I have heard the same suggestion from many small business owners: 'I tried that, it doesn't work for my business'. The practice of advertising is a mystery to most small business owners. For them, it's hard enough trying to perfect the process of dealing with their customers; acquiring new customers is an entirely different challenge. Most business owners are not fully aware of the difference between advertising and marketing.
Let's take some of the mystery out of the minutes.
One of the most misunderstood aspects of the process is the distinctions between: marketing, advertising and selling:
Marketing: is the total collection of tools used to build your business. Marketing has one overall goal - to lead customers through the process of noticing your business, buying from your business, enjoying your business's products or services successfully enough to tell their friends and family, and returning for more as appropriate.
Some of the marketing tools include:
1. Advertisement
2. Public Relations
3. Direct mail
4. Personal sales
5. Internet
6. Promotional activities in printed form
7. Education
Advertising: Its job is to get you noticed for the specific things you do well. Advertising promotes the distinctive features, benefits and advantages of your offering to a broad market. The goal of advertising is to bring in valuable leads to make the sales process happen.
I have sold advertising in the Yellow Pages to business owners who originally believed that Yellow Pages ads brought in a lot of callers who were just shopping. They didn't want to waste time with "eyeballs".
If someone takes the time to make a phone call or send you an email about your product or service, why should you treat them with contempt? These people are looking for the right answers to their problems. More importantly, each of them knows about 250 other people personally. Every opportunity for a connection or a sale should be treated as equally important.
Sales: Once the advertisement has attracted the potential buyer, the sales process takes over. This is done either by face-to-face sales or by using point-of-purchase materials (e.g., a storefront, a video demonstration, etc.). The sale should be brought into play after it is determined that the prospect is a good fit for the product or service.
The mystery and confusion begin when a business owner has to decide which tools to use in the customer acquisition process. Who should you advertise to? Where should you advertise and why? How should you advertise? What kind of return should I expect to get from my advertising program? When do I use other marketing tools to enhance my advertising program? What should be the ratio between advertising and selling?
Who should you advertise to? Let's get this straight. You should never put a single dollar into advertising until you know who you will ultimately sell your product or service to. You shouldn't even go into business if you have no idea who you want to do business with.
Marketing is used to identify your ideal market. Sure, you may not have 100% of your ideal market, but if you know who is likely to benefit from what you have to sell or serve, you can get more of them.
For example, if you are a chiropractor in a large city, your ideal market may be the late 40s to early 60s couple who are health conscious and active. They seek to stay fit and are open to CAM (Complementary and Alternative Medicine.). They may have an unfavourable view of the current healthcare system and wish to take a proactive approach to health maintenance. So let's say that after you identify your ideal market, you identify 15,000 of them in your market area. So now you have 15,000 potential prospects that you need to reach out to on a regular basis.
Where should you advertise and why? If you wanted to find a 34-year-old Buddhist from Cambodia, where would you look to find one? The question may seem a bit silly, but you know you wouldn't start by going to every mosque in the area.
Sometimes you really do have to rule out all the unlikely places to look until you get to the most likely ones.
You should, of course, choose the targets of your advertising programs based on how many of your potential customers are likely to see your message. If your local gym in your area has a demographic of over 3,000 members aged 45 to 65, you may want to advertise in their monthly newsletter. If they don't have a newsletter, you may want to have them sponsor one.
Remember "The best place to go fishing is where the fish are biting". Take the time to learn about your target audience and their buying habits.
How do you advertise? Imagine your very expensive Mercedes breaks down and the mechanic says it's the fuel pump. He needs to change it, so he takes a blowtorch and cuts your hood off, opens the engine block and then replaces the fuel pump. Once he's done, he'll weld all the parts and return your vehicle to you.
Would you give this guy the OK to work on your vehicle? Of course not. Once you determine what you need to do, you need to be careful about how you execute the solution.
Going back to our chiropractor, if he finds that the best way to reach the 15,000 couples aged 45 to 65 in his area is through the Yellow Pages; then he has to decide whether it is cost-effective, timely and competitive.
The goal now is to find the best way to reach all or most of these 15,000 ideal candidates.
Will it have comparable results from repeated exposure in the gym newsletter, where it will have a captive audience and no competition?
There is no reason not to use both the Yellow Pages and the gym newsletter if they are cost effective. The goal of advertising is to obtain valuable leads to carry out the sales process.
What kind of performance should I expect from my advertising program? The answer I give my clients to this question is usually shocking: the answer is a big zero (0). How is it possible for a business owner to spend so much money on advertising and expect no return?
This is the basis of the confusion between marketing, advertising and selling. The value of advertising in the marketing mix lies in generating initiatives. When used properly as such, its effectiveness is measured by how many links are generated.
This is why it is so important to distinguish between the different marketing tools. If our chiropractor had 20 leads coming in every day from his advertising campaign and the front desk had a lousy conversion rate, I bet he would blame his advertising for not bringing in more customers.
Measure the response rate when quantifying the results of advertising. Measure the number of inbound leads and adjust the ad copy to test for better results.
When do I use the other marketing tools to enhance my advertising program? Advertising should never be used alone. Remember that the average adult has to deal with over 2700 messages a day from all types of media.
Marketing should be seen as a combined effort to reach the minds and hearts of your target market. You should use at least five of the seven marketing tools each week. Depending on the age of your business and your business plan, you should budget 10 to 15% of your estimated annual revenue for marketing. If you just opened your doors in the last five years, bump that up to 20%. There's a reason Pepsi and Coke spend over 400 million a year each to satisfy their shareholders.
What should be the ratio between advertising and sales? Consider that the relationship between advertising and sales is complementary. If your advertising is generating a large number of leads, adjust your sales strategy to convert at least 30% of your leads while capturing all of your leads for systematic follow-up.
Please note that at any time, your 3% purchase is ready to commit to your product or service. The goal is first to convert your 3% of leads. Then work on selling to those who are hesitant. Whether through personal sales, direct marketing, or point of purchase sales, your ratio will be determined by several factors, the offer, the product or service and the immediate need of the prospects, and of course price.
Don't get too analytical about the proportions. The most important thing to remember is that marketing is an inexact science. You should keep testing and striving for better results as the market changes.
Determine the value of a new customer and the lifetime value of your customers. Once you do this, make sure that your marketing efforts are bringing in enough new business to cover the cost of acquiring new customers and that your sales efforts are covering the cost of retaining your business.
Improve the numbers and track consistently. If your estimated marketing budget is $37,500 for the year and your estimated revenue is $250,000, then you have a typical starting point.
At the end of the year your numbers should add up. If you haven't made the $250,000, don't just blame your advertising, look at your list of leads and determine if you've converted the required number into sales.
If you don't have a list of leads then you need to re-evaluate the purpose of your advertising.
