Small to medium size businesses are constantly challenged to find cost-effective ways to advertise in order to gain market share, win new customers, and retain current customers. For the past five years, businesses have been struggling to deal with changing economic conditions that have forced them to continually analyze their campaigns in order to figure out what is working and what needs to be changed.
And a key part of their analysis is to determine Return on Investment (ROI) not just the number of responses to an ad. Recently, I spent two days doing field research talking with business owners in our local area. My mission was to get firsthand information about their advertising campaigns and what has worked best for them in the past year. It was an interesting expedition.
During my field research, I visited a roofing company, a pizza restaurant, a small auto sales dealership, and a local hardware store, all family-owned. And although the results of the advertising campaigns from each business varied, the differences were remarkable in some aspects. Here’s what I found.
Each of these businesses, except the pizza shop, uses a mix of advertising channels to reach their potential customers, including TV and radio, along with print advertising. Yet the three companies in this area that provide print advertising products and services are woefully inadequate when compared to Front Door Advertising.
For example, the average cost for door hangers is $1,500.00 for the minimum purchase of 10,000. But that purchase price doesn’t include delivery. Any business utilizing door hangers from any of these companies must deliver their own door hangers, costing the advertiser hundreds of dollars more, and requiring significant time for delivery.
Postcards are also utilized by one of the other companies that I surveyed, with the cost being comparable to that of door hangers, for the minimum purchase of 10,000. When postage costs are added in, the total cost is nearly the same as that of door hangers.
I talked with the owner of the pizza shop and he said that he uses door hangers for most of his advertising, because he gets the best ROI from them as compared to TV or radio.
He said that he gets an average 5% response rate from door hangers, as compared to 1% or less from TV and radio. And even taking into account his additional cost to distribute the door hangers, it’s cheaper to utilize them than any other type of conventional advertising. His plan is not only effective, it’s less expensive when compared to what the other business owners were spending.
He purchases 60,000 door hangers in April of each year, and utilizes family members to distribute 10,000 of them each month, May through October. He pays the family members a few cents for each door hanger they deliver and by buying the greater number of door hangers, he gets a price break and pays $1,200.00 for 10,000 of them. His basic cost to purchase and deliver 60,000 door hangers is just over $10,200.00, or $1,700.00 per month.
Here’s where the ROI becomes significant.
He gets approximately 3,000 responses to his door hangers over the six month period, and the average amount spent by each customer is $9.00. That equates to $27,000 in revenue from the door hangers, which is over 265% ROI! He doesn’t do any winter advertising because his business picks up as school gets back in session and vacation season ends.
By contrast, the roofing company, the automobile dealership, and the hardware store all utilize varying advertising mediums and realize fluctuating ROI. In part two of this article we’ll look at the typical campaigns of these businesses and how they compare to the simple philosophy employed by the pizza restaurant.