The biggest challenge for new and existing businesses is how, where, when and how much should I spend on advertising. It would be nice if there was some kind of cookie-cutter method of doing this but unfortunately
there isn’t.

Advertising takes time, testing, investigation, guessing and even a little luck to make it work. Advertising is nothing more than being in the right place, at the right time, with the right message, and the right product. Pretty simple huh?

A business should never advertise just to advertise. There is a reason you carry the products or supply the services to your customers. Well, your advertising should be treated the same way. You need a plan that will not only improve your bottom line but will also pay for itself so you can keep doing it.

It’s a Numbers Game
In Bozeman it’s estimated that the population of the town completely turns over every seven years. Part of the turnover is because we are a college town. Studies show that 25% of your customers will move each year. A tip I have given for years is to have a yearly “Grand Opening” to attract that new 25% percent who move to your selling area each year.

A portion of the market is always shopping. Did you notice the tire ads in the paper today? If you need tires you did. If not you probably didn’t give them a second glance. Not everyone is your customer every day. But each and every day there is a portion of the population that is looking for your product. And you need to be there when they are ready to start looking for that product.

How much to spend and where?
One of the most asked questions I get at seminars is, “How much do I spend on advertising?” A loose rule of thumb is 2-5% of gross sales. That’s easy to compute but the problem is that when sales are down advertising has to come down too and that’s not good.

There’s a Better Way
Instead, consider this. The 80-20 Rule. We all know this rule right? Eighty percent of your business will come from 20% of your customers. So why spend money advertising to the 80% that don’t produce anything? Let’s say for the sake of easy math that you have 1,000 customers and spend a $1,000 to reach them. Each dollar spent on advertising, in your media of choice, brings in an average of $1.10. So you make a 10% return on your advertising investment.

Now let’s say that after examining your customers and truly defining them more closely you find that half of them are bringing in $8.00 in profit for each dollar you spend. What if you changed where and when you advertise to reach just 500 of the 1,000 customers who are spending more at a price of $2.00 each and not advertise to the remaining five hundred? You are still spending only $1,000 in advertising but you are getting a return on investment of 400% because you are reaching the right target market in the right medium for the same dollars. Which do you like better?

Some Final Thoughts
As you can see, it pays to know your customer, where they are and how to reach them. You don’t have to match the big guys dollar for dollar in your advertising. It’s not getting more customers, it’s getting the right customers.  Be where they are as often as your budget allows. For some businesses that might be newspaper, others TV, radio or direct mail. For some it might be all of the above. And the best part… these higher-end customers talk to each other and make strong recommendations to their friends. Always remember, advertising must be an investment; it can never be an expense. It always has to produce more in revenue than it costs. Become a smart investor.

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