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The options for small business advertising can be confusing. At the end of the day you want to know If I spend X on ads, will I get X+Y in net new sales? Investing in ad channels without proper planning and preparation can be costly.
I recently had a client approach me with the idea of sending out flyers via EDDM (every door direct mail). This effort would be his first attempt at any mass advertising. His business primarily serves commercial and residential clients with various property maintenance and restoration services, with mold removal being an area of specialization.
This idea made me realize he needed to think through the concept effectively. It is not an uncommon approach for many owner-operators and small businesses. People tend to go with advertising that they are familiar with regardless of whether it is the most effective ad approach based on their target market, the buyer’s journey, seasonality, ad alternatives, and any other relevant but often overlooked considerations.
Here are a few questions I advise anyone to consider carefully before implementing any significant ad program and dollars. Addressing these seven critical questions up front can help ensure your advertising campaigns’ effectiveness.
What solution or desire does your business provide members of your target audience?
Understanding the problem your business solves is the foundation of a successful advertising campaign. By identifying the target audience and their needs and pain points, small companies can develop a unique value proposition (value prop) that resonates with their target audience. Your value props will help you tailor your messaging to meet their needs. For example, suppose you operate a home cleaning service. In that case, your target audience might be busy professionals who need more time to clean their homes. Your messaging might emphasize how your service can save them time and reduce stress.
Do you have a pricing strategy, and how does the business generate income?
The second critical question that enterprises must address is understanding how their business generates income. This understanding allows small companies to develop a pricing strategy that maximizes profitability while remaining competitive. Targeting the right audience with ad campaigns is crucial to generating a return on investment (ROI). Suppose you operate a restaurant. In that case, you might identify your highest revenue-generating products as entrees and develop a pricing strategy that emphasizes those items. Your advertising campaigns might feature those entrees prominently, with messaging that emphasizes their delicious taste and value.
Identifying which parts of the business are not profitable is equally essential. By conducting a cost-benefit analysis and developing strategies to increase revenue from underperforming areas of the company, small businesses can ensure that advertising campaigns target higher-profit regions of the business. For example, if you operate a clothing store, you might identify that your accessories category is less profitable than your apparel category. You might develop a strategy to increase revenue from accessories, such as bundling them with apparel items or offering promotions that incentivize customers to purchase accessories.
How can you maintain positive cash flow while investing in advertising?
Positive cash flow is the desired state for any business, and it’s crucial to ensure that advertising campaigns do not negatively impact cash flow. Developing a cash flow statement and budgeting advertising campaigns accordingly can ensure that small businesses remain financially stable while investing in advertising. Suppose you operate a small business that sells handmade jewelry. You might develop a cash flow statement identifying your revenue streams and expenses. Budget for advertising campaigns based on your available cash flow and identify potential sources of working capital to ensure that cash flow remains positive.
How can you develop an effective pricing strategy?
Developing an effective pricing strategy is critical when planning an advertising campaign. Small businesses can align their advertising campaigns with their pricing strategy by conducting market research, developing pricing strategies for different products or services, and adjusting pricing regularly to remain competitive and profitable. Let’s assume that you operate an online retailer that sells pet supplies. In that case, you might conduct market research to identify competitive pricing for pet food. You should expect a change in the pricing strategy to maintain competitive prices while remaining profitable. Your advertising campaigns might feature competitive prices with messaging emphasizing your value commitment.
How effectively do employees generate revenue?
Measuring employees’ effectiveness in generating revenue is crucial when planning an advertising campaign. Small businesses can ensure that employees generate revenue by developing metrics to measure employee performance, identifying top-performing employees, and using their strategies to improve overall employee performance. In this example, the business might be a fitness studio. In that case, you might develop metrics to measure the effectiveness of personal trainers in generating revenue. You might identify top-performing trainers and use their strategies to improve employee performance. Your advertising campaigns might feature those top-performing trainers with messaging emphasizing their expertise and results-driven approach.
How can you improve customer retention rates?
Favorable customer retention rates are a surefire way to contribute to the success of any small business. By developing a customer retention strategy that includes regular communication and engagement with customers, using customer feedback to improve products or services, and using incentives or creating loyalty programs that stimulate repeat business, small businesses can ensure that their advertising campaigns generate repeat business and maximize customer lifetime value.
For a business such as a subscription box service, developing a customer retention strategy with regular communication with subscribers, such as email newsletters or social media updates, is a viable ad strategy that would yield exceptional returns without materially impacting your cash flow. Use customer feedback to improve the products included in your subscription box and develop loyalty programs or incentives, such as discounts or complimentary products, to encourage repeat business. Your advertising campaigns might then feature those loyalty programs or incentives, with messaging that emphasizes the value of your subscription box and the benefits of being a loyal subscriber.
How can you align your small business advertising campaigns with your overall strategy?
One crucial element of effective advertising campaigns is ensuring they align with the company’s goals and values. Small businesses should view advertising campaigns as something other than standalone entities but as part of a larger strategy.
By identifying and addressing these seven critical questions, small businesses can ensure the alignment of their advertising campaigns with their overall business strategy.
These seven critical questions are crucial in planning an effective advertising campaign. Understanding the problem your business solves, how your business generates income, which parts of the company are not profitable, and maintaining positive cash flow ensures that advertising campaigns create a return on investment. Developing an effective pricing strategy, measuring employee effectiveness, and improving customer retention rates maximize revenue potential and customer lifetime value.
Other Advertising Considerations: Choosing the Appropriate Ad Channel
Smaller businesses typically have lower discretionary budgets than larger firms. Lower discretionary budgets leave less room to experiment with various ad channels and increase the importance of diligence before jumping into the fray.
While traditional advertising channels, such as print and television, still have a place, digital advertising channels offer several advantages. Digital advertising channels, such as social media and search engine marketing(SEM), provide some of the most effective small business advertising options for targeting your ideal customer with specific messaging and budgets. These channels also provide valuable data and insights that small businesses can use to optimize their advertising campaigns continuously.
It’s also essential to monitor and adjust advertising campaigns to ensure effectiveness. Small businesses should establish clear goals and key performance indicators (KPIs) to continually measure advertising campaigns’ success. Based on the results, decision-makers can often adjust their advertising campaigns to maximize their return on investment.
In conclusion, carefully planned and strategic investing in advertising increases the likelihood of success in advertising. By addressing these seven crucial questions and implementing the necessary strategies, your business can develop effective advertising campaigns that generate a significant return on investment. Small companies can maximize profitability, achieve business goals, and succeed in today’s competitive marketplace.
Small Business Advertising References:
Dunn, C. W. (2016, December 13). 8 Powerful Ways to Market Your Business on a Limited Budget. Entrepreneur.com. Retrieved March 30, 2023, from https://www.entrepreneur.com/growing-a-business/8-powerful-ways-to-market-your-business-on-a-limited-budget/286171
Kumar, S. (2021, July 13). 10 Tips to Boost Employee Productivity and Skyrocket Performance. Entrepreneur.com. Retrieved March 30, 2023, from https://www.entrepreneur.com/living/10-tips-to-boost-employee-productivity-and-skyrocket/375856
Matthew-El, T., & Bottorff, C. (2022, August 22). 14 Customer Retention Strategies That Work In 2023. Forbes.com. Retrieved April 4, 2023, from https://www.forbes.com/advisor/business/customer-retention-strategies/