Tuesday, January 6, 2009

How Long Should I Advertise?

The simple answer is: forever.

If you only advertise when you open your business, such as a Grand Opening, and then don't continue, the next thing you'll be advertising is your Going Out Of Business Sale.

But don't jump around and try something for a few weeks, and then something else for a few more weeks, and then take some time off and come back a few months later trying something else.

Plan and Commit to building a customer base by inviting the same group of people to do business with you.

Let's use radio advertising as an example.

Pick a radio station that has listeners that are typical of your typical customers.

Depending on:

  • Your profit margin
  • The buying frequency (how often a good customer buys what you are selling)
  • The actual $$ value of a customer over the course of 12 months
  • The amount of referral business each new customer is likely to bring in
  • And your budget
You should be able to determine how much advertising and which station to use.

I'm going to use a real life example of a jewelry store.
  • Profit Margin (including sales) 50%
  • Buying Frequency, twice a year for sales, twice a year for service, repairs & cleanings
  • Annual dollar value of a customer $2500 gross profit
  • Each new customer is also worth 1 more referral customer.
  • Budget... To Be Determined in a moment.
Most radio stations would love to set you up on an annual contract. The longer the term, the better the rates in most cases, which is to your advantage.

Radio stations schedule their commercials by dayparts. The typical dayparts are:
  • Morning Drive 6a-10a Monday-Friday
  • Mid-days 10a-3p Monday-Friday
  • Afternoon Drive 3p-7p Monday-Friday
  • Nights 7p-12mid Monday-Friday
  • Overnights 12mid-6a Monday-Friday
For our Jewelry Store, I'm going to pick Mid-days and Nights. Why? Drive times are typically more expensive than Mid-days, and Nights are less expensive than Daytime.

I want to dominate each daypart. Since each daypart I chose has 5 hours a day, I want a commercial in 3 hours of each chosen daypart.

Depending on the size of the audience, the city you are in and the sales manager of the radio station, you could pay as little as $10 per commercial to several hundred dollars. We're going to use a rate of $40 for Mid-Days and $15 for Nights. Do the math and that means $40 x 15 + $15 x 15= $825 x 52 weeks = $42,900.

What do you need in results? $42,900/$2500= 17 new customers over 12 months, pays for the advertising. Based on your referral rate of each new customer refers one additional customer, you can double your money by getting just 17 new customers from your radio advertising.

Can you make more money? Yes! Internal marketing through special promotions and your sales staff can increase the value of your customers. You can also add more dayparts and become the dominate jewelry store on the entire radio station.

Next, we'll talk about the content of the commercials. Your Comments are always welcome.

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