How Do I Get My Advertising Costs Down?
Photo by Mikael Blomkvist

How Do I Get My Advertising Costs Down?

First place to focus is by reducing the cost of getting a customer and knowing the most cost effective place to spend your money on getting them.

But you can’t get your costs down, unless you know what they are in the first place. That might sound obvious, but it isn’t as simple as I spend £X and I want to spend less. There are some key pieces of information you need to get to grips with.

?Cost Per Customer

(We’re not talking Cost Per Click - that's a different metric)

In a small business, especially if you’re selling a product, there is a very straightforward measurement that underpins everything, it’s knowing what it costs to get a customer and how to constantly review that cost and reduce it. If you don’t know, it’s essential you make it a priority to find out.

Total Advertising and Marketing Cost over X weeks

divided by

Total Number of Customers over X Weeks

= Cost Per Customer

?I worked with a company that sold beautiful, expensive bespoke furniture, they had a full order book and so measured their success on that basis. It really was that simple for them. But they really hadn’t figured out why they weren’t making money, which incredibly isn’t that unusual for a small passionate business.

Actually, when pointed in the right direction, it wasn’t that difficult to work out. An advertising spend across lots of different medias, Google SEO paid for, Magazine adverts, paid for social media and couple of paid sponsorships, cost them in excess of £120k a year. In that year they averaged 3 customers a month and the average spend of that customer was £4.5k.

My lovely furniture makers thought Woo Hoo! we’ve made £162,000, more than we spent on advertising, so £42k profit, happy days.

Well, what can I say? It was costing them over £3,000 to acquire each customer and that £40,000 profit was gross, material costs, running costs, wages, all had to come out of that £40,000.

?Reducing Your Cost Per Customer

Getting your CPC down isn’t hard, but it does need dedication to keeping a record of your advertising and marketing costs and what specifically it was that they responded to – a sponsored ad on Instagram, a magazine advert or any other channel you’ve been using. The next step is to work out what isn’t working and stop spending money there.

?1.????? You Need To Know What Marketing Channel Your Customer Responded to:

  • Online Order Form - list all the current places you’re promoting the product and ask them to tick where they saw you.
  • Phone Orders – ask where they heard of you and make a note with each order.

2.????? Record that Information With the Customer Order:

(How you do that is up to you – either manually copying data onto a spreadsheet or integrating into existing software).

An example of what basic data you might collect:

Ad Source

No of Weeks/ Ads

Total Cost of Advertising ???????

No of Sales

Average Cost Per Customer £

Cost Per Ad Source £

With this very simple information you can see what performs well and what performs badly and start?planning accordingly. For example, from your results data and where you've been advertising you might decide:

·???????? Ditch spend on Google

·???????? Increase spend on Instagram and Facebook

·???????? Magazine Ads are working well, but see if it’s possible to renegotiate the rate or try different size ads to get costs down.

·???????? Based on the current average cost per customer, make it a goal to see if you can reduce that cost over time by making the advertising working well, work even harder.

·???????? Try new advertising channels, but now you know what the maximum you should pay is, ?to deliver your ideal cost per customer.

Making Your Adverts Work Harder

I could write a book on the nuances that make for a really great ad (actually many people have – check them out), but regardless of what your ads look like or what they say, you can evaluate what’s working and what’s not.

Record your customers by ad and vary what you say, so you can see what works best. Try testing different ads with the following changes:

  • Headlineo?? Test putting the price in the headline vs no priceo?? Test your existing headline vs a new headline (rest of the ad the same)
  • Imageo?? Test the same ad vs different image (No copy change)
  • Copyo?? Test the same ad vs different copy (No image change)
  • Producto?? Test one product benefit vs another benefit Only do one test at a time, but if you record the responses to each specific ad you will build up a picture of what your customer responds to best. With that information you can start to produce advertising and marketing messages that are more likely to generate more sales amongst your target customers and, therefore, make your advertising spend much more cost effective.

?

My Challenge to You:

3 Actions You Can Take in The Next 7 Days.

-????????? Find out if you already have the data available to you to work out your Cost Per Customer and if you don’t, work out how to get it.

-????????? Put all the relevant information into a format you know you will work with, spreadsheet, existing software, A4 notepad and work out what your Cost Per Customer actually is.

-????????? Take a look at your existing ads, decide one thing you want to find out (best price/offer/message etc) and create a test ad for your next campaign.

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