Monday, July 6, 2009

Advertising Math

Too often businesses will allocate a percentage of their operating expenses to advertising and that's that. However for most small and medium size companies, that amount is too small.

Instead of a percentage, do this simple math formula:

Cost of Advertising Expenditure = ______ new customers spending $________.

Then fill in the blanks based on your current flow of business. Don't expect an immediate return either. It may take a few weeks or months depending on the frequency of advertising and the length of your customers buying cycle.

A home owner buys a new roof once every 10 to 30 years. A person gets their hair cut or styled between once a week to once every two months. Most people eat 3 meals a day. People are more likely to spend money on the days right after payday. These are all factors we call the customers buying cycle.

Back to the Advertising Math Formula. Be honest with yourself. There are certain fixed costs that you will have to pay if you have one customer a day, or 10 customers. Rent, Utilities, etc. Leave those fixed costs out of the Advertising Math Formula.

And also be honest about the true value of a customer. Click here to read more.

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