Double Trouble

There is a famous saying attributed to John Wanamaker…. “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” If anyone could figure out a magic formula for spending advertising dollars, they would be millionaires within days. Until that happens, however, we are all left to “guess” which half is working.

Of course, you shouldn’t really guess. Much effort is spent on tracking and proving which half is working. As a small business owner, if you’re spending ad dollars and NOT measuring basic key metrics yourself, I urge you to start. If an outside firm is showing you the “power” of your ad dollars, don’t be afraid to ask questions.

If you own a small business, never spent ad dollars before, hired a firm to help you advertise, then spent what you view as a small fortune on advertising, you would expect results, correct? Other marketing firms boast how their approach “doubled customers” or “increased sales 50%!” Can’t argue with those results… or can you?

Let’s say a small business normally has 10 customers a month, and want to grow that number. They listen to the advice of a marketing firm (or media outlet) and start advertising. They spend $5,000 on radio spots. This advertising brings in 10 new customers that month, and each customer spends $225, which we’ll say is 50% more than a normal customer would spend. The marketing firm has doubled the customers to 20, and increased sales by 50% ($2,250) for this business for the month.

Wow – Doubled customers and increased sales by 50%! However, if we REALLY look at the numbers, you see the business actually LOST $2,750 in acquiring those (10) new customers. They spent $5,000 on ads, which generated (10) new customers, and $2,250 in sales, for a net loss of $2,750. The “headline” is – “Doubled Customers, Increased Sales by 50%” - but when you read the article, you realize the news isn’t so bright.

Don't be misled by fantastic headlines and gaudy numbers. There is no magic formula. Going from $0 ad dollars to ANY ad dollars should have an impact on your business. Make sure you look at the numbers carefully, and be sure you have a marketing partner you can trust.