How to Know If You’re Wasting Your Advertising Money

Over the past few posts we’ve seen that we have not one business but three:

1. A Marketing Business with the purpose of lining up new business
2. A Service Delivery Business which job is to deliver world class service
3. A Client Retention Business to keep the clients we already have.

Once we’ve started to put systems into our business, how do we know if they are effective? The answer is to monitor exactly what’s happening and see if it’s working.

This time I’m going to look at tracking our advertising and marketing so we know if we’re wasting our money or not.

There is a saying that “Everything measured improves.”

I’ve often asked carpets cleaners about their response to advertising, such as Yellow Pages for example. They respond by telling me “Yellow Pages works really well for me. We get a lot of work from it.”

Then I ask them “exactly how much work?”

In most cases they don’t know because they do not track where their enquiries come from. So at best, they only have a gut feeling that their advertising is working. But oftentimes it is not.

I’ve often thought that a particular marketing campaign has worked well, but when I look at the ‘numbers’, that is the numbers of enquiries or jobs that it has produced, it’s quite the opposite!

Now I track everything that is useful...the number of enquiries from a given advert, the cost of acquiring a new client, how much it costs to get the job from each advert and so on. It’s given me quite an insight into what’s really going on in my business.

And this way, I’m never an advertising victim.

Whenever an advertising rep phones me with a special offer in the newspaper or wherever, I’m able to look at my numbers and forecast whether or not the rep is telling the truth. Especially when he tells me that other businesses are getting so many enquiries for work from advertising with them.

A few years ago a local directory rep told me casually that one of my competitors was getting a ridiculously high number of enquiries from advertising in his directory. Because I knew exactly how many enquiries I had the year before, I was not swayed by this nonsense. It was clearly untrue because the ‘numbers’ simply did not add up. My competitor should either have retired by now or he should have had a fleet of vans on the road just to cope with demand from this one source. Neither in fact was true. Hence, I saved myself several hundred’s of pounds by not being an advertising victim.

So what numbers do I track?

One thing is Return on Investment (ROI). My goal when I advertise is to get a new client for free. Did you not realise that new clients cost money? In fact, getting a new client is one of the most expensive things you will do in business.

For example if you run an advert in the local paper and it cost you £400 and you get 10 jobs, each new client has cost you £40 to get. For Yellow Pages, the numbers can be much higher. A few years ago, it was costing me £54 to get each new client from Yellow Pages. I’ve now got that down to well under £20. Many business owners do not even think about this! Now armed with this information I know a number of things: Firstly, if I was charging less than £54 plus expenses to clean their carpets I’m slowly going broke unless I can get more money on the back-end i.e. repeat work and referrals.

And secondly, I am now able to ask the question “can I get the same clients cheaper using different media or methods?” For instance, I could have paid a salesman £40 for each new client and it would have been cheaper than what I was currently doing.

This is just one example of how ‘knowing your numbers’ is critical if you don’t want to waste money on advertising. And if you want to improve its effectiveness.

Next time: What other ‘numbers’ you need to know so you can systemise your marketing business.