

Once PI ads prove their effectiveness, it is usually more cost-efficient to convert the broadcast media buying to a traditional paid direct response schedule.

Most stations and networks do not accept PI advertising, so this is not a widely available option for most direct marketers.

Another similar advertising concept is "guaranteed payout." On guaranteed payout schedules, advertisers pay cash for a direct response media schedule but receive a guaranteed response rate (their breakeven figure) from the media.

Are you a direct marketer who would like to consider per inquiry or guaranteed payout advertising to sell your product or service? Does your broadcast station/network or media property want to consider PI or guaranteed payout advertising as another discount system that you can use to liquidate unsold inventory?

E-mail diana@cypressmedia.net to discuss the PI and guaranteed payout advertising options for your product, service, or broadcast property.

Frequently asked questions about per inquiry, guaranteed payout, and direct response advertising

Q: What is required of an advertiser who wants to do a per inquiry advertising campaign with your company, and what are the costs?

A: To begin a per inquiry campaign through our company, advertisers need the following:

Creative that meets media guidelines: We can use your existing creative if it meets guidelines, or we can produce the creative for you. If we produce the creative for you, the costs begin at US$2,000 for a basic radio spot and US$5,000 for a basic television spot. Both of those are on the low range of production costs.

Independent call center: We work with several call centers that know how to handle per inquiry campaigns and can refer them to you if you work with us. Call center set-up fees range from US$1,500 to US$5,000+ and also include monthly charges of US$400+. Toll-free number costs vary. You will need at least 20 numbers to begin. We will not handle any per inquiry ads with an in-house call center.

Dubs (tapes): We work with professional dub houses and would be glad to refer you to those we work with if we do business together once your creative is finished and the call center is in place.

Deposits: We require per inquiry advertisers to maintain a deposit with our company against upcoming projected charges to the media. The minimum deposit is US$3,000. This is required with NO exception.

Is PI and guaranteed payout a good way to test a product when you have a very small ad budget?

Per inquiry advertising is a viable option for those without a large ad budget, but you will still need money to launch a PI campaign. First, it is usually necessary to pay for a test of a new ad in order to prove its viability to stations/networks so they will accept it as a PI offer. It is very difficult to find a station/network to run a totally untested PI ad. There are also startup costs involved with a PI campaign like production costs, telemarketing set-up costs, and other administrative costs that require capital.

If you have a product/service that is tested, and you can provide documented results of the advertising test, it is easier for our company to convince stations/networks to take a chance on your ad. Stations/networks that accept PI would rather do business with an advertiser and product/service with a documented track record.

PI advertising should not be viewed as an option for those without any budget whatsoever.

It is easier to test a product with a guaranteed payout schedule rather than with a PI schedule, but the same principles mentioned for PI also applies to guaranteed payout advertising. You will still need capital to launch a guaranteed payout campaign. Additionally, with a guaranteed payout campaign, you must pay for the guaranteed media schedule in advance.

Is it a good idea to test a product on a local TV station or cable system that can be purchased cheaply to see if it will work before we roll out our spot nationally?

Testing a product on a single local TV station or cable system is not a good way to determine its financial viability for a wider roll-out. We have found it best to test DR products and services in several local markets or on national cable networks and let the marketplace indicate which regions or demographic groups hold the most promise. For local market tests, you need to run enough media to provide statistically valid measurements. If you happen to test in the wrong local market, or on the wrong station, or with the wrong frequency, you may have a "winner," and not know it if your test is too narrow.

What profit margin is necessary for a successful DR TV or radio campaign?

A 6 to 1 profit margin is necessary, at a minimum. Ideally, you should have greater than a 6 to 1 profit margin in your product or service for your campaign to be financially successful.

Granted, these margins are difficult to achieve, but it is better that you face this financial reality rather than lose your money on a campaign that has no mathematical chance of succeeding.

Can a DR campaign open the door to other marketing opportunities?

Many DR campaigns today are considered highly successful even if they are never profitable on their own if they open other sales channels for a product. Often the product/service awareness and brand building that occurs with a broadcast DR advertising campaign opens the doors to selling a product or service into wholesale or retail channels. It is not unusual to use response statistics from a DR campaign to show a buyer for a chain store or catalog that your product appeals to their target audience.

Can we run our ads on just PI to start before spending cash on a paid DR campaign?

You can launch a campaign on a straight PI basis if you can obtain an adequate amount of media time to do so; however, it is difficult. A common challenge is to convince enough stations/networks to take a chance on an untested spot to achieve the critical mass of exposure that you need to be successful.

Is per inquiry and guaranteed payout advertising only available for TV and radio?

Per inquiry and guaranteed payout advertising is most common to TV and radio, but it can be used in any advertising medium, including newspaper, magazine, direct mail, e-mail, outdoor, and Internet ads.

What are the biggest hurdles for an advertiser interested in a broadcast PI campaign?

  • Having the necessary profit margins in a product or service to allow financial success
  • Convincing stations/networks to test your product or service instead of continuing to run ads for known money-makers
  • Finding enough stations/networks where your product or service is profitable for both you and the media to sustain a continuous marketing campaign

What if we already have a commercial made? Can your company still help us get our spot on the air?

We can work with those who already have a spot produced. Ultimately, the stations or networks decide if they will accept the commercials, which in the case of direct response, per inquiry, or guaranteed payout ads, must meet both the production value requirements, station/network policy rules, and also appeal to the sales personnel who must accept the commercial for airing.

If you have a commercial that has already been produced but is untested with the media, it will probably be necessary to test your spot. As stated earlier, PI is not usually available for advertising tests.

What if we have a product but do not have a commercial made to sell it?  Can your company help us get a commercial made?

Cypress Media Group, Inc. has over 30 years experience producing all forms of advertising commercials, including direct response TV and radio ads. Our company can either produce your ads or refer you to someone who can produce a spot.

What kinds of products or services is your company looking for to run as per inquiry advertising offers?

Cypress Media Group likes products and services that have a wide appeal. It has also been our experience that products/services that are popular nationally rather than regionally are the most successful with PI advertising. We strongly favor products and services that can be advertised and sold in both the US and Canada.

About the Author

Randall P. Whatley

Randall P. Whatley is president of Cypress Media Group, an advertising, public relations, and training firm. Cypress Media Group provides training primarily related to business and technical writing, presentation skills, and media relations. He can be reached by e-mail at randy@cypressmedia.net.