What’s your Advertising ROI?

April 14, 2009 at 6:00 am 4 comments

Creative Commons License

Creative Commons License

This week we are covering 3 common pitfalls that wedding professionals make in their businesses.  Today’s topic is advertising and making sure it’s paying for itself (and then some!) Small business owners sometimes invest in advertising that does not result in sales.  How can you ensure that you are not falling into this trap?

Calculating your Return on Investment

A few weeks ago we discussed promotional strategy and how you can track your sales to different methods of promotion.  Tracking how your customers find you is the first step of calculating Return on Investment (ROI) and you can read more about it here.  The next step is to do a little math.

The calculation is easy:

Take the $ amount you receive (income from an ad) and divide by the $ amount you pay for that ad (expense of the ad).  This is your ROI.  Here are two examples:

$100 earned from ABC ad
$1000 paid for the ABC ad       =   0.10 Return (or 10%)

$10,000 earned from XYZ ad
$1000 paid for XYZ ad              = 10 Return (or 1000%)

Over time, you’ll be able to determine these for all of your advertising outlets.  The hardest part is tracking the information to determine how your clients came to you.  Once you have a system in place, the math is easy.

Analyzing ROI

If you are paying more than you are earning from an advertising, you probably want to consider why you are paying for this ad. Here are some things you can ask yourself if an ad is not performing for you:

  • How much time do I want to invest (in addition to dollars) until I see a return on my investment?
    There is usually a period of time that each business owner is willing to invest before pulling an ad that does not perform.  This period is usually 3-12 months and also largely depends on the dollar amount of the advertising.  Make sure you give the ad enough time to perform, but that you are honest with yourself about terminating an ad that has seen it’s course in profitability.
  • Is this a valuable relationship to my business that is an important investment?
    Often, an ad will expose you to a number of opportunities available to you that are not available to non-advertisers.  For example, a local bridal magazine will typically have numerous events year-round for networking within your community.  The cost of this ad may be the cost of those networking opportunities and not necessarily the direct revenue you receive from that ad.
  • Is there an intangible value associated with the ad?
    Sometimes, there is an intangible value that you have associated with the ad.  For example: an ad in a magazine may not be easy to track direct sales.  However, you may feel that the cost of that advertising is important to building brand awareness on a much broader level.
  • What is my expectation for ROI?
    For some people as long as the ad pays for itself, they feel that it has done it’s job.  (An example of this is paying $1200 for an ad that brings in $1200 in sales.  What comes in = What goes out.)  For some people an ad must exceed it’s cost.  And, for others, they take a look at the top performers and adjust their expense budgets accordingly.

Advertising Evolution

Calculating ROI on your ads is not something that you do once and move on.  It’s something that you should continually monitor to ensure that ads continue to perform.  When I started mmm… paper in 2004, I only had enough budget to invest in one website ad.  That ad performed outstanding in the first several years and resulting in revenues of over 10 times the cost of the ad.  However, over time this changed and I started seeing diminishing returns.  Sadly, I made the decision to stop paying for this ad.  It was important for me to put those advertising dollars in promotional outlets that were performing.

Tomorrow, we’ll be talking about the third common wedding pro mistake: lack of balance between work and play.


Entry filed under: Excercises, Market It, Sales, Strategy.

3 Common Mistakes that Wedding Pros Make Balance: harmony between your biz and your life

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