Advertising buying for a small business can be confusing and expensive. You have to be methodical and in control of every dollar going out to make sure it’s being used wisely. Here are three things you can do for better ad buys.
The following tips and suggestions are things I learned and implemented throughout my small business journey. I don’t profess to be an advertising expert, I’m not. And you don’t have to be either to be advertising savvy. I have no doubt you’ll find at least one of these tips helpful in your upcoming advertising campaigns.
1. Think of Advertising as an Investment, Not an Expense
Just like any other investment, advertising has to bring returns, or you’re better off keeping the money in your pocket.
If you invest in stocks, gold, or real estate, you likely check regularly to see how that investment is performing. If it’s bringing a good return, you keep investing. If it starts to wane or isn’t producing a return on investment, it may be time to restructure the campaign or make a change altogether. If you can get a 6 to 8% return on even the simplest investment, shouldn’t your advertising dollars be held to a similar standard?
So how do you measure the return on advertising? Create a checklist of your expectations that every ad has to meet, then develop a set of KPIs to track the campaign’s progress while it runs.
2. Understand the Terms Reach and Frequency
Reach and frequency are terms used to define the number of customers you can reach (reach) and how many times you’ll reach them (frequency). This information should be readily available from whatever advertiser you’re working with, and it comes from an algorithm they use internally.
Every industry and customer segment is different, but there’s a number out there that works well for you. Mine was 3.5. I wanted to reach my key customers 3.5 times in one week. The higher the reach, the more expensive the frequency will cost you, and vice versa. You don’t have to reach 100,000 people with every ad you run.
Some Added Insight
To make things more affordable and financially efficient, I used to target a local TV morning schedule for two weeks, then shift to another station, then back and forth, but only between 6am and 8am. Evenings were expensive, and people get home at different times every night of the week. Some have after-school sports and other activities like church and scouts. But people get up at roughly the same time every morning and usually watch the same channel every morning. So while I didn’t reach the full 100,000, I reached fewer customers multiple times per day and per week, and that worked well for me.
Make sure you ask about and discuss the reach and frequency numbers of your ad campaigns before you agree to them.
3. Develop a Checklist
Take time to develop a checklist that every advertising offer has to meet before you sign anything. A simple list of boxes to check can keep you from wasting ad dollars on the seemingly endless media “special offers” you’re presented with every week. Here was mine.
How much revenue should this campaign generate for me to profit from it? Remember that generating $10,000 in new revenue means nothing if your ad campaign costs you $10,000. If you’re going to invest $2,000, $5,000, or more, how much do you want to make in return for the effort and risk? Just be realistic and patient in your expectations.
Will it reach my ideal customers? Knowing your demographics matters here. Information like income, family makeup, and your defined service area should match the ad buy you’re being offered. If it doesn’t reach customers who can use or afford your product or service, that money is better spent elsewhere.
How many customers do I want to reach? Don’t just say “all of them.” Don’t be lured into the idea of attracting thousands of new customers if you don’t have the resources to handle dozens of new customers. Advertising to 400,000 people may make sense for a pizza shop or restaurant that needs several hundred customers a week. It may not make sense at all for a lawn mowing company with two crews that’s fully booked at eight customers.
For Example
I was once pitched an ad buy from a local TV ad rep where 400,000 people would be watching an important ball game on a Monday night, and I should run an ad during it. The pitch suggested that for $3,500, my cost per customer would be pennies. But that math only works if 400,000 people actually show up as customers, and what would I even do with 400,000 of them? I only had 14 parking spots out front.
The truth is that if 1% of viewers came in, I’d have to service 4,000 new customers. Realistically, I might get 4 new customers, and at $3,500, my cost per customer would be $875 each, and that’s if all 4 came in. Did my business focus on items where I profit more than $870 per sale? No. So that ad buy wasn’t the right fit.
How long will the ad buy run? Always have an end date in mind for your ad campaign. Leaving the same ad up for too long can have an adverse effect, especially once customers grow tired of seeing it.
How will the campaign’s success be measured? You’ll need a way to review your new ad campaign, just like you’d review a new employee. After a few weeks, check whether your campaign is yielding results. If it isn’t, don’t just ride it out. Make a change.
Frequently Asked Questions
What’s a reasonable return to expect from advertising? It varies by industry and campaign type, but treating advertising like any other investment (with a target return in mind before you spend) helps you judge whether a specific ad buy is actually worth it rather than just hoping it works.
How do I know if an ad buy’s reach is too broad for my business? Compare the audience size being offered to how many new customers you could realistically serve. If the math only works assuming an unrealistic response rate, the reach is likely mismatched to your actual capacity.
Should every advertising offer go through the same checklist? Yes. A consistent checklist protects you from being talked into “special offers” in the moment and forces every opportunity to justify itself against the same standards, regardless of how good the pitch sounds.
How long should I run an ad campaign before deciding if it’s working? Give it enough time to gather meaningful data, often a few weeks at minimum, but always set an end date up front and review results against your original expectations rather than letting a campaign run indefinitely out of habit.
