How Much Should You Spend on Your Yellow Page Advertising Budget?
MoneyMoz.com presents you “How Much Should You Spend on Your Yellow Page Advertising Budget?”, an article written by Jeffrey Hauser. We hope you’ll find a lot useful information in here.
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When it comes time set up a budget for your advertising, I have a simple rule of thumb: whatever it takes.
Okay, maybe I’m being a bit flippant, but after three decades in advertising that’s
almost the best I can do. I could give you the standard answer that most marketing
textbooks offer. An average business should allocate about between two to five
percent of your gross revenue. A startup or new business might have to do double
that the first year or two. Let me amend those figures and walk you through a few
companies that don’t meet these numbers.
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During the heyday of AT & T, they only spent about one percent of their income
on advertising. But, in the sixties and seventies, they were making a billion and a
half dollars annually. So their advertising budget was $150,000,000 a year. That’s
still a staggering amount. I read somewhere that many major companies spend
about twenty percent of their anticipated gross, during a campaign to introduce a
new product into the marketplace. Here are some other industries and their allotted
percentages as expressed in very general terms according to some current
advertising journals’ statistics:
Auto Manufacturers: Up to 1%, Retail Stores: 2% to 3%, Service Businesses: 3% to
5%, New Business Startup: 5% to 7%, Fast Moving Consumer Products: 8% to 10%,
Pharmaceutical or Cosmetic Companies: 20% and up.
But suppose you’re not Revlon Cosmetics and, instead, your business is cleaning
carpets: so where do you fit in? It depends. It’s all about the mystical, magical ROI,
once again. If you’re the new guy in town, odds are you will need to do the most
advertising to establish your name and identity among the other carpet cleaners.
Unfortunately, it means the outlay of sizeable marketing dollars to compete with
existing ads. They, after all, have already earned their place by their longevity. You
have to break into the heading with a large ad to draw customers that ordinarily
would migrate to the older competitors.
And it probably couldn’t have come at a worse time for you. You’ve just invested
in trucks, equipment, perhaps an office and that overhead, employees, insurance,
signage, accounting and licensing fees. It’s outflow without any inflow. Yet now you
are expected to cough up even more money for a marketing campaign. It’s just
about this time that many new businesses say they’re tapped out and opt to bypass
the Yellow Pages. It’s just too darned expensive, they moan. But, a smart
businessperson would have allowed for this expensive in the original business plan.
You do have a business plan, right? You don’t? Shame on you!
Assuming you have some basic strategy for your business, then you should have
an advertising allotment. It’s as important as a sign on the front of the building or
on the truck. It would include those items plus any direct mail, Yellow Pages and any
other appropriate media. If you’re a retail business, try the two to five percent of
anticipated gross sales. If you’re a service provider, go with four to ten percent.
Then double that for the first year.
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This is a general rule of thumb. There are so many factors that affect the
outcome of a campaign, I hesitate to set down a firm number. What if you use a
figure I mention for a year and have a miserable result? Did you over or under
spend? How do you know? I will bet that most business failures are due to a
lack of an, or under-funded, advertising program. I remember how many of my
customers cut back their campaigns during recessionary times.
This is exactly the reverse of how large corporations view a downturn in sales. They
realize that they must increase their marketing in hard times. It may be counter-
intuitive to a small business to spend more when profits are down, but it’s the same
as playing the stock market.
When a stock is soaring, do you buy when it’s peaked or when it starts dropping?
Most amateur investors will jump on the bandwagon of a climbing stock, thereby
forfeiting almost any chance of a profit. The smart investor will buy the so-called,
“bottom-feeders” because they are the best potential profit-makers and have the
lowest cost factors. Again, the counter-intuitive approach works every time.When
determining a budget, a change in mindset is in order. Rather than looking at
advertising as an expense, consider it as an investment. Many businesses think of
marketing as an overhead expense. That may be true of your insurance, rent,
utilities, employees, accountant and legal fees, but advertising is the only service
that can actually bring in customers. None of the other aforementioned items can
make a sale. With the exception of a commissioned salesperson, the remainder of
these overhead expenses are always outgoing only. So you have to reevaluate your
advertising strategy viewing it in the proper light: an investment that helps provide
cash-flow.
After many years of YP consulting, one thing stood out above all others. The idea
that a business’s ad was a necessary evil which drained the company of profits and
was quite over-priced. I never heard a customer remark how cheap his YP ad
appeared to be and how happy he was to write that monthly directory check. Even
when times were good and they knew the ad was getting them calls, the expense
was painful. What would be even more painful would be to close a business due to a
lack of sales.
I used to compare a YP ad to a business sign. Most retail stores recognized the
need for letting the public know that ABC Auto Sales was open for business and
spent huge amounts on massive signs around the property. But, when it came to
their YP program, their invariably asked what the smallest ad would cost. I would
say that perhaps they might consider reducing their signage to a tiny, one by one
foot size. Of course, that would cause them to become indignant. The whole idea
was laughable to them and why should they even consider such a stupid
suggestion? The poor owners didn’t make the obvious connection.
So they would budget for a neon-illuminated monstrosity that would put a Vegas
casino to shame and yet have a pittance remaining for the directory. When I
explained how few people drove around town looking for the Auto Sales sign, they
would justify the investment by saying how many customers came in because they
said they saw the sign. I was happy for them but pointed out that placing a sign in
front of every person actually seeking out a business would be an even better
investment. Where could they do that, they wondered. Hmm. How about under the
heading of “Automobiles-Dealers” in the Yellow Pages? Sure, they would have to
forgo the flashing lights, but think of all the electricity they could save.
My long-winded treatise is to convey one hypothesis: have a plan. Cover all the
essential areas of the business. Even if you decide that the directory is not your
ideal form of promotion, make sure that your advertising program is well funded
and part of the overall business scheme. Also, have a multi-year strategy that allows
for future growth and marketing, unless you have figured you’ll be closing within
the first year or so. In that case, save your money and go on a nice vacation instead.
After all, a company that “fails to plan, plans to fail,” or so it’s been said.
Jeffrey Hauser was a sales consultant for the Bell System Yellow Pages for nearly 25
years. He graduated from Pratt Institute with a BFA in Advertising and has a Master’s
Degree from Monmouth University. He had his own advertising agency in Scottsdale,
Arizona and ran a consulting and design firm, ABC Advertising. He has authored 6
books and a novel, “Pursuit of the Phoenix,” available at amazon.com. His latest
book is, “Inside the Yellow Pages.”
Keywords assigned to this article by MoneyMoz: marketing,advertising,directory,yellow pages,budget,consulting,advertise,business
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