Advertising Payoff
I recently received a question about advertising payoff. How much would you expect to get if you invested a certain amount into adverting? Well...this question doesn't have a short or easy answer...
Here is what you are looking for:
Return on Investment (ROI)
Well, I could write a thesis about ROI, in fact many people do write their thesis about ROI and advertising case studies. But in simple terms. VERY simple terms...by no means is this ALL of it. WARNING...VERY READERS DIGEST VERSION....
Here is what you need to do to track your ROI-
1) ask how people found out about you on your website or on the phone.
2) track your sales according to media outlet
3) track your traffic from those media outlets-easier said than done! Personally I have a guestbook contest where i ask a referred by question
4) figure out your gross sales from those media outlets
5) figure out your net sales from those media outlets
6) figure out your advertising % is. (if you grossed $100 amount and your advertising cost $10, your advertising cost was 10% of your gross)
Sounding pretty hard to track...yep it is. Especially if you throw in there the intangeable aspect of advertising. To give an analogy... with advertising, you have planted a seed. The example I like to give about advertising is the seeds in deserts or forests that require specific requirements for germination (to get the person to purchase). You might plant the seed now, but 1 year (or 2 years) from now they germinate (place their first order). After something happens to trigger them to grow(buy). But by advertising you have spread out a whole bunch of seeds just waiting to germinate (buy) given the right requirement.
How do you make sure those seeds will eventually grow?
1) Continue to advertise to the same magazines. Repetition is key. There are many marketing books written on the psychology of buying. Many books say it takes a person 3-5 times of seeing a marketing message to act on it. Which is the BIG reason we are trying to repeat ads in the same magazines for multiple insertions.
2) Market to them internally via newsletters. After they make it to your site. GRAB THEM. Get their info and put them on your monthly newsletter list. So if you don't already have a newsletter....consider it. Some of my best ROI comes from my monthly newsletter.
3) Continue to advertise within the same demographic. If a certain type of customer reads Bust and Unsigned. (which I think is the case, I'd love to see demographic overlap!) They will be seeing your message twice as often.
Then, make sure they continue to buy from you by:
1) Having a great product
2) innovations and new product introductions
3) great customer service
4) mark your products with your name, every piece of my jewelry has my logo clearly marked. So everytime a customer wears my jewelry they are reminded of Amy Peters' Studio. My little advertising seeds out there!
Why are repeat customers so important? In general (again very basic and simple terms here...) it is said to be 5-10 times more expensive to gain a new customer as it is to sell AGAIN to an exising customer. So repeat customers are what you are looking for. Getting new customers is hard and expensive. Silly (and scary) example...but it makes sense....this is why drug dealers make the first high free...after they hook you, you WILL continue to buy.
A good advertising plan is well thought out and requires patience. MOST people don't buy the first time they see your ad. But, with repetition and the right requirements....they will. So look at advertising as a part of your overall marketing. If you are having to put your advertising on a credit card...think again. Set a % of overall sales that you are willing to put towards advertising. So say you gross $10,000 a year with your business and you are wanting to GROW your business. Then your advertising would be a larger %. If you are happy with your current volume...you could use a smaller %. And how to figure out a % would be a whole other thesis!
As far as case studies go....
1) I have had places where I have advertised and my ROI was actually a negative figure. I paid more for the advertising venue than I made. That tells me that the media outlet wasn't a good fit for me.
2) I have had places I have advertised for $100 and I made $1000 in profit from it.
3) I've had places where I invested $50 and made $8000 in profit from it.
So it can be ALL over the place. You can't just say if I invest X amount I will get X amount in return. BUT...you should set a % of gross sales that you want to spend on advertising and what you EXPECT to gain from it.
But DON'T forget the intangeable aspect of advertising.......planting seeds. The more seeds, the more potential for future sales.
If you are interested in a co-op advertising group visit Indie Finds








