Advertising: When it works, when it won’t

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Marketing Strategy by Nick Youngson CC BY-SA 3.0 Alpha Stock Images

By Mark Buckshon

Should you advertise to find new customers? Since my business earns 95 per cent of its revenue from advertising, you might expect a totally biased answer: “Yes”.

However, I realize that advertising, while a useful resource in many situations, is not the magic answer for most construction industry marketers.

            The advertising referred here relates to marketing, not the necessary legal notices you must publish under the Ontario Construction Act.

You need to know when and how to advertise before spending your hard-earned money. And you need to be wary about any sales representative who suggests advertising in their publication, directory, or electronic media will provide a quick fix to your marketing problems.

Consider the results of a poll I conducted for more than a decade within the  Construction Marketing Ideas blog, which showed that 74 per cent of construction companies discovered most of their new business through repeat and referral relationships. (While the poll is offline now, I doubt the story has changed much from when it was live.)

Only 10 per cent say advertising is their major source of new business. These results are significant, because advertising can be truly costly – you can spend hundreds, even thousands of dollars on a single print ad, for example, and receive not a single call in return.  The  money just disappears.

Measuring your results and controlling your costs

Still, advertising has real advantages if you can manage and measure your results and control your costs. With an effective advertising campaign you will enhance your brand and attract new clients – and if you know what you are doing, you can dial up or down your advertising volume to ensure a steady flow of qualified leads – a real advantage in a recession. With online and pay-per-click or inquiry advertising, you also can avoid some of the biggest problems of conventional advertising – the need to commit large sums of money up-front for uncertain results.

Other advertising methods, including print media trade publications (like ours), trade/home shows, direct mail and electronic newsletters, and even the Yellow Pages, have their advantages, in certain circumstances.  I’ll explain these in the pages ahead.

Why not rely on referral and repeat business?

Consultant Michael Stone believes too many contractors rely too much on referral and repeat relationships, and advertise too little.  He has a point, in that if your advertising campaign is well designed, and correlates solidly to a proper sales lead and calculation process, you can measure your results effectively, and then control your flow of business by attracting new leads and reminding former clients of your presence.

His point is that relying passively on repeat and referral business is a recipe for business disaster, especially in hard times. You can of course design your advertising to enhance and encourage repeat and referral orders – and this will probably be the most effective advertising you can do.  You should, as your first priority, engage your previous clients in your advertising and systematically encourage them to refer new business to you.  (See Chapter 2-1 for more observations here).

How much should you spend on advertising?

Stone advocates that you advertise in at least six different ways and observes that contractors, on average, need to spend at least five per cent of their overall sales on advertising. However, his definition of ‘advertising’ is broader than mine – the five per cent number is valid for overall organized marketing initiatives rather than just conventional paid advertising.  (He counts your website and business cards, along with organized referral and repeat business development to come up with the five per cent recommendation.  I would add organized media relations and association membership fees to this total.)

This suggests if you are a contractor with about $1 million in business volume you should budget about $50,000 for organized marketing and advertising. If your business is expanding into new areas, you will need to spend a higher percentage than if you are maintaining your business/brand – and if you are just starting up, you will need your expense to be much more in sweat than cash if you are to remain in business for any length of time.

You may find you can achieve great results with relatively modest advertising investments. Consider that retailing giant Wal-Mart and its strongest competitors allocate two per cent or less of their revenues on advertising.  Regardless, it is wise to have a budget and to plan your expense.

Consider your current clients first

Besides engaging your current clients in referral and repeat marketing initiatives – which will provide you the highest return on your marketing investment – consider asking them to tell them which media they read, watch, and respect.

Similarly, check with non-competitive peers in other markets similar to your demographically, either through online forums or (more effectively) through your trade association network. You may find you can combine this research with a family vacation and write off many of your travel costs.

Certain types of media work well in some markets, rather than others. For example, a glossy high end magazine may produce great results for home renovations in Toronto, but a similar publication might be ineffective in Thunder Bay.  You need to learn from your clients and colleagues what is most likely to work, and what won’t, before communicating with advertising sales representatives, or taking their calls.

Where advertising really works

Advertising can be effective in these circumstances:

You provide a specific service that fills an occasional need

If you are a roofer, sell windows and doors, pave driveways or install siding, clients need your services occasionally and in emergency situations. Advertising can help you capture this business when they are ready.

You wish to maintain and enhance relationships with your existing clients

My business sell much of its advertising this way. Construction-related businesses work with us on special editorial publicity feature profiles (see the section about publicity and media relationships) and, with their consent, we sell advertising to the featured companies’ suppliers. Here, the advertising supports your existing client relationships, while expanding your credibility through positive association with this message: “We’re good enough to supply this credible business, so we must be good enough for you.”

You are protecting and preserving your brand

This is the type of advertising that may, on the surface, seem to be the most expensive and least effective, and I believe media outlets thrive on this soft advertising since often large and expensive ongoing brand-focused advertising campaigns rarely generate little in measurable, additional sales.

Nevertheless, done right, and in conjunction with other strategies to ensure your clients are well served and treated, this form of advertising can increase competitive entry barriers and help you preserve and enhance your marketing power.

You can also score strategic successes against your competition if you brand-focused marketing with natural word-of-mouth and high product/service quality. (Consider the successful Apple advertising campaign poking fun at the nerdy, bloated, Microsoft Windows/Vista operating systems.)

When advertising doesn’t work

Advertising is rarely effective when:

You fail to test, measure, or understand why you are advertising

I’ve seen much money wasted on advertising, especially in low circulation, poorly produced publications which no one reads.

Recently, I analysed some so-called police journals sold by telemarketers.  The police associations may receive small referral fees, but the magazines have little  content and relevance to law enforcement officers. I discovered these ineffective publications earn most of their advertising revenue from local construction businesses. Maybe the contractors and sub trades advertising hope for more police protection, but I can’t see how lining the pockets of telemarketers really helps your business security. This advertising is certainly wastes your marketing budgets.

You offer a professional or business-to-business service (unless framed in an editorial context)

Although some large engineers, architects, and lawyers advertise to support their brand, this is expensive and your money could better be directed to improving your client experience, recruiting top notch professionals, and increasing your trade association/group marketing activities.

The exception to this rule is when you discover a valid linkage between advertising and editorial publicity – the advertorial.  In the right media (and this should only be in high quality publications distributed to the people you really want to reach), these advertorials can provide  credibility for your professional practice while allowing you content and scheduling control unavailable in regular editorial coverage. However, you should be satisfied that the media reaches and is respected by your current and potential clients before rushing into any campaigns.

You are sold advertising, rather than purchase it

Most of the time, you should initiate rather than accept unsolicited inquiries from advertising media. You need to plan and strategically consider how and when to advertise, not respond to media representative promises.

You also need to test their credibility. Do they have real evidence of their media’s effectiveness, value, and reliability?

A good way to separate the phony sales claims from real results is to ask if the publication or media outlet will stand behind their claims and guarantee results.

Most will come up with excuses to decline such a commitment. A few will take the risk, knowing they are effective, or at least they will provide you with enough of an overall value commitment that you can be confident that you will receive your money’s worth for your advertising investment.

(This is our philosophy– our advertisers will, on request, receive enough independent free marketing consulting services to more than offset their advertising investment with us, regardless of  immediate results.)

Leave 10 per cent for extras

While you should plan your advertising and be generally wary of inbound media sales inquiries, when you set your annual advertising budget, keep some money aside for special circumstances: The off-the-wall idea might just work; or you may want to publish some advertising in support of your best clients.

A good rule of thumb is to reserve about 10 per cent for spontaneous and non-budgeted advertising options. This gives you room to try out new media during the year, without tearing apart existing campaigns.

Maintaining your discipline in hard times

When economic conditions deteriorate, you may be tempted to pour money into advertising to find new business, or cut your advertising budget drastically to preserve cash flow. Both solutions are generally unwise. You should of course review your expenses – you may have habitually continued advertising in ineffective media and can wisely reallocate your resources.

As well, you will need to begin planning advertising if you are to survive hard times: Just think things through carefully and if the advertising costs a significant amount of money, satisfy yourself that you will really reach your clients and you know similar advertising is effective for non-competitive businesses in markets similar to yours.

In  the next article, you’ll learn some ideas about how to get better results, with less money, from your advertising, and how to decide which media to use, and when.

            This text is excerpted from Construction Marketing Ideas: Practical Strategies and Resources to Attract and Retain Clients for Your Architectural, Engineering or Construction Business, which is available at Amazon.ca or through the Construction Marketing ideas blog.

 

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