How much should I spend on Advertisements?
I get this question all the time. Unfortunately, there is no set amount. It very much depends on your company, your competition’s spend, the industry you are in, the products/services you sell, your gross sales, your company size, new product launches, etc.
Getting an industry average number is not feasible, but anywhere from 2% to 10% of gross sales is not unheard of. But here are two important things to keep in mind when getting started
- START SMALL. It’s very difficult to predict the ROI on your Ad spend on a particular channel (Adwords, Banner Ads, Newspaper Ads, etc.), so take baby steps. Try out a channel with the least amount possible and see if you get any leads. For instance, you can try out Google Adwords for less than $50 to $100 and make a decision on whether it’s worth your money.
- DIVERSIFY. You don’t know if one channel would work better than the other until you try it out. So try out a few Ad channels, measure their ROI and then make a decision on which channel to invest money into. For instance, for Realtors, flyers work better than Adwords, since the intention is to establish a brand and not make a quick sale.
Twitter is tribe’s best friend
Twitter is an incredible medium for a tribe (Seth Godin). The three things important for a tribe can be found with Twitter.
1. Leader to lead the group – Brace yourself! if you have @followers, you have a chance to lead
2. @Followers who are passionate about a cause or simply have shared interests
3. Medium to communicate with each other
Want examples? How about the Iran Twitter revolution? or tweeting hotel manager?
SMBs out there… Your customers are your followers! you can potentially turn them into a tribe. Start tweeting, but keep it relevant.
Educate! Lather! Repeat!
Marketing a never before done product/service? Don’t forget the mantra! – Educate! Lather! Repeat!
If you are offering a product or a service which requires people to change their habits, then their first resistance is through the ‘why?’ question. For this you need to educate the consumer on features and benefits of your product.
Ever wondered why those ‘As-seen-on-TV’ products spend hours educating you on the benefits of the product? It’s all about education, deep education.
Besides, these Ads don’t educate you once and leave, they keep repeating it over and over again. Ever wonder why that is the case? Research has shown that on average people need to see an Ad 27 times before they will recognize the product.
Pricing your products/services through Floor and Ceiling concept
Pricing is as much an art as it is a science. There are two major concepts that needs to be taken into account before pricing – Floor and Ceiling.
Floor is your cost, such as, the cost of building a product plus management overhead plus other resource cost. You obviously don’t want to price below the floor unless you have a well thought out strategy.
Ceiling is the maximum price your customer is willing to pay for the product/service. But note that each customer can have a different ceiling, which is why many software products don’t offer a flat price. They will figure out the customer benefit before pricing the product.
Ideally, you want your product to be as close to ceiling as possible. And of course, you’ll have to take into account your competition’s pricing as well.
The art portion of pricing is really figuring out what your customer is willing to pay so you don’t underprice yourself. There’s a joke on pricing as an art which is an interesting analogy.
A customer walks into an optical store to buy a pair of glasses…
Sales person: It’s $100
Customer: Ok (says it without flinching)
Sales person: That’s per eye
Customer: Ok (says it without flinching)
Sales person: Transition lens is another $25
Customer: Ok (says it without flinching)
Sales person: That’s per eye
Customer: Ok (says it without flinching)
Sales person: Scratch proofing is another $15
Customer: Ok (says it without flinching)
Sales person: That’s per eye
Customer: Ooook (starts getting uneasy about the price)
At which point sales person has figured out the maximum price the customer is willing to pay and makes the sale.
For ideas on how to set an optimal price, read this great article from Joel Spolsky – Camels and Rubber Duckies
SEO – View your site through Google’s lens
If you know what SEO is, then you probably know the importance of keywords. You don’t have to litter your site with keywords that you are optimizing your site for, but it’s good to repeat the words a few times so search engines know that it’s not a passing reference. SEO lingo for this is keyword density.
A customer of ours, a spa finder service, wonders why their website is not ranking high for certain searches. They haven’t done any SEO in the past, but his site has been around for years and provides quality content.
To analyze and solve this, we did four things
1. Identify search terms that customers use
We used Google keyword tool and other services to identify common search terms for this spa finder service. Surely enough, the words ‘spa finder’ was at the top. Next step was to see if Google saw these words in our website…
2. Find out what Googlebot sees
We used Google webmaster tools to see what words Googlebot sees in their website. These were the top 5 keywords that Googlebot noticed
- spa
- locate
- massage
- home
- comfort
3. Visually check the website to see if the words ‘spa finder’ were used.
We checked the site for the words ‘spa finder’, it was mentioned, but just 4 times. Apparently, this wasn’t enough. So, we managed to add some more content around the words ‘spa finder’.
4. Finally, updated our sitemap to ask Googlebot to visit us soon.
Within a few weeks, we made peace with Googlebot as it started seeing the words ‘spa finder’. We patted ourselves on our back and moved on to other SEO tasks for our Spa Finder customer.
SEO – Whoever promises you the first page on google search is a crook!
That’s because they aren’t telling you the whole story. Your site can be on the first page, the first week or second week, but are you there for months together? After initial SEO setup, unless you constantly work on updating your site with relevant and quality content, external links, etc. you are not guaranteed the first page.
What if your competitors do SEO too? You just won’t be guaranteed the prime first page. It’s simply the laws of nature, if everyone does what you do, you loose your competitive edge and you are ALL at the starting line all over again.
SEO has many advantages, but if you want to benefit from it, you should understand that it’s a long term commitment. It involves parsing through analytics to understand which keywords get the most conversion (leads to customer conversion) and tweaking keywords, website content, links, etc. on an on-going basis.
No one can promise you the first page for months together, but if done right, you could be on the first page on and off and take advantage of your newly discovered leads.
Dead Shopping Complexes
Who doesn’t know that location is important for retail businesses, but some biz seems to forget the importance of it. It surprises me when even franchises make this mistake.
Opening a retail store in a dead shopping complex is worse than opening one in a not-so busy area. We all know of some dead complexes in our neighborhood. Here’s how you identify them
1. A good % of stores are not occupied
2. Old sign boards, not updated in years, with missing/unlit letters
3. Less than 25% of parking space is taken during busy hours
Why would anyone open a store in these dead complexes? Beats me! Case in point, Tapioca Express, a tapioca beverage vendor, which opened one in one of the dead complexes near my neighborhood.
Any shopping complex needs an anchor store to get traffic in. Even malls survive on this principle- Macy’s and Target in a mall act as anchors. This rule is not any different for a local shopping complex. If you want to open a store, and if there is no anchor stores in the desired complex and you still want to open one there, make sure you check off these major items…
1. There should be very high demand for your products/services
For instance, open an Indian grocery store in a neighborhood with significant Indian population.
2. Your competition doesn’t have a retail location nearby and in a better location
If there are 2 Szechuan restaurants close by and if you are the 3rd opening in a dead complex, well… the odds are against you.
3. There are more shops from a similar industry in that complex.
If you are opening a restaurant, having a grocery store and other restaurants in that complex helps drive additional traffic
Of course, there are always exceptions to the rule, but I wouldn’t bet my life savings on those exceptions.
