“Half the money I spend on advertising is wasted,” Philadelphia department store magnate John Wanamaker was famously quoted as saying. “The trouble is I don’t know which half.”
Wanamaker’s dilemma remains the bane of advertisers today—especially small-business owners on shoestring budgets. Unlike big-name advertisers like Pepsi, Nike, Apple and Ford, small-businesses can’t afford to throw millions of dollars at Super Bowl commercials or glossy magazine ads. Whether your ad budget is $5,000 or $50,000, you’ve got to make every dollar count.
And that means doing the math to calculate the return on investment on every advertising campaign you run.
What’s ROI? Think of it this way: Let’s say you rent a targeted list of 100 dentists in your local zip code and send them each a package containing free samples of your revolutionary new dental floss. After adding up the cost of printing, postage, list rental and samples, you may end spending $3 for every package you mail. This means that your campaign will have bring in at least $300 in profit in order to break even and $600 to double your money.
Here’s the good news: With the double whammy of the recession and the Internet hurting traditional media channels like newspapers, magazines, TV and radio, there’s never been a better time to buy premium advertising at bargain-basement prices—even for a small-business buyer.
The key is finding the advertising channel that best fits your company and your industry and use it to get the biggest bang for your buck. At the end of the day, it’s not about how much you spend or how many eyeballs you reach. It’s about how many customers you can bring in the door while still making enough money to float your boat. And, while no advertising strategy is foolproof (there’s always going to be some initial trial and error before you figure out what works), you’ll get better results and waste less money if you do your homework ahead of time.
“E-mail marketing, television, search marketing and yellow pages typically yield a better ROI for unknown or unbranded direct response offers,” says Michael Weinstein, CEO of Primary Systems, a South Salem, N.Y., Internet marketing firm.“Banner advertising, print and social media are better for companies with existing visibility. For example, Toyota will do better with a banner ad while a one-time ‘act now’ offer would excel in print or television.”
Here’s a quick guide to help you decide which advertising strategy is right for you:
Despite the gloomy predictions of the death of the newspaper and magazine industries, print can still be a great way to target a niche market. For example, if you’re looking to sell pre-paid phone cards to Indian immigrants in Queens or Mexican-Americans in L.A., local ethnic newspapers can be a low-cost way to reach the entire community in one shot and to deliver discount coupons that let you track response to your offer. Likewise, a targeted local or national magazine can offer an inexpensive way to reach quilters or new parents. Depending on the size of the market and the size of your ad (quarter page, half page or full page), newspapers will typically charge $5 CPM to $25 CPM (cost per thousand impressions). National magazine rates average $6 CPM.
Broadcast
No media outlet reaches more people than television, which is why it’s still so popular among advertisers but also why it’s so difficult to measure ROI. While TV may be a great way to market a new car to the roughly 100 million people who watch the Super Bowl, it’s not a cost-effective way to reach your target market—even if you could afford $2.6 million for a 30-second spot. TV advertising ranges from $10 CPM for a local broadcast to $35 CPM for a commercial on a popular network sitcom. That doesn’t include the cost of producing the spot.
“If a general demographic description is all you need, then TV can be great,” says Jerry Shereshewsky, a New York City ad agency veteran and CEO of Grandparents.com. “But as soon as you need to get narrower, you’re out of luck.”
Direct TV is a better bet for small-business owners, especially inventors who have a blockbuster new kitchen appliance or fitness machine that must be seen to be believed. Both broadcast and cable television networks offer 30-, 60- and 120-second direct response commercials at a fraction of the cost of traditional spots. Because DRTV spots usually contain a “call to action,” you can flash a toll-free number or Web address that will let you measure your ROI to the penny. If your product is hot, you may even land a deal with a DRTV production company to foot the bill for your infomercial in return for a share of the revenue.
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