Today I want to share two examples from our advertising portfolio.
The first I want to talk about is Angie’s List. Businesses can create free profiles and members can to fill out reviews on these companies. This does not cost the company any money and it is possible to gain some clients just by great service and word of mouth. Companies can also choose to advertise with AL for some premium services that will put their brand at the top of the list.
When a member searches for your service they get a list of companies. Premium companies will show up at the top of the list and have the ability to create offers or coupons that the free listings don’t. Premium companies cannot alter their reviews in any way and must maintain a B rating or better to advertise with AL so the integrity of the process is maintained.
We started advertising with AL in the middle of 2012 and didn’t see major results for about 6 months when our reviews started to come in. Once we had 3 or 4 good reviews we started to see a lot of traffic. Even better was the types of people coming in the door. Our AL customers on average spent 20% more than our average customer in 2013 and 80% more in 2014. I attribute this partly because people with larger upcoming repairs are more likely to seek out a highly rated repair facility than someone coming in for regular service so these were customers with lots of repairs coming up soon.
- As of right now AL members make up about 10% of our total business.
- In 2013 our total cost of advertising was around $6500 and total revenue generated was $47,698.62 for the year.
- In 2014 our total cost of advertising was around $7800 and total revenue generated was $41,118.19 for the year.
In our industry the gross profit is around 50% (before rent, utilities, insurance, advertising, training, uniforms, etc) so we need to make sure our advertising cost is less than 1/2 the total revenue generated. As long as the advertising cost is lower than the gross profit we are able to put money in the bank to pay for all our other expenses and we come out ahead.
As you can see, the cost to advertise is a lot lower than the revenue generated which is why we continue to use AL. It was surprising to us how well it has worked years later. Now we have 58 reviews with an A rating and we are Super Service Award winners for 2012, 2013, and 2014.
The key to making Angie’s List work is to find out who is a member and treat them like superstars! Obviously as a business owner you try to treat all your customers like they are the most important person in the world but some times we have bad days and we just don’t have the energy, but EVERY member gets 4 emails and phone calls to fill out reviews on your company after they look you up so there is an extremely high chance that person is going to fill out a review that hundreds of potential future customers will see one day.
Treat them like Superstars no matter what!
The second company I want to highlight is our local Town Calendar.
This is an advertising program run by a local person who we have known since we first opened 5 years ago. She is pretty awesome and one of the nicest ladies you will ever meet. Every year she puts out a local calendar that is sent to every home in our town with important dates and coupons for local business on the bottom. She sells these coupon sections for a couple hundred bucks each to cover the cost of printing and make some profit.
We have tried a few different coupons and had very mixed results.
2012 – Cost: ~$1100 for four coupons in March, June, Sept, Dec for $9.95 oil changes
Results: 118 total visits, $8,338.51 spent for an average of $70.67 per person
2013 – Cost: ~$500 for two coupons offering $10 off any service over $100 or $5 off any oil change.
Results: 2 total visits, $106.74 spent for an average of $53.37 per person
2014 – Cost: $350 for two coupons offering 10% off any service
Results: Depends. What we found out is that the people using the 10% coupons were already customers of ours. That means they were getting discounts on work they already were probably going to pay for any way. If you look at new customers in 2014 there were only 5 and they spent $428.81.
If you look at the total spent in 2014 and assume they only came in because they had the coupon it could be as high as $4,456.13 but that really isn’t a good indication the program worked because those were all people who came to us in 2013 and were already customers. More than likely the 10% coupon cost us $500 in discounts we probably wouldn’t have given otherwise.
We found the only way this advertising worked was to offer a stupid cheap oil change for $9.95 and have 118 people come in. Of those we got several lifetime customers that have spent $25,007.27 over the last three years. The problem with that figure is the amount of time it takes to get those customers and what they spend. We had to do 118 oil changes that lost money to gain customers that spend 42% of what our average customer spends.
That was fine in 2012 when we had lots of free time but now we’re a busy shop and that is time we could spend with our loyal and regular customers! We would need to put off customers who spend a lot more money to service 100 coupon shoppers to try to get 10 return customers that spend less than half as much over their life.
In 2015 we did not repeat our coupon offers.
Hopefully those two examples shed some light in how we make advertising choices. It’s not just about attracting customers or generating positive cash flow. Targeting your ideal client is important too!
What ever you do, make sure you have a system to track every client so you can go back on a regular basis and see what works and what doesn’t.