6 Questions You Must Ask Before You Even THINK of Advertising
You’ve got a little bit of money. Not a lot, sure, but a little.
You know you should be doing more to get people in the door. You don’t relish the idea of hand selling every single buyer.
Should you advertise?
Here are some things to think of:
1. What is the lifetime value of a client or customer?
When people become your client or customer, how much money do they send you now? How much money do they send you over the course of a year? Over the course of their lifetime with you?
This applies for both product and service businesses. If you’re a designer and the average new job gets you $1500 and second jobs from the same client tend to run in the region of $1000, your customer is worth $2500. Unless…
2. How much of your business comes from word-of-mouth?
Good product and service providers get a lot of their business by referral. If I like you, I tell all of my friends about you. How much of your business comes from word of mouth? If every client you get tends to send three more at around the same value, your $2500 customer just became a $10,000 customer.
Not every time, but enough.
3. How good is your ad?
If you’ve done your homework and have created a compelling ad using sound copywriting and design techniques, you’re going to have a whole lot better chance of success.
Don’t fall into the 1950s Ad Man trap, thinking that by simply showing up, the people will start coming. They won’t. I had a banner ad on one website and one of my fellow advertisers wrote me an email asking if I was getting a return on investment.
Over the course of a month I got around 1000 new visitors from the ad.
He’d gotten 46.
Your ad matters.
(Don’t know if you can write a good ad? Check out Copywriting for People Who Categorically Do Not Want To Become Copywriters When They Grow Up. It’s got a crash course in ads, and 12 other crash courses, come to that. And 18 copywriting concepts! And exercises! And writing prompts! There’s a 40-page sample you can check out, too, to see if you like it. Click this link to take a look.)
4. Is the venue right?
If you come to me and you want to run a banner ad on IttyBiz for Cheez Doodles, you won’t necessarily flop, but it’s likely. If you want to run an ad for graphic design or productivity systems or invoicing tools, your odds of success go way up.
Either make sure the place you’re advertising has a targeted audience, or an audience so big that it doesn’t matter.
5. Can you commit?
If your price point is high or your sales cycle is long, you have to stick it out and try your ad for a while. For most products and services, customers and clients don’t buy the first time they ever hear of you.
“Hi, it’s so nice to meet you! I’m Naomi Dunford from IttyBiz. Wanna buy a few grand worth of consulting and copywriting?”
Amazingly, that doesn’t tend to work.
In addition, and also important, is you cannot get relevant statistics from too short an ad run. You can’t really see if it’s working. And with an ad that relies on multiple exposures, it often takes people longer than a month to decide to buy and by then, your ad is gone.
(The rules here are a little different for pay per click advertising, but most of you are not running pay per click ads. With PPC, you’re not dealing with a sales cycle issue, but you’re still dealing with a “give it long enough to test” issue.)
6. Can you watch the money burn?
Here’s a good rule of thumb. Think about how much you’re thinking of paying in advertising. Let’s say $500.
If you can’t afford to burn that $500 in front of your eyes, you shouldn’t be advertising.
Sometimes ads work and sometimes they don’t. Sometimes they need tweaks. Sometimes you misjudge the market or the venue. Sometimes your ad is great but your sales page sucks. (Seriously. We have a book for this.)
If you can’t afford to watch the money burn, you can’t afford to advertise.
(Note: You don’t have to relish the prospect of burning the money. You just have to be able to technically afford it. It probably won’t result in a complete money burn, but it might, and you have to be prepared for that.)
The Bottom Line: Metrics, People
Let’s say lifetime value of a client, including referrals, is $2000. A year’s worth of advertising is going to cost you $1500. Your ad and offering are good enough that it’s pretty likely you’ll score at least one additional client from the spot. The $125 a month isn’t going to leave you homeless.
Then, yeah. Can’t hurt to try it.
Let’s say lifetime value of a customer, including referrals, is $200. The ad still costs $1500 for the year and it still won’t make you broke. Your product has a much shorter sales cycle than a service would, so you’ll get more impulse buys. You’re pretty sure you’re advertising to the right group of people.
You need to score 8 new customers over the course of a YEAR to make the ad worth it.
More Bottom Lines
If it won’t render you homeless…
If your offering is pretty good…
If your ad is pretty good…
If the audience is pretty good…
If you won’t freak out and quit after a month…
Then, yeah. Advertise. You may as well.
Seriously. The Real Bottom Line
Don’t suck too badly, don’t spend too much, and you should be fine.