Hard Learned Lessons About Advertising for Small Businesses

Everything in business is a learning process and advertising is no exception. Advertising promises to reach new potential customers and create a brand or image for your company in the public’s eye. What happens when the results don’t meet your expectations, you think back about where things went wrong.

Lessons Learned

1. Trust but verify. Often advertisers will try to sell you ad space based upon the size of their audience, the geographic area of distribution, the frequency of publication, and so forth. This kind of information tells you nothing about their effectiveness as a channel. A good approach is to find previously published advertising material and check with the companies that advertised (even if the publication provides references). If you ‘re considering placing an ad in a tradeshow program guide, obtain last year’s guide and call the companies that advertised to learn what their results were. Media salespeople always want to sell long-term contracts. Even if the discount is great, avoid such contracts until you know whether the channel works.

2. To gauge the appropriateness of any media for your ads, check out who their advertisers are now. Have you ever noticed that ads on highway billboards and public bus panel are always the major players in some industry? How many local businesses advertise on a highway billboard? How many are instead Ford, Toyota, IBM, Microsoft, and Apple? There is a reason: these channels are very expensive and cost prohibitive to small companies.

Note when competitors or similar industries are running their promotions. They have a lot of experience advertising to the same audience and know best when to reach the targeted customer. Car dealers know to advertise late in a week because most people buy cars on weekends. Weight loss programs don’t advertise late in a week because no one wants to start a diet on Friday. Watch your email box. When do you receive notices about online store offers, newsletters, or notices about tradeshows?

A medical clinic and day spa service business advertised in the local newspapers and through email marketing. The clinic tried each of these approaches for a year or more before they disappeared from both media. Look back at previous advertisers and see what they did; it’s an indication of how well the media worked for them.

3. If readers get something free, it’s not as effective for advertising as a publication with paid readers. All trade and newspapers want to tell you about how many readers they have, but many give away their publications. The readers don’t necessarily look at or read such publications. My local town newspaper boasts a large circulation because it is mailed without charge it to all businesses and everyone’s houses. Likewise, many online information sites have free email newsletters, but that doesn’t mean the recipients read the newsletters. Similarly, organizations will report that a percentage of their membership rolls have particular demographics, but it doesn’t follow that those members have paid for those memberships. Some organizations offer free memberships to certain individuals just to be able to use them to promote the group for advertising rates. Advertising rates reflect the audience size. The more people, the higher the rates. Media buyer beware!

4. Large companies tend to advertise in the largest reaching media. They will place ads in The Wall Street Journal or Time magazine, but not in local or regional publications. It’s easier and more manageable for them to deal with national media organizations than a gaggle of small, niche, or local media companies. By contrast, targeted and niche marketing works best for startups, which have a limited budget. It’s better to dominate a subset of customers in a niche market or a locality and to be pervasively known within the niche than it is to build a little awareness everywhere.

Whenever the target audience has a lot of choices, it’s difficult to pinpoint the most promising ones. It’s harder to be effective in TV than in radio. In television, viewers are loyal to a program, not to a network. Most viewers have hundreds of channels available and flip between them looking for an interesting show to watch. With radio, listeners usually have their favorite three stations and change between these few.

The concepts of frequency and reach apply equally to newspapers, television, radio, or the Internet. It’s more effective to dominate a time slot or customer segment. Instead of advertising in twenty-five magazines, advertise in a few and give the appearance of being a national brand to that customer segment.

5. Advertising strategy must be consistent with pricing. The average selling price of one startup’s product was $1,200, but the advertising cost to obtain a single lead was over $300. Competitors were spending less than $156 to obtain an actual customer. By contrast, if the product price is $25,000 and the advertising cost to obtain a sale is $300, then the producer may have a viable marketing strategy. The key to a viable strategy lies in the advertising cost per lead and advertising cost to obtain a sale, not in the size of the overall advertising budget. When choosing a promotion approach, consider whether it can be sustained long enough to prove the assumptions and whether if it fails, there is enough budget left to try a different approach.

6. Advertising is about trade-offs. There is no right answer; many approaches can achieve the same results. It is, however, a zero sum game. Location is a good example. A location, either storefront or tradeshow floor position, can give a startup more visibility with passer-by traffic. With more visibility, less can be spent on paid advertising to get customers to the location. Likewise, there can be trade-offs between advertising versus labor and travel costs associated with direct marketing and sales.

7. On a whim, I found a useful (and free!) Silicon Valley marketing group through Meetup. The peer group organization I discovered invites professors from the local business schools, local advertising and marketing experts, and SMB companies to relay their experiences. The practical and specific advice and discussions on strategies and how well they’ve worked have made the group an invaluable resource.

8. An agency or a media buyer will be expensive and most won’t even handle small companies, but despite the costs, it’s still less expensive than the DIY method. The reason is because they will be able to “ramp up” faster than you can without them. Agencies have many clients and are paid on commissions for the media buys. They are not going to get you better pricing, but they can get better positioning for your ads as well as help you with changing the original contract if the ads don’t work as expected. Advertising is an art. Even an agency will need to experiment with your product and company, and this is both a time consuming and costly trial and error process.

When dealing with an agency, startups need to be very proactive. They need to track the results diligently and feed them back to the agency. What worked well five years ago may not get results today, and what worked for a similar product might not work for yours.