Six Things To Think About Before You Advertise
Are you getting the biggest bang for your advertising buck? Good advertising starts with good information. Here are some suggestions to help your advertising and improve your bottom line.
1. Customers Forget.
Did you happen to see or hear an ad today for Coke? Pepsi? McDonald's? Burger King? Wendy's? I'm guessing you probably did, or at least someone in your family did. The reason for this question is why? Isn't the hard work done? These companies have certainly established their brand names in the minds of their customers.
In the case of Coke it's arguably the most well known brand name in the world. So why not cut back on the advertising a little? Put some of that ad money to the bottom line or make the employees happy with an extra year end bonus cash.
The reason is very simple— We the customer forget without constant reminders. Each day a customer doesn't hear about your company is one more day they start hearing about your competitor and forgetting about you.
2. Name Recognition.
When a customer thinks of a product whom do you want them to think of? Target? Walmart? Or you? It's pretty hard for them to immediately think of you if they don't see or hear your name anywhere. Some brand names like Facebook are built by word-of-mouth. Others, like Amazon took millions of advertising dollars to build.
3. People Don’t Buy Immediately
I often use a laptop when I travel and the time is coming for a new one. So I'll be shopping for that. Am I going out to buy it tomorrow? Probably not. I'll start watching the ads studying the available brands and assembling the features I need. I may not make the purchase for several months but when I do I will probably have a dealer in mind and they will get a shot at my business.
4. Customers Move
In Bozeman it's estimated that the population of the town completely turns over every seven years. Part of the turnover is because we are a college town. Studies show that 25% of your customers will move each year. A tip I have given for years is to have a yearly "Grand Opening" to attract that new 25% percent who move to your selling area each year.
5. We’re Always Shopping
Did you notice the tire ads in the paper today? If you need tires you did. If not you probably didn't give them a second glance. Not everyone is your customer every day. But each and every day there is a portion of the population that is looking for your product or service. And you need to be there when they are ready to start looking for your product.
6. How Much To Spend And Where?
The next question is how much to spend and where? One of the most asked questions I get at seminars is, "How much do I spend on advertising?" A loose rule of thumb is 2-5% of gross sales. That's easy to compute but the problem is that when sales are down advertising has to come down too and that's not good.
Consider A Better Way
Instead, consider this. The 80-20 Rule. We all know this rule right? Eighty percent of your business will come from 20% of your customers. So why spend money advertising to the 80% that don't produce anything? Let's say for the sake of easy math that you have 1,000 customers and spend a $1,000 to reach them. Each dollar spent on advertising, in your media of choice, brings in an average of $1.10. So you make a 10% return on your advertising investment.
Now let's say that after examining your customers and truly defining them more closely you find that half of them are bringing in $8.00 in profit for each dollar you spend. What if you advertised to just 500 of the 1,000 customers who are spending more at a price of $2.00 each and not advertise to the remaining five hundred? You are still spending the very same $1,000 in advertising but you are getting a return on investment of 400% because you are reaching the right target market, in the right media, for the same dollars. Which do you like better?
Some Final Thoughts
As you can see, it pays to know your customer, where they are and how to reach them. The more information you can give your ad rep about your customer the more effective they will be in placing your advertising in the right place for the biggest return on your advertising investment. After all, they are looking for repeat business just like you are.
You don't have to match the big guys dollar for dollar in your advertising. It's not about getting more customers — it's all about getting the right customers. Be where they are as often as your budget allows.
For some businesses that might be newspaper, TV, radio or direct mail. For others it might be all or one or two of the above. Use radio to direct attention to your big ad in the newspaper for example. And the best part… these higher-end customers talk to each other and make strong recommendations to their friends. Define your customer and reduce the cost of your advertising, not by spending less, but by producing more affluent customers for the same dollars. That makes your advertising an income producing investment, not an expense.