Spending more money on Marketing Services (SEO, Facebook, Adwords, Email) is the quickest path to the Business Graveyard.
Look–starting a business is easy. Each year in the U.S. there are 400,000 new businesses opening. However, there are 470,000 businesses closing. This is the first time the U.S. has been a net loser in new business growth since the measurement began.
So what does that tell us?
In the words of the great ‘Red’ Redding in Shawshank Redemption, that means that as a business “you better get busy livin’ or get busy dyin'”. And there is no faster way to get busy dying than by hemorrhaging dollars into mass broadcast advertising.
The Wrong Way to Invest in Advertising
Mass broadcast advertising has its place in certain markets and industries. Time and time again, small businesses put their last dollars into an advertising blitz of television commercials and newspaper ads. They bet their business on the hope that running an ad leads to more phone calls.
If earning a return on marketing dollars was really that easy, then why would anyone wait until they are down to their last dollars before doing that? Wouldn’t they run an advertising blitz every week?
Car dealerships in every city across America have caused this delusion among many business owners.
Most business owners do not realize that after all the add-ons and financing, a new car’s profit margin is $3,000 per car. That figure increases to nearly $5,000 on a used vehicle.
Now let’s say that most consumers by a car once every four years. That means that every month approximately 2% (1/48th) of the adult population is in the market for some local dealer to make $3,000 – $5,000.
With how that math works out, local TV ads seem like a pretty great investment if you are in a big enough market.
So no matter what business you are in . . . if 2% of the adult population will be in the market for your service AND you will profit $3,000 – $5,000 off of every sale . . . then I am here to tell you that you should seriously consider the economics of local TV advertising.
The Right Way to Invest In Advertising
For most local businesses, our potential for such a large and profitable buying market is not as reliable. And so our strategy must adjust accordingly.
For businesses like yours, it is crucial to have a well-scripted plan that leads potential customers through all the phases of the buying process. We are not trying to “sell” your services. We want the consumer to “choose” your service when they need you.
In our example above, car dealerships are spending advertising dollars to speak to 100% of the market, when only 2% of the market is a potential customer. Try as they may, if I am not looking for a new car, then they are certainly not going to talk me into making a $25,000 impulse purchase during a 30-second television commercial with a man in a giant monkey costume.
So what is the smart way to attract new customers?
Deliver value. Build authority. Create a relationship. Be front-and-center when needed.
This concept is not new. In fact, the most successful car dealerships have figured this out. They know that executing this strategy actually delivers new car buyers far cheaper than television advertising. Lucky for them, television advertising still has a positive return on investment.
But for you . . . this old school strategy for generating leads may be your lifeline.
But for a new age spin on this old school strategy: the internet. The internet is an incredible channel for executing this relationship-based lead generation strategy because the internet works for you 24 hours a day, 7 days a week, 365 days a year, and it is scaleable.
Now, I am not talking about running Facebook ads blasting your name to everyone in your area.
And I am not talking about buying Adwords displaying your website to Google searchers.
Both of these tools have their place, but 99% of local businesses you see online are executing this all wrong. Because just like the television commercials, they are advertising to 100% of the market when all of those people do not need you.
If you are working with a marketing firm who has sold you a Service (SEO, website, Facebook, Adwords, Email) and not a Strategy, then now is the time to challenge your return on investment. Your marketing firm should understand the lifetime value of your customers, the sales process for you to close a sale, how you take a prospective customer from a cold lead to a warm lead to a hot lead . . . .
This is all fundamental to recommending a comprehensive strategy with a maximized return on your investment.
Is this easy? No.
Is this something that you can hand off to a junior associate? No.
Is this something that a marketing firm can plug into a software tool to output your exact strategy? No.
Don’t let your marketing mistakes of the past continue to haunt your business until you are no longer in business.