Anything in business comes down to dollars and sense. Why should marketing be any different? Marketing is constantly on business owners’ minds. To be more specific, they’re thinking about how to market effectively. Corporate giants spend millions of dollars each year on marketing. On the other hand, some small-to-medium-sized companies rely solely on word-of-mouth advertising.
Those needing a more substantial advertising medium should first consider how much money to put into it. Generally a client should spend five to 15 percent on advertising.
I advise my clients to maintain a comfortable monthly budget for advertising. But wait. Let’s pause here to define the term advertising, because it can refer to traditional and nontraditional media. It can mean the regular media – TV, print or online ads – but it can also be something as simple as taking a business contact out for dinner. You sell them on your services, and eventually they send you new clients.
The key to effective marketing is tied to the acquisition cost per client. You will need to try a few different advertising methods, and then carefully measure your results. Here’s a general rule I follow: take the total cost of any given advertising medium.
Once you’ve spent the money on it, divide the cost by the number of customers you brought in as a result. For example, if you sent out flyers for your business and it cost you $1,000, and this brought in 10 customers, then your acquisition cost per customer would be $100. For a realtor, that may be a bargain, but for a flowershop it may be far too costly. That’s why post-advertising evaluation is vital! The florist will require less of a budget because they’re retail-driven, whereas the realtor will need to use stronger advertising such as business benches and repetitive flyers.
The above seems an easy formula, but it’s not an exact science. Some advertising media like TV or radio will need repetition to gain you more business. Here, the general rule is that a consumer needs to hear your name three times before they will remember it. Factor that into the advertising budget and decisions if that’s the route you choose.
Don’t get discouraged if the leads don’t pour in the first time you try. Remember, some customers may not need your services now, but your advertising efforts may pay off in the future when they do.
I’ll use my company as an example. Generally, personal-tax clients come in once a year. Therefore, I may market to a potential client our services this year, and they may sign up next April.
Here’s another rule I like to use in marketing: the 10-percent rule. For any advertising you do, assume that 10 percent of people will look at it. Of those, 10 percent will come in. Of those, 10 percent will buy. If you send out 1,000 flyers, 100 people will look at them, 10 will inquire, and only one will become your customer. Again, hardly an exact science – but a useful means of measuring success.
On a low budget? There are several ways to advertise these days. Popular methods are online advertising sites such as craigslist and Kijiji, and social media advertising such as Facebook and Twitter.
Decide your budget, try a few things out, and measure your results. This applies whatever size your business. Figure out your acquisition costs and you should be just fine.
If the marketing isn’t paying off, you can’t continue to throw money away. But, hey, at least you get to write it off!
Let’s take a few steps back. Before you begin marketing, it is very important to set aside a healthy budget for branding your business. This includes logos, mission statements, and key characteristics that attach to your brand. This way, you’ll have the building blocks in place to keep building on your brand as your marketing grows. If you look at large companies, they also started as an unknown brand, and built from there through their marketing efforts.
The preceding is for information purposes only. Prior to making decisions, contact your accountant for advice.
Simeen Gaidhar-Bhanji, CA, owns Simeen Bhanji Chartered Accountants, which offers a variety of services to corporations and individuals, ranging from tax planning and consulting, compilation, reviews and audits of financial statements, corporate and personal tax returns, HST services, and consulting for internal control, financing and tax.