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Before you
decide how
to
advertise
or whether to
do so at all,
make sure
you know
the facts
By Reed Richardson
Like a lot of business owners, Gary Tonniges,
Jr. is extremely busy. And when he
started Triquest Technologies, an IT management
company, in Fort Worth, Texas,
nine years ago, he readily admits he didn’t
give much thought to his advertising strategy.
“Those first few years, my business
plan just involved making it another
month,” he recalls, chuckling. “The last
piece in the whole pie, for me, was the ad
and marketing side.”
Most business experts will tell you that Tonniges is far from alone. With all the other hats small business owners are often required to wear—human resources manager, accountant, IT expert—who can blame them if they’re hesitant to take on the role of marketing manager, as well? After all, this daunting task means fighting for recognition in an already saturated media market—where a recent study found that the average American is exposed to an astronomical 2,904 marketing messages each day, only four of which ever elicit a customer response.
Tom Eglehoff, marketing expert and author of The Small Town Advertising Handbook, says the enormity of this market can leave many small business owners paralyzed from uncertainty. “Because of their limited budgets, there’s this fear that nothing they can do will ever work,” he says. “Most of the time, they only end up running an ad because some salesman contacted them. Consequently, they never really think about what ad strategy suits their business best.”
But how does a small business owner with little formal training figure this out? David Minor, director of the Neeley Business School’s Entrepreneurship Program at Texas Christian University, says finding the best advertising strategy starts with simply finding out more about your customers. “The single biggest mistake I see small business owners make is not identifying who their target market is before they start buying ads,” he says. “I tell them to set up short, in-store surveys or just talk to their customers at the point of sale, making sure to ask them how they heard about the business and to learn more about their habits. Once you’ve established that feedback loop, then you can start to design a cost-effective ad campaign.”
Keeping that key constituency in mind, what follows is a basic, small businessperson’s perspective on several different types of media advertising.
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Yellow Pages
Perhaps the most familiar type of advertising for small businesses, yellow pages advertising has two major advantages over most other types of media: Your ad lasts all year and the people who use it are ready to buy. (Fully 86 percent of yellow pages users eventually make a purchase, according to the Yellow Pages Association.) The evergreen nature of yellow pages ads does have some drawbacks, however, and if you’re careless with your ad copy it can cost you, a lesson Tom Eglehoff learned the hard way.
“Before I started my small business consulting business, I ran a chain of video stores in San Diego for a number of years,” Eglehoff explains. “One year, I put a 2-for-1 video rental coupon in our yellow pages ad, but I forgot to put an expiration date on the coupon. That little $100 a month, 2-inch by 2-inch ad ended up costing me hundreds of dollars in lost sales, as month after month these coupons kept coming in. Eventually, I don’t think there was one coupon left in any phone book in San Diego.”
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Eglehoff’s story illustrates an important point about advertising: the difference between cost per view and return on investment. When you buy advertising, you’re only buying access to be seen, not to be sold. Or as Eglehoff points out, “Advertising isn’t really about selling, it’s about putting the customer in front of the business owner to create a selling opportunity.”
Typically, when ad agencies or media sales reps quote prices to a potential advertiser, the numbers are based on a cost per thousand views, or CPM. This CPM number is an ad industry standard that acts as a helpful guide to compare advertising rates across different types of media. Since yellow pages tend to reach large audiences, they traditionally have decent CPM rates. If, for example, you spend $1200 a year on a yellow pages ad and it gets distributed to 120,000 people, your CPM would be $10. However,
because ads from your competitors also surround your yellow pages ad, all those views don’t necessarily translate into sales. And to stand out amid the clutter of ads, sales reps will recommend that the advertiser buy larger, more colorful ads, which can quickly drive the price up into the thousands. But more important to a small business owner than an ad’s CPM is its cost per sale—the return on investment (ROI) of your ad. Instead of concentrating your entire ad budget on a quarter-page, threecolor ad in the yellow pages, many small business experts instead suggest a multipronged approach. They recommend a modest, black-and-white ad in the yellow pages run in concert with ads in another type of media, like direct mail or the Internet, as more cost effective
Direct Mail
In contrast to yellow pages advertising,
direct mail campaigns tend to have high
CPM costs, but a better than average ROI.
A 1,000-piece mailing, for instance,
can cost anywhere from $250 to
many thousands of dollars—
depending on the accuracy and
research involved in the mailing list
and the size, sophistication, and
production values of the direct mail
piece itself—but it often recoups
that investment very quickly
because direct mail appeals can outline
a clear call to action for a very
well-targeted group of customers.
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The heart and soul of any direct marketing effort is the mailing list, the quality of which can often mean the difference between success and failure. “There are list providers all over the place for every kind of product,” says TCU’s Minor. “But you should look carefully at what you’re buying and always do a small, test mailing before you commit to a big list purchase.”
Minor, who started his own landscaping company at age 15 and eventually consolidated it into a nationwide business, says his most effective ad campaigns always involved direct mail, despite its relatively high CPM rates. “We had a lot of success with it because, even though our rate of response was pretty typical—1 to 1.5 percent— our average customer would spend $15,000 on our services, so it still more than paid for itself,” he says. If your company is selling widgets at $1.99 each, however, Minor notes that direct mail will probably never be a profitable ad method. “But if you’re on a limited budget and have the right product, going direct to your buyers beats advertising to the masses.”
There are some caveats, though. Although your direct-mail brochures or postcards may not be sitting right next to your competition as your ads would in the yellow pages, they still have to fight dozens of other pieces of mail to grab your customer’s attention. So, while glossy color brochures and postcards may cost more to and a better rate of response, something to consider before you embark on any direct mail campaign.
Newspaper
Despite the fact that weekday newspaper readership has declined nearly 12 percent since 1998, newspapers are still the most popular ad medium for small businesses. Why? Because they can fit ads of almost any size and accommodate almost any budget.
But in addition to this flexibility, newspapers also offer advertisers two things that they desire even more: so-called “permanence” and “desired obsolescence.” Permanence means that your ad won’t immediately disappear after it’s broadcast—a major drawback of radio and TV advertising. If your potential customers miss your ad the first time, they can always examine it at their leisure later. And unlike magazine or yellow pages ads, which can grow stale, ads in daily newspapers have a built-in obsolescence since readers eagerly look forward to tomorrow’s newspaper. This means newspaper ads appear more current and appealing to your potential customers.
“Whenever I give one of my seminars, I always say, ‘Raise your hand if you saw the tire ads in today’s paper,’” says Eglehoff, who notes that, invariably, few people raise their hands. “But they’re in there, even if most people ignore them because the advertisers don’t know which day you may need tires and start noticing their ad.” And thanks to the short shelf life of newspapers ads, he points out that small businesses can regularly modify the size, placement, and copy of their ads to make them more effective. “Those tire ads wouldn’t be there everyday if they weren’t making someone good money,” he notes.
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This kind of daily presence isn’t cheap, however. Newspapers typically have relatively expensive CPM rates, ranking behind only TV ads in terms of their cost per viewer. As with other print advertising, newspapers base their rates on their circulation and the size of your ad, normally using a standard rate based on columninches per week as their guide. So, purely as an example, if a newspaper’s columninch rate is $250, then a small business owner will pay $7500 for a 6-column by 5- inch ad (about one-third of a page) to run from Sunday through Saturday.
For some small business owners, those prices can prove to be far too steep, something Anne Pyles found out after the fact. Pyles, who runs her own web hosting company, 12wonderwebservices.com, says that not long after starting her business, she decided to start advertising, but she didn’t know where. “So, I spent about $700 on local newspaper ads and I didn’t get any new business from it.” After that experience and a similarly unsuccessful foray into the yellow pages, she concluded, “I needed my exposure to really focus on where my business and my customers are—online.”
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Internet
Increasingly, the Internet is the tool
Americans turn to when they begin a purchase,
a trend that even extends down to
the neighborhood level. According to a
recent survey by the Kelsey Group and
Comstat, Inc., 7 out of 10 households now
search online first when looking for
local merchants and services. This
makes the $20–$50 monthly cost
of a company website and the
time it takes to register your company
on free Internet business
directories like Google, AOL, or
Yahoo Local some of the best
advertising investments a small
business can make.
However, Internet advertising still has its drawbacks. Much like newspaper and yellow pages ads, your website can easily get lost amidst the millions of others on the Web. So, to drive traffic to it, many small business owners have felt compelled to invest in online banner and pop-up ads, as well. While the costs for these types of ads appear quite affordable, tracking the number of viewers and ROI of Internet ads remains an elusive and difficult task, making it hard for small business owners to justify the expense.
One tactic that Google and other online media companies have developed to address this is pay-per-click (PPC) advertising. With PPC ads, advertisers pay only a small fee, about $.50 per click on average— that click presumably representing a more serious, active level of interest than that of a passive viewer or reader of a TV or magazine ad. They can also control their ad budget by installing pre-set monthly spending limits (see above). Still, even the viewer “click-thru” rates generated using PPC ads are susceptible to inaccuracy, as the technology cannot yet discern when the same person clicks on an ad multiple times.
Radio
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Compared with most other media, radio advertising is very affordable and forges an extremely powerful and intimate connection with the listener, which might make it appear as a natural place for small businesses to advertise. But before you buy a radio ad, consider not only your customers’ listening habits, but also how well you can explain your product or service using just words. “No matter how good my ad copy was, if I were trying to sell a hula hoop, I wouldn’t do it on the radio,” Eglehoff notes.
As a broadcast media, radio rates are determined by the length of your ad— usually increments from 10 to 60 seconds— your ad’s frequency, and the time of day that it airs. A normal broadcast day is broken into five “dayparts” that correspond to different listening habits (see below). The three most expensive of these dayparts include the popular morning and evening “drivetime” periods and the midday period. The ads that run during evening and overnight time slots cost much less, but they reach a much smaller audience. Consequently, one 30-second radio ad can cost anywhere from $1 to $100, depending on when and how often it plays. One other factor to keep in mind is that, unlike the Internet and most print media, radio advertising has a limited capacity and stations generally cap their ad inventory at 18 minutes per hour.
While there is no magic formula to creating the perfect radio ad, most business experts agree that high frequency over a relatively short time period is most effective. The Small Business Administration suggests, as a good starting point, a 42-commercial campaign across two weeks, concentrating three spots in the morning and four spots in the afternoon on only Tuesday, Wednesday, and Thursday. This method hammers home your message and, by advertising in tightknit blocks, gives the impression that your company is much larger than it is.
One recent development in radio advertising that may prove to be a boon for small businesses involves Google’s entrance into the market. In January, the web giant announced that it plans to expand its vast, automated system for brokering online ads to include radio advertising, which could further lower the costs of radio ads.
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Magazine
At the start of 2006, there were
more than 19,000 paid-circulation
magazines being regularly published
in the United States and a 2005 Har-ris Poll found that 84 percent of all American
adults had read a magazine within the
past week. Even more important to potential
advertisers, studies have shown that
magazine readers, more so than any other
media consumers, welcome and accept the
ads in their magazines.
Of course, a large majority of these magazines cover fairly narrow subject matter and have a relatively small subscription base. For small businesses, which could never afford the five- to six-figure price tag for just one ad in a large, wellknown periodical like Time or Family Circle, these niche magazines offer a great way to both reach an already targeted audience and still keep an ad budget under control.
One small business that follows this strategy is the R. L. Winston Rod Company in Twin Bridges, Montana, which specializes in building fresh and saltwater flyfishing rods. “We’re a small company with only 60 employees and limited advertising funds,” says Leslie Clark, Winston’s marketing director. “So, we focus pretty much all of our marketing budget on ads in the three major flyfishing magazines because their readers are our customers.” To launch one of their newest rods, the Boron IIx, Clark says her company, through an ad agency, developed three different ads as part of a several month-long campaign. “We ended up placing a total of nine ads for only about $50,000,” she says, noting that that figure included the ads’ production costs, as well. “It was a very successful launch for us.”
Still, Clark says that the ads’ real goal is simply to emphasize the Winston name and she admits that her company has not instituted any method for tracking the ads’ direct effect on sales. “The best thing those ads do for us is reinforce our brand rather than our products.”
Television
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As the undisputed heavyweight champion of all advertising media, television has rarely figured into a small business’s marketing strategy, but it should. Admittedly, TV airtime rates are traditionally higher than any other media and the production costs of a commercial can quickly eat up funds, but some recent changes in the industry should have entrepreneurs taking a second look at advertising on TV.
“I never had any intention of doing TV ads,” says Terri Merrick, who, along with her husband Al, runs the Channel Islands surf shop in Santa Barbara, California. “We had been approached about it in the past, but the quality of the local TV ads was never very good and, besides, it didn’t fit our budget.” The Merricks, who have run their own surfboard manufacturing and retail business for 35 years, instead stuck with the “expensive” advertising in their local newspaper. But over the past six months, Channel Islands has run dozens of 30-second TV ads during daytime and primetime hours on cable channels like VH1, MTV, and ESPN—all for only $3000.
That the Merricks could afford such a TV ad campaign is due, in large part, to the rise of Internet-based ad agencies, like the Los Angeles-based start-up company, Spot Runner. Much like Google’s recent expansion into the radio market, Spot Runner is leveraging an online platform to streamline the planning time and sharply reduce the production costs of TV adver-tising. (Google is rumored to be considering the TV ad market, as well.)
David Waxman, one of Spot Runner’s co-founders, explains how it works. “We have a comprehensive library of professionally produced ads which can be personalized by the advertiser in a simple process online,” he says. “For as little as $500, we can put together a commercial, develop a media plan, and put ads on the air anywhere in the country, all in about one week’s time.” By significantly simplifying the process, shortening the rollout time, and keeping costs low, Waxman hopes to draw in more small businesses who haven’t considered advertising on TV in the past. “Our target customers are those local companies, like Terri’s,” Waxman says. And for her part, Merrick couldn’t be more pleased with her new business’s foray into the big time. “We now have people come in all the time and tell us how beautiful our ad is,” Merrick says. “It really sets us apart.”
CONCLUSION: Five Things to Remember About Small Biz Advertising
1. Getting to really know your customers
before you advertise pays off in the long run.
2. A mix of advertising media is more effective
than any single approach on its own.
3. First choose the advertising that’s right
for your product, then tailor it to fit your
budget.
4. Track the ROI on all your ads to find
out what works and what doesn’t.
5. Finally, remember that if you think you
can’t afford to advertise, you’re saying
your small business can’t afford to grow.
FREE ADVERTISING RESOURCES FOR SMALL BUSINESSES Newspaper: www.naa.org/sectionpage.cfm?sid=2110 |
