Today I want to share a little about the advertising layout for our garage. This is a complex topic so I’ll split it up into two parts. This week I’ll talk about our overall advertising costs per month and what works for us and what doesn’t. Next week I’ll go into specific details about what we spend on each one and what results we see.
This has been a steep learning curve for me over the past 5 years. Hopefully I can save some of you from making the same mistakes I have.
So let’s start by talking about what our current marketing budget looks like…
As of Jan 2015 we gross about $40,000 per month on average. Our core advertising budget is $1,824 per month and that consists of our Google Adwords campaign, Angie’s List, our Yahoo! listing, our website hosting, our customer retention programs and our BBB listing.
In addition to our core advertising we usually rotate different programs on a trial basis or seasonal basis and track the returns on the advertising dollars we spend. Overall we try to keep our advertising budget around 4-6% of our gross income, meaning we usually play with another $200-500 per month on alternate advertising for a total budget ranging from $2000-2300. Where this number should fall will differ depending on your industry but I have heard a good average is between 4-7% of your gross income.
I put all advertising into two categories, Branding and Direct.
Branding is anything that does not result in a relatable sale but puts your company out in front of people, usually when they are not looking to purchase your service. Examples of Branding would be billboards, naming stadiums, radio and TV commercials, etc. My experience tells me that small companies should avoid branding advertising like the plague because of the high costs and low returns. You’ll see nearly all of my overwhelming misses are branding related.
Direct marketing is anything that focuses your message toward people ready and willing to buy your service. Google AdWords is a great example because you are getting your message in front of people that are currently looking for your service usually in your area. This is hyper targeted marketing and if you put your message in front of people actively looking for your product you will close many more of those impressions and the average cost per sale ends up being much lower!
When you are a small business with limited funds, focus all your efforts on direct and traceable marketing only. You also need some way to trace every person you make a sale to so you can figure out how they found your business.
Every person that walks into our door for the first time is asked “How did you hear about us” and that source is entered into the computer. We now can track the original ad that brought them in and their total spending behavior over their life. I can take that data to find out what marketing is effective and what sources not only drive traffic, but provide great customers.
So what has worked for us and what hasn’t?
- Angie’s List – WORKS GREAT! (for us)
- This was a surprise to us a little bit. While you don’t have to pay anything to be on Angie’s List and you can’t affect your reviews, they do offer a service that will put your business at the top of search results when a member looks for your service. This means someone in our area looks up “Auto Repair” and we are on the top of the list with about 5 other businesses. They can see our ratings and any coupons we have before the “free” businesses listings.
- This is direct marketing. People are looking for a mechanic when our ad comes up
- This works for us because it aligns the customers perfectly with our business. Our company is designed to foster trust between the business and the customer, and Angie’s List members are using reviews to find people they can trust. They are more worried about finding quality businesses that offer a great experience and this aligns very well with our demographic.
- Almost 10% of our business now comes from Angie’s List and they are typically some of our best customers!
- This will be an expensive and horrible failure if you are not the most amazing business in the world. A few bad reviews and you will not get any customers at all from this. You must treat Angie’s Listers like they are VIP’S because EVERYONE will get multiple requests from Angie’s List to fill out a review on your company. I have got up to 4 and 5 emails when I use businesses from the site. Users are hounded with multiple emails and even called up to give reviews on your company so treat them AWESOME or you will find yourself paying for the rest of your 12 month contract and getting no business.
- Google AdWords – WORKS
- Direct marketing puts our name in targeted ads. People search for auto repair or any number of targeted searches and we show up on the side of the page.
- This works great for new businesses because your website will nor rank organically for a while
- This is hard to judge. Our service has a unique phone number and we match our calls with our customers so we know who comes in each month from the Adwords campaign.
- This campaign basically breaks even each month in driving new business but as customers come back regularly we end up positive for the year.
- If you work with a company to manage your AdWords campaign make sure they provide a trackable phone number so you know how many calls you get from your campaign. A good company will also tweak your campaign every few months so make sure they are working for you and not just taking your money each month.
- Yelp! – DIDN’T WORK
- I have heard businesses getting great results on the west coast through Yelp! so we wanted to try. Our results were not noticeable and it was expensive each month. We ran a 6 month program and saw some traffic but not enough to break even.
- Part of the reason is that the traffic we saw from Yelp! was not really our target demographic. This may just be a matter of the wrong fit for Yelp! users and our business.
- Extra negative marks for the really pushing high pressure ad sales people. If I wasn’t so keen to try Yelp! I would have never dealt with the guy. I’m very glad I didn’t get stuck in a 12 month contract.
- I’ll continue to track our Yelp! customers and see how they are for the next year. I may find that they are super loyal and it may make sense to start advertising again if that’s the case.
- As it stands right now we have some super awesome people that are now customers because of Yelp! but it just wasn’t nearly enough to justify the cost involved.
- I think this would work great if I ran a different business like a restaurant for example.
- Worth a try!
- New Movers Coupons – DIDN’T WORK
- There are various programs but basically it’s a coupon packet that gets sent to every new house each month. The theory is that families who just moved into town are looking for local restaurants, doctors, mechanics, etc. You give them a FREE oil change, they come in, love you and they are customers for life.
- In reality people come in for a FREE oil change and never see you again. Most seem to be expecting a bait and switch and there’s ZERO way to control who gets these coupons. Most of the people were not our target customers and after a year of the program and close to a thousand bucks we had almost nothing to show for it.
- These programs typically work much better for restaurants.
- Local Newsletters – DIDN’T WORK
- We have done several local publications. Everything from senior mags to local papers to coffee newsletters. None gained us more than a customer or two and all were a few hundred $$ to try out.
- People reading these are not looking for your business. Brand marketing requires TONS of exposures and the payoff is either non-existent or so far in the future you’ll be long broke before they can try your services.
- It’s hard to tell the sweet old guy no to the $65 ad for the local high school paper
- Groceries store receipts / bags – DIDN’T WORK
- There are companies that sell ads on groceries store carts, receipts, and pharmacy bags.
- When was the last time you EVER used a business because there name was one any of these things?
- No one else does either.
- Online Reviews – WORKS GREAT
- Nearly free – You will sometimes have to cave into customer demands to keep them happy even if you were in the right so it’s not totally free.
- You must maintain your online reputation and respond to any negative reviews in a professional manner.
- People come in all the time and tell us our reviews set us apart from the competition.
- Partner with sites that allow you to respond to reviews. You want a dialog on the internet. You’re best to not even create profiles on sites that won’t allow you to respond to reviews in your industry.
- Phone Book – DIDN’T WORK
- We stopped our phone book ad after two years.
- This may be needed if your target customer is much older but most of our 60-70 year old customers are internet savvy now anyway.
- Why pull out the phone book when you can type in the computer in half the time?
- Phone books will soon be in the same category as dinosaurs, pagers and the telegraph.
- Christian Phone Book – WORKED GREAT!
- There was a publication called the Shepard’s Guide. It was a local phone book that featured Christian Businesses and they would sell ad space in the book and then distribute 100,000 of them in all the local churches and businesses.
- It was around $600 for the year to advertise in the guide and it brought in 20 or 30 customers a year for us. Sadly they had trouble making the jump to digital and they were not able to keep going and closed down.
- This worked great because it was laser targeted to our exact customer. People looking for businesses they could trust!
- If you can find something that’s literally a perfect fit, give it a try!
- Radio – DIDN’T WORK
- We tried some ads on our local Christian Radio station but didn’t get much from it. Mainly it was super expensive and we tried too early into our business when we just couldn’t afford to keep it up each month.
- This is branding at its core and you probably need to be on the radio for 8-12 months to see any results. We couldn’t afford it so we had to stop before seeing any benefits.
- This may be worth looking into if you are the big fish and can afford the cost but as is typical with branding you never know how much of your advertising dollars are coming back into your pocket.
- At the end of the day I think I was more interesting in the prestige of being on the radio but I couldn’t afford it and neither could my business.
So there are a few things that worked and didn’t. I honestly thought this would be a quick post but I only covered about 10% of what I was going to talk about. I didn’t realize how many things I’ve tried over the last 5 years. Bottom line, nail down your ideal customer with laser clarity! Focus your efforts on getting in front of the perfect customer at the perfect time! Only after you have maximized that should you move onto other forms of advertising. You must also track every purchase source so you know what works and what doesn’t.
Next week I will post hard numbers for the last 12 months on some of our advertising. What I spent over 12 months and how much business each brought in. I’ll show what I pulled the plug on a few programs and how some new ones are performing.