Friday, May 23, 2008

How to tell if your advertising is working....

There are many things we can measure in the business world, such as income and expenses. But how did we get our income? What part of our ad budget is being spent wisely? What are we wasting?

When I began in the advertising side of media 20 plus years ago in Detroit, we did things differently than nearly every other radio station in town. We wanted to measure actual trackable results. And now that radio station is still going strong 49 years old with the same basic format and same advertising philosophy as when I worked there for 8 years.

They have advertisers on their airwaves that I put on the air 20 years ago that have seen a return on their investment and continue to use that radio station because they believe it works for them.

However, it is truely impossible to measure with absolute certainty, the effectiveness of any one form of advertising unless you are only marketing in one solitary form.

If you have a sign that can been seen without coming into your store, then you have to count that as part of your marketing.

If you have business cards that you hand out, then you have to count that as part of your marketing.

If you spend $5000 a month on Radio Ads for 12 months, then you have to count that as part of your marketing.

If your Yellow Pages bill is $3000 a month for 12 months, then you have to count that as part of your advertising.

See, the reality is that each part of your marketing is supporting another part and all the parts together add up to the sum total of your marketing efforts.

I may drive by your place 5 days a week, without a second thought until I have a need for what you sell. Then hopefully you will be on my short list of places to contact to take care of that need.

Can you track your advertising? Sort of.

I had a restaurant that asked customers at the cash register what radio station they listened to and asked them to put a check mark on a list that was taped to the counter.

I liked it when my radio station was ahead one day. But three days later when I went in for lunch, nobody asked and only a few people took the initiative to answer the in house survey.

Tracking coupons is flawed too, because there are customers that see your coupon and never use it, but spend money with you because you have branded yourself using coupons. And there are the customers that only visit you when they have a coupon, but shop your competitor when you don't have coupons.

Ideally, your various advertising and marketing efforts are reaching you ideal customer repeatedly so you become a good habit and your loyal customers create positive word of mouth.

That means your advertising messages are coordinated to eliminate confusing or conflicting images and brands. This is not easy. It's why ad agencies are hired and media buyers are used, so you can run your business, and leave the marketing to the "Professionals".

But I told you that I would tell you how to tell if your advertising is working.

Here's how.

Look at your gross income for the 12 months before you started advertising. Compare it to the next 12 months that you did advertising. Did more money come in the door? Then whatever you did differently probably had an effect on the positive result.

Here's another way. If you spend $10,000 in advertising over a certain period of time, what do you need to earn that money back, in Gross Profit? Did you at least break even? Then given the unreliabilities of tracking, you probably made money.

One last question for now... Do you know how much a customer is worth to you?

We'll talk about that in the near future.

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