Five Reasons To Advertise All The Time

by Tom Egelhoff

Reason 1. Customers Forget. Did you happen to see an ad today for Coke? Pepsi? McDonalds? Burger King? Wendys'? I'm guessing you probably did or at least someone in your family did. The reason for this question is why? Isn't the hard work done? These companies have certainly established their brand names.

In the case of Coke it's arguably the most well known brand name in the world. So why not cut back on the advertising a little? Put some of that ad money to the bottom line or make the stockholders happy with an extra dividend. The reason is very simple- We the customer forget without constant reminders. Each day a customer doesn't hear about your company is one more day they start hearing about your competitor.

Reason 2. Name Recognition. When a customer thinks of a product whom do you want them to think of? Target? Wal-Mart? Or you? It's pretty hard for them to immediately think of you if they don't see your name anywhere.

Reason 3. People often take their time when buying. I often use a laptop when I travel and the time is coming for a new one. So I'll be shopping for that. Am I going out to buy it tomorrow? Probably not. I'll start watching the ads studying the available brands and assembling the features I need. I may not make the purchase for several months but when I do I will probably have a dealer in mind and they will get a shot at my business.

Reason 4. Customers move. In my hometown of Bozeman it's estimated that the population of the town completely turns over every seven years. Part of the turnover is 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.

Reason 5. 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.

The next question is 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.

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 advertised to 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 media for the same dollars. Which do you like better?

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.

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