I received the following question via email …
“… based on your blog today, when is there ever a good enough ROI to justify advertising?”
I understand the confusion. I did a math equation yesterday that showed how a $400 ad buy might not get the desired results for a company expecting to do $60,000 in December sales. You could draw a conclusion between the ratios of $400 and $60,000 and determine that any ad buy over that ratio would be worthless.
That wasn’t the point.
The real point of yesterday’s post was to get you to ask the question, “Is this the best place to spend that $400?” When you ask that question your possible answers include:
- Yes, it is. Go for it.
- No it isn’t. I get a better return elsewhere.
The math was also about spending an extra $400 more so than spending $400 of your already budgeted money.
Here are some Truths about Advertising that might clarify some of the questions.
Marketing and Advertising are necessary expenses of running your business. You have to be doing something to get the word out about you. The key is to find the best, most effective ways to reach your audience and convince them to shop with you. The reality for most small businesses, especially indie retailers, is the budget isn’t big enough to do major media buys like the big brands. It isn’t to say that they aren’t effective for small businesses. If you have the budget, radio and billboard have fairly strong ROIs for most markets. But since most stores don’t have that budget, one of my most requested presentations is Main Street Marketing on a Shoestring Budget. (Follow that link and you’ll learn some ways to market yourself that won’t cost an arm and a leg.)
Marketing and Advertising will not fix your business. Drawing traffic won’t help your business if the model is flawed. It won’t help your business if the math is wrong. It won’t help your business if your service isn’t up to par with expectations. In fact, all advertising can really do is speed up the process of what is bound to happen. If your model is good and your staff consistently meet and beat customer expectations, advertising will help you grow. If your business model is flawed, your selection is lousy, or your service stinks, advertising will only speed up your demise.
In other words, you have to first shore up your financial strategy, your product selection strategy, and your levels of service before you should spend a penny on advertising. Otherwise you might be heading more quickly down the wrong path.
Customer Service is a form of Advertising. Poor customer service will kill your business. Good customer service is actually a neutral. Good customer service is when you meet expectations. You do that and you get a thank you at best. End of transaction. But when you go above and beyond the customer’s expectations your service is a game-changer. It turns your customers into fans and gets them to advertise for you. We call it Word-of-Mouth.
Yes, you can “buy” word-of-mouth. One way you buy it is by spending more time and energy training yourself and your staff better ways to serve your customers. (For other ways to buy Word-of-Mouth, check out this Free eBook Generating Word of Mouth.)
Price and Promotion Advertising become less effective over time. The companies that always seem to be offering sales always seem to be upping their game with those sales. Why? We get easily bored with their promotions.
Ten percent off? Yawn.
No payment for thirty days? Zzzzzzzz.
One window company is currently offering a “Buy one window, get the second window 30% off!” promotion. Why don’t they just say “Fifteen percent off all our windows!”? Because thirty is greater than fifteen and they hope you’re either lazy or bad at math. If you’re running Price and Promotion ads you need to keep upping the ante or people will get bored.
Price and Promotion ads also end their effectiveness when the promotion ends. Same with seasonal ads.
Branding Advertising increases in effectiveness the longer you run the ads. Unlike promotional ads, branding campaigns are built for the long run. They aren’t as flashy out of the gate, but like the steady drip, drip, drip of a river can eventually carve out the Grand Canyon, a long-term branding campaign can help you create a following that lasts for years. You just have to have the patience to let it work.
Branding campaigns also keep working long after the ads have stopped running because the brand message sticks in the mind. I haven’t run a radio ad in over 20 months, but still people tell me about their favorite ads, especially the one about The Men’s Bathroom (that only aired way back in August 2008!) They also know my slogan, “We’re here to make you smile.” They heard it for over ten years.
The methods for advertising will change (anyone remember Yellow Pages?) but these truths will not. Yesterday’s post was speaking directly to Truths #2 and #3.
If you only have a limited amount of money to spend, the first place to spend it is on raising the bar of your Customer Service.
PS Wanna know if you’re in the race to the bottom or the race to the top? If all of your events, promotions, and advertising revolve around some sort of sale or discount, you’re racing to the bottom. As Seth Godin asks, “What if you win the race to the bottom? Worse yet, what if you finish second?” If you spend as much money training your staff as you spend on advertising (and all that advertising is about your brand) and all of your events are about customer engagement and education, you’re in a race to the top.