How Can We Test Advertising?

Transcript of actual conversation:

Potential Client: Tell me the truth. How important is advertising in this economy?

Chuck: It's critical. When there is a lot of money in circulation it's not difficult for most businesses to attract their fair share of it. When the velocity of money slows, small businesses have to work harder than ever to keep enough customers coming through the door.

PC: If I had the money, I'd advertise now.

Chuck: Why?

PC: It would help to differentiate me from my competitors.

Chuck: Why do you want to do that?

PC: Isn't being different what makes a company marketable? It's what would get me into people's minds. Prospects would be more likely to choose my company.

Chuck: If I'm hearing you correctly, you're saying that you believe advertising will bring you new business.

PC: Well, yes.

Chuck: Then why aren't you advertising?

PC: I can't afford it.

Chuck: You can't afford new business?

PC: Well . . . new business is important. I need to keep money coming in ahead of my bills. I know, I should be advertising.

Chuck: Why are you hesitating?

PC: I'm in an industry that doesn't traditionally advertise. I don't know if I should or not.

Chuck: A minute ago you said if you had the money, you'd be advertising right now. Is the economy effecting your business?

PC: Yes. We're hurting.

Chuck: How long can you afford not to invite new customers to do business with you?

PC: Honestly? I'm scared. I'm scared of what could happen, or more accurately what might not happen. I'm scared that the return on my investment won't be measurable.

Chuck: I'm hearing you say that you don't have the knowledge to make sure your advertising investment will pay for itself. What knowledge do you need? What information are you lacking?

PC: I lack knowledge of marketing. I don't know enough to understand which is a good idea and which is a bad one. What kind of return will my advertising investment bring? How can I predict it? If there were some resources that I could use to learn the basics of marketing . . .

Of all the reasons to advertise . . .

Increasing sales is by far the most important. It's been said that during good times businesses should advertise, and during bad times they must.

During the rough times, though, the stakes are much higher.

When customer counts drop, its common for businesses to find that operating costs exceed revenues. Most companies have some cash or credit which will allow temporary negative cash flow. The length of time they can sustain operations is their “staying power.”

Every additional day of negative cash flow drains those reserves.

Each day that cash flows out contributes to a chronic, protracted demise. Since none of us can accurately predict any economic downturn, we don't know how much staying power we'll need. Every dollar invested in advertising becomes one less dollar of staying power. That can put a company out of business quickly. The same conditions which create the need to invite more customers also create a danger in doing so.

Sometimes we simply fear customers won't react to advertising because they have no money to spend. We fear the advertising lessons we learned during the good times are no longer valid. These fears become more justification to hunker down and wait for better economic times.

Oh, sure. We believe in advertising. Just not now.

The astute business owner/manager will note that his competitors have abandoned the advertising arena. Their absence leaves great share of mind available to the few with the courage to invite new customers to their places of business.

The courageous owner/manager will seize the opportunity to increase market share.

The prudent owner/manager will attempt to reduce the risk by “testing” his advertising. He'll hedge his bets by doing more of that which proves to work, and eliminating that which doesn't.

Interesting concept, testing. How does one test advertising? I wish there was a simple answer.

Let me rephrase that. Of course there are simple answers. They are worthless. There are also valid answers, but unfortunately they are never simple.

For the next several days . . .

We'll be discussing methods of testing advertising. We'll be calculating ways to make sure that every advertising dollar is held accountable. And most likely, we'll come to some conclusions about media, messages, and scheduling.

We'll explore good ideas, and bad ones. We'll look at the returns that advertising investments should bring. Must bring. We'll determine how to predict those returns. We'll find some resources for basic marketing during tough economic times, or for that matter, during any economic times.

I invite you to participate.

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Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about testing your advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.