Why It Gets Frustrating

Let me give you an example of why my work can be frustrating. 

Suppose a client has two advertising options.  I have tracking results for both options.  In one option an advertiser pays less for his ads, but he gets fewer leads.  That might seem to be ok for a business on a budget, right?  Perhaps the business isn’t willing to risk much at this point and they just want to ease into a program to see what results they will get. 

It might make sense for this business to start with a conservative advertising program.  Maybe.  First let’s look at another business considering the same two ad plans.

Let’s the second business has been advertising for years and they decide they need to reduce costs so they have decided it makes sense to reduce ad save money.  I have the same tracking and results to share.  It would seem to make sense that a smaller advertisement would result in savings, right?

Wrong.  Or I should say not necessarily.

You’re only going to save money with advertising cuts if you are losing it by having the advertising in the first place.  In that case you need to think long and hard about whether you shouldn’t just cut it all.  If you’re spending a furtine trying to selll bikini’s in Nome, you might have something other than poor advertising to blame…you have a poor advertising decision.

Or perhaps you’re spending more than you need to spend.  If you’re the only bikini dealer in Nome, you might not need a billboard on every street corner and an ad on every page in the newspaper.  If your advertising costs exceed your potential revenues, your wasting money.  If you spend a million dollars advertising in a half million dollar market, you’re going to be disappointed.  You have to look out for redundancy, too.  A million dollars in sales on a $500,000 budget isn’t as good as a million dollars in sales on a $250,000 budget.

So what do you?  You get a ad exec or rep you can trust…and maybe this is where I am losing the game!  Let me explain my example from the yellow pages phone directory advertising world.

I have two ad plans that we have tracked.  For the sale of simplicity let’s say that Plan A costs $100 and results in an average of 5 leads per month.  Plan B costs $400 a month but results in an average of 100 leads per month.  Which is going to “save” you money?

If you’re the new advertiser and you want to start slow, perhaps you’re willing to pay $20/lead and your business opportunities can justify that.  Let’s say your closing ration is very high on a product that has a profit margin high enough to get a return on your investment.  There are scenarios where you want to play these odds with an untested advertising product.  However…

Let’s say you’re the existing advertiser and you’re already the hypothetical $400/month getting 100 leads.  How does reducing your investment help you?  How does moving from $4/lead to $20/lead make any sense?  If you are not closing enough deals at the $4/lead rate to justify the $400/month plan, how does going down to the $100 plan improve your odds?

Buying down is a common mistake people make in yellow page directory advertising.  Leads are like commodities.  If you can get them at a lower cost, go for the lower cost.  Often that happens in a phone directory simply because you invest smarter.  If you need gas and you see on one corner a station offering gasoline for $2.00 a gallon and across the street another station offering the same gasoline for $2.50 a gallon…where are you going to go? 

This example is a simplified situation that exists in many larger phone directories that contain a lot of competition.  If you open a directory for a major US city, for example, you’ll see dozens of pages of ads for auto services, attorneys, home improvement contractors, dentists, etc.  In these situations the smaller ads often pay the most for their leads compared to bigger ads. 

It isn’t always the case that smaller ads are mistake, however.  And my example here — while being very close to an actual example — is unusual for how clear the cost-per-lead comparison breaks down, but these comparisons are typical.  However, if you’re a small business you might not be able to handle all the business you would need so you could pay for and profit from a larger ad plan.  So you need to be honest with yourself and your potential.  A good rep will help you sort out your opportunities and your costs.  Take your time and do it right.

Also take your time and do it right when comparing companies you might want to advertise with…especially yellow pages.  They are not all the same.  Lower cost doesn’t always mean best value.  On the other hand, the “incumbent” or the “utility” directory might not be the best value either.  Often they charge high rates based on reputation…everyone mistakenly thinks they are the “real” phone book and they charge accordingly.  Today this simply is not a sound way to make a value judgement.  Most consumers have no clue about the distinction between one book and another … and they don’t care.  They use the books with the most information.  More on that later.  But briefly now…you can do the same sort of comparison…reversed.  If one book charges $1000 for an ad and the other charges $500, don’t presume the $1000 is better.   If you get 50 leads for $500 and 75 for $1000, which is a better value?

Don’t be one of the many business owners making poor investment decisions when buying yellow pages advertising.


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