You have a new store. It’s ready to open to the public. What’s the first thing you should do?
You should hang out a “Now Open” sign.
People will drive by and see the sign. Some will walk in to see what you have to offer. Some will buy. Then, depending on that first experience, some will come back to buy again, and some will recommend you to other customers.
You advertise to reach people who never drive by.
I bring this up because a very common question is, “If I spend money on advertising, what will I get back? Can you guarantee I’ll see any results at all?”
To that I have to answer “Maybe.”
Let’s look at the variables.
Your traffic driven sales will depend on location. Your repeat sales and referral sales will depend on customer experience. Your advertising driven sales will depend on the salience of your message, your share of voice, and the frequency of delivery of your message.
If you had a high profile location, perhaps the intersection of two major highways, your sales may develop like this:
1) Traffic Driven Sales . . 70%
2) Repeat Sales . . . . . . . 16%
3) Referral Sales . . . . . . . 5%
4) Advertising Sales . . . . .9%
That high profile location, coupled with the experience your customers have shopping with you, can determine as much as 91% of future growth. The last 9% will come from effective advertising.
Consistently well done advertising could also effect the number of people who normally just drive by, but today decided have decided to walk in.
Perhaps you don’t have a prime location, but are instead a neighborhood store on an average street with average parking. Your sales could develop this way:
1) Traffic Driven Sales . . .19%
2) Repeat Sales . . . . . . . .36%
3) Referral Sales . . . . . . . 14%
4) Advertising Sales . . . . .31%
Sometimes business people expect that if they increase their advertising budget by 10% that they should see a corresponding 10% increase in sales.
Under the best of circumstances a 10% advertising increase in our first example would boost sales by slightly less than 1%. In our second example our best possible outcome would be a sales boost of slightly more than 3%.
You’ll note that I said “best of circumstances.” We’ve assumed that your competitors aren’t increasing their spending or increasing the relevance of their message.
It also assumes that you don’t have any new competitors.
Most businesses aren’t willing to advertise aggressively enough to maximize sales and gain significant market share.
This provides a major opportunity for those who are.
Which are you?