It's not gambling, it's marketing

Your Marketing Spend With “The Best of” is a Risky Gamble, Unless…

It's not gambling, it's marketing

We often get asked this question “Should I continue to advertise using using The Best of, Scoot, Touch Local or The Big Yellow Directory of Businesses aka “Yellow Pages”…

Our answer is Yes, No, Maybe, Depends…

And the only person who can answer that question is you, because how do we know how much business you get from these channels? But there is a rule of thumb that we go by as to whether or not we want to continue to use a marketing channel and here it is.

We ask this one question “Does the income from the channel exceed the expenditure by at least four fold?”. If you spend £1K placing ads in “Dog Walkers Weekly” you want to make AT LEAST £4K back. Because…

Factor in the Cost of Doing Business

If you take 4K and your running a decent, profitable business then it’s not about just making the £1K back, oh no. Because you have to factor in operating costs, taxes, employees and all manner of other expenditure that allows you to make a profit. From our customers we see that between 75% to 80% of their income is costs and the rest is clear profit. That is different for a lot of industries and I know of some people making less than 5% profit but due to the volume of their business it stands at a tidy sum each year. So you need to know what your “margin” is…

Lets say for this example your costs are around 75%, so that means if you make 4K, 75% or 3K will go on operating costs and costs of doing business generating the 4K. This gives a “theoretical” profit of about 25% or £1K. If your Dog Walker Weekly ads costs you £1K and you make £4K from that month’s ads you have washed your face on it and broken even.

So now you can ask the question: “Is it worth doing?” and get an idea of what the right answer is. In this instance probably not, unless you can improve the income or squeeze your margin. So, (in this example) the question is how much more than 4X can I possibly make? And did I make AT LEAST 4X that last month? And the month before was it up or down? What is the trend?

This approach is based on the numbers, removes “gut feel” and produces a better understanding of what you are spending and why. It also allows you to test and measure your ads, seeing what makes more and what improvements make the biggest difference? Do dog walkers like pictures of dogs, or walks, or dogs on walks? We’re pretty “agnostic” when it comes to channels, platforms, content management systems and technology – all we want to see is a worthwhile sales lift and a learning if not.

Don’t Think of Spending a “Marketing Budget”, Think of it as Ongoing “Customer Research and Development”

You have to look and track outcomes. If you do not “close the loop” you will waste your money. In a recent test we discovered that contrary to one of our customer’s beliefs his subscribers were not so into their horses as much as they were into their winnings from their bets. Therefore pictures of winners punching the air, money piles and winning betting slips were all more likely to get the desired effect and build their “Concrete Goal”. In retrospect it seems obvious, you are showing them the desired outcome, and maybe you can do the same in your ads? But showing the right ads to the right market is half the battle, but you need to know where your market is looking and your numbers will give you a good indication if you’re right.

Now, I am betting that most business owners won’t have the stats they need to hand and being to busy working IN your business to work ON your business.

But if you cannot work out if the ad spend is worthwhile then STOP and look at your income figures, try and see where the customers are coming from, if in doubt ASK THEM! Yes, simple say “Have you ever seen our ads here”… and list your channels plus a few that you don;t advertise in but maybe the competition do. Find out where your customers are looking because if they are not looking where you are spending your money then go into the garden, car park or local park, pile up £1K and set light to it. Video yourself doing it and put it on You Tube and I reckon you’d get more eyeballs looking at you doing that than you might be getting from some of these older, historical ad spends.

It’s Marketing NOT Gambling…

With marketing money you absolutely have to know what your margin call is on any channel you invest in. It’s business not gambling. With gambling any prior knowledge is useless (unless you play poker or black jack 🙂 whole other story betting against people…) But if you gamble, say on roulette, doesn’t matter how many times before you played roulette it’s blind luck if you win or lose no previous knowledge of winning or losing will change the future outcome of a spin of the wheel. With business it shouldn’t be down to blind luck making a profit or a loss. It’s about making a judgement call, based on skill, experience and previous knowledge. Not just plonking £1K down on red and keeping your fingers crossed, that is a whole different kind of fun to be had!

So if you want to work out if your spend is worthwhile do some basic maths, and then ONLY make the spend if you have evidence that you are likely to make at least 4X that spend back. Otherwise maybe you should pop along to Cheltenham and have a flutter (and use our customer who are seeing great returns with us!).

Back to our first question then… “Should I continue to advertise using using The Best of, Scoot, Touch Local or The Big Yellow Directory of Businesses aka “Yellow Pages”…
Yes – if it is where your customers are looking and you are likely to achieve a 4X return on your spend. You have to do SOMETHING though! Having the best kept secret business is definitely going to cost you!

To your continued success…


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About Stuart Morrison

Stu Morrison's background in marketing, entertainment and web development has fused him into a guy thirsty for results in marketing. His regular talks on marketing and web conversion help others to gain more revenue from their websites. He also has a big moustache.