When tough times come around,companies generally slash advertising spending.
Advertising is a particularly easytarget for cost cutting because few companies have developed reliable ways totrack or predict return on investment (ROI). Instead, advertising budgets areoften calculated strictly as a percentage of revenues or based on the previousyear’s budget, with little attempt to determine how much is needed to addressmarket goals. This is certainly the wrong approach.
Calculating the costs of amarketing program is an important part of determining the program’s ROI.Identifying the costs is actually one of the easier parts. The far moredifficult component of ROI is determining the effectiveness of the marketingplan.
How is effectiveness defined? Themost obvious is an increase in sales volume, but others will say effectivenessis actually the number of leads generated by a marketing plan. Here are some ofthe ways you can determine effectiveness: number of mail pieces, number of newcustomers, number of Web hits or visitors, awareness changes and the list goeson and on!
Advertising Age magazine did astudy with 222 marketing professionals, which had a confidence level of plus orminus 6.6%. That study unveiled the fact that network TV was the worst mediafor proving return on investment. Direct mail was seen as the best media forproving ROI with accountability. Forty-two percent of respondents said it wasthe best, with the Internet coming in second, with 19% of the vote.
Another study conducted by TargetMarketing magazine revealed that 42% of advertising budgets in 2007 would bespent on customer acquisition, compared to 47% in 2006. Direct mail was notedas the best ROI generator, at 32%, with e-mail being second, at 22%. As far asthe best media for driving ROI on customer retention contacts, 35% listede-mail as their top choice, with direct mail closely behind at 31%. The studyalso noted that 41% of companies intend to increase their direct-mail budgetsfor 2007, with just 10% planning on decreasing. The rest – 49% – plan to spendthe same this year.
Enough of the statistics. Goodwork, fair prices, quality technicians, and a clean shop may produce asatisfied customer, but a satisfied customer is no longer a guaranteed repeatcustomer.
Each year, it is estimated thatbusinesses lose an estimated 15% to 20% of their customers. So, it is safe tosay that you must continue advertising or your customer base will diminish eachyear.
Plan your advertising wisely.Direct mail offers demographic and geographic targeting, making the impact ofconsistent advertising cost effective. It offers a higher percentage ofresponses and is the most trackable media available, making direct mail thebest ROI generator among all forms of media.
– By Angie Nielsen, CEO, MailAmerica, Inc.
