Advertising Results - Dollars included!

[HCHTech]

This is a long post - opinion / suggestions welcome!!

I have an established mobile repair business (8 year anniversary last month). I'm a numbers guy so for better or worse, I track these things mercilessly. I've seen a general slowdown (about 15%) in business over the last 18 months or so, hopefully due to the economy. I say "hopefully" because I do good work and have a good reputation in my area - I don't think I have made any big mistakes in that arena.

I'm in a suburb of a large metropolitan area (pop. ~2.5m) with a fair amount of competition.

I'm right in the middle of redesigning my marketing/advertising efforts. I thought I would share how I have spent my advertising money in the last 12 months and the results I got. I see lots of recommendations and opinions here on TN, but no actual numbers - so here goes...

My budget was right around $10K. Here's how it worked out (alphabetical order):

Angie's List - I have been on the list for about 6 years, and have won their "super service award" in 5 of those years. I have over 80 reviews (the most in my area, and they are all "A's". I have advertised with them for about 3 years, but stopped 6 months ago as a test to see whether my reputation would carry me and I could save the $100/mo expense. In these results, I've had 6 months with advertising and 6 months without.

New customers: 40 (28 while advertising, 12 after stopping)
Calls: 76 (58 while advertising, 18 after)
Revenue: $8465 ($6,440 while advertising, $2025 after)
Expense $600
ROI: 1,423%

I think it makes sense to start this back up again...

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Direct Mail Brochures (This is a full-color trifold with a discount coupon - we cull addresses and mail this all ourselves, one at a time)

New customers: 10
Calls: 18
Revenue: $1,425
Expense $471 (postage only for about 1,100 mailed, we had a few thousand printed a couple of years ago) Printing for the ones mailed was probably $150.
ROI: 230%

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BNI (I've only been involved for about 4 months, I expect this to get better with time)
New customers: 9
Calls: 10
Revenue: $1,090
Expense: $465
ROI: 235%

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Friends / Family

New customers: 6
Calls: 10
Revenue: $715
Expense: $0

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Internet (I have a wordpress site redone last January, and a facebook page, but don't do adwords or any other paid online marketing)

New customers: 15
Calls: 20
Revenue: $1,955
Expense: $600 (hosting plus design services)
ROI: 325%

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Radio (I did 30 spots per week (no weekends) on an AM "Standards" station for 4 months trying to get more of the older folks that are a big part of my business)

New customers: 3
Calls: 3
Revenue: $338
Expense: $2,250
ROI: 15% Wow, what a fail.

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Referrals from existing customers

New customers: 68
Calls: 109
Revenue: $12,528
Expense: $0

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RSVP (These are packs of color postcards that are sent direct mail to about 20,000 homes in the area with incomes of >$75,000. My card included a discount coupon and I did two separate mailings)

New customers: 16
Calls: 31
Revenue: $2,900
Expense: $2,000
ROI: 145%

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Yellow Pages (I have done YP since my second year in business. A LOT of my current customers came from the YP. 2 years ago, I upped my ads to the most I've ever spent, about $575/mo. Last year, I cut it back to $300/mo, and this year, I expect I will either not renew, or go back to a very small presence. I have competition that is running full page ads, I'm thinking he can have it.)

New customers: 17
Calls: 26
Revenue: $2,740
Expense: $4,525
ROI: 61%

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Totals:

New customers: 184 (compared to 240 for the previous 12 months)
Calls: 303
Revenue: $32,256
Expense: $10,592
ROI: 305%

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I'm going to be re-allocating where I spend my advertising dollars over the next few weeks, and that will certainly include online marketing of some description. I'd appreciate any advice you might have. Thanks!!

 

[seedubya]

A quick question

Are your revenue figures NET revenue i.e. net profit?

 

[PCX]

Thanks for posting this. I know that this will be different for different businesses and different areas, but it does encourage me (and others I am sure) to keep better track of their advertising. I can tell you how much percentage of each of my customers have come from different types of advertising, but I honestly am not sure of the profit or loss. I know enough to know when some advertising is effective or not, but thats about it.

In any case, one thing you have to understand about certain types of advertising is that they are not really forms of advertising as much as they are forms of marketing and branding. For instance, I would never expect a huge turn return from radio advertising because advertising is not really the goal (unless there is a huge sale or promotion) as much as marketing your name and brand is. The idea behind radio advertising is that they here your name over and over again and eventually they will association your name with your type of business. As a result, when they think of a computer shop or business, they will think of you. This is why consistency is key. Many of them wont even remember where they heard it from and in many cases they will simply search online for a company or even the phone book and your name will immediately pop out.

Recognition is a funny thing. Even if a customer has never been to a place of business, if they recognize one business name over another, than they will assume that they are a good company, that they are well established and successful for a good reason. Some will even think that they have used the business before and want to return.

Marketing is all about getting your name and your brand to be recognized. You have to diversify this type of advertising so that people see and hear your name everywhere and it has to be done consistently. While we do get a lot of referrals, we hear even more from our customers that they see us or hear about us everywhere. People say that everyone knows who we are and that everyone says to come to our shop. We have a recognized name brand in our location and it is because of a combination of advertising, marketing, branding and customer referrals.

Anyways, it will be hard to truly measure the effectiveness of marketing, but I can tell you that it is essential.

 

[compnet]

Interesting.. I agree with PCX. Radio probably won't give you good ROI right off the bat, but having your name out there and recognizable is a good thing. Still don't know if I'd go with a radio ad.

Also, I had written angie's list off more for home contractor type stuff.. Might have to take a closer look.

 

[Instant Housecall - Corey]

We have several customers who rave about how much business Angie's List brings them. I've only heard positive things.

 

[mraikes]

HCHTech, this is such a timely post - thank you for putting it out there.

Since sometime last winter, I've been getting an increasing number of potential customers contacting me from Angies List, and now have a handful of 100% "A" ratings out there.

As a result (I guess) I've also attracted the attention of an Angies List sale rep. I've simply ignored his calls/emails for months now, thinking that just being there with good reviews was enough, and it's unlikely spending actual advertising dollars would make a difference. But I always wondered...

And now, your detailed report is very eye opening. While certainly everyone's mileage will vary, it's interesting to see the difference in Angies List business you experienced by advertising rather than just being "present".

You're making me rethink my whole attitude toward A.L.

And by the way, I've found Angie's List customers to be some of my best - and almost a guaranteed sale when a new one contacts me. They trust A.L., put a lot of stock in the ratings there, and have already pretty much made up their mind by the time they even call you.

 

[HCHTech]

The revenue numbers are gross revenue. I think this is the only way to measure it that makes sense. It's up to me to manage other expenses and charge enough to make a profit. I use Quickbooks and update it daily so I always know where my profit is. It's a pretty good tool, but it's definitely a job keeping everything in and up to date.

I also keep a very detailed spreadsheet that lets me get automatic projections for the current month and current fiscal year.

Lastly, I have a customer/call database (Lotus Approach) I wrote when I first started that lets me know at a glance what I've done for each customer, and it allows me to easily produce the revenue numbers by source I used in my post. If anything, I spend too much time on the numbers...

 

[HCHTech]

One more thing, my Angie's List ad was "online only". I had advertised in the monthly magazine they send to members in years past, but a) they force you to give a discount, and b) I did NOT see any real difference after I stopped the print ad.

 

[JonnyRT]

Brilliant post HCHTech, thank you very much for posting such detailed information. Really useful!

 

[ComputerCorner]

Great stuff, thanks for sharing.

 

[pcpickup]

I have declined doin the radio ads and your data certainly supports that decision. I didn't see craigslist in your list. We get a lot of business from our CL ads as well as a number of laptop sales. Same goes for Facebook.

 

[cmonova]

Great numbers and information.

I actually talked to Angie's List rep last week. Almost pulled the trigger on it also. He was going into detail about how many people have seen our listing on Angie's list and we have outstanding rating on it also but have never paid. But, I have received the reviews from those people from there.

Then he says about search terms and the more we talked about it and the population of this area the more it did not make sense. And the rep even said "maybe we should wait and revisit this at a later time"...That is after he realized the numbers don't make much sense. Pretty impressed he did that vice trying to make up some number game.

 

[joydivision]

Although I am in the UK it is quite useful. I generally get poor response from leaflets but it is just about worth doing. I wish I could even get anything like the ROI figues you're getting.

 

[Eagle21]

Interesting post. Thanks for showing your figures.

The revenue numbers are gross revenue. I think this is the only way to measure it that makes sense.
...

So your ROI figures are not the usual return on investment (%) = Net profit ($) / Investment ($) × 100,
your figures are "Revenue on investment", which is not ROI. I suggest including all the costs of each method (including time), so you can calculate real ROI figures, which would allow a more a useful comparison of advertising methods.

Consider yellow pages and BNI as examples.

For yellow pages, your net profit may be a fixed proportion of your revenue, so the real ROI may not change very much from your current figures.

BNI is very time-consuming. If you include your time 'invested' (1.5 hours per meeting per week, plus travel time) at your usual hourly rate, plus car travel expenses, plus breakfast/lunch expenses. The real ROI will drop dramatically to less than 100% (a loss).

To boost profits:
Sort the advertising methods by (real) ROI.
Reduce or drop the lowest ROI advertising methods (or find a way to dramatically increase their effectiveness).
Look at the highest ROI methods, and see if you can further improve or expand that method of advertising.

Also, keep giving good service to keep getting referrals, since referrals from existing customers is one of the best methods. You could even estimate the ROI on referrals by using a notional charge of 0.5 hour at the minimum wage (say), times your number of jobs per year.

 

[HCHTech]

Ok, I wasn't an econ major, so you made me look up 'notional'.

I purposely stayed away from any attempt at net profit. This adds at lot of time and assumptions to the process. It seems to me that using revenue is an easy way to compare each source. Assuming you'd like to engage on this a bit though, here are some additional points:

- For all intents and purposes, I charge hourly for everything I do. One job is not more profitable than any other (leaving hardware out of the discussion for a moment). I do have a one-hour minimum, so I guess if I could fill my schedule with jobs that only take 15 minutes to complete, my profit would go up. Travel time isn't billed, but it works out to be pretty predictable on average. We try to schedule jobs so as to not make travel unwieldy.

- My overhead is largely fixed. I pay myself and my scheduler a salary, and I pay my tech-employee hourly. I measure my tech's profitability on a monthly basis by comparing his total revenue against his total cost, but I don't do that per job = too much detail for too little benefit. Most other expenses only change infrequently. Insurance, advertising, phones, etc.

- I try to have a consistant markup on hardware/software. My business is probably about 15% hardware/software and 85% labor, though so this really isn't a huge part of my revenue.

Could you elaborate on the theory behind estimating an ROI on referrals? I'm curious about what value this could give? If I assign a nominal "expense", the ROI is obviously going to be very high, so what does that tell me? How would this change my behaviour? I guess I just don't see how this is any different than assuming the cost of referrals is zero.

Lastly, I'm going to give BNI a good effort for a year and then look back to see if it was worth it. I like the community and have gotten some good personal benefit from the relationships in addition to the business revenue.

 

[Eagle21]

I purposely stayed away from any attempt at net profit. This adds at lot of time and assumptions to the process. It seems to me that using revenue is an easy way to compare each source. Assuming you'd like to engage on this a bit though, here are some additional points:

I agree that it is usually best to keep things simple. But I think it is good to be aware that some forms of advertising have little or no labour/time cost, and others use a lot of labour.
Newspaper and yellow pages ads don't require much labour, but BNI, delivering flyers, and cold calling, can take up a lot of time.

You don't need to calculate the net profit on each job. But to compare advertising methods I think it is best to attempt to calculate the full cost of each advertising method, including the labour time/cost.

Could you elaborate on the theory behind estimating an ROI on referrals? I'm curious about what value this could give? If I assign a nominal "expense", the ROI is obviously going to be very high, so what does that tell me? How would this change my behaviour? I guess I just don't see how this is any different than assuming the cost of referrals is zero.

You said you're a numbers guy, so I was just suggesting using an estimated referral cost to allow the calculation of an ROI. But I don't think it has a great deal of value. It would probably just show that referrals have the highest ROI which you already know.

What I was thinking was that when a job comes in, you can rush the job, do the minimum required, take the customers money, and move onto the next job. Or you can slow down a little, double check your work, do extra diagnostics, and make sure you do a good quality job and hopefully get a referral. The good quality job would take longer than a rushed job. So there is a cost of doing good work and getting referrals. Perhaps the job takes 1.5 hours instead of 1.0 hours for the rush job. So the cost of good quality work and aiming for referrals is 0.5 hour per job, in this example.

The 0.5 hour is just a rough estimate, it may be just 10 minutes. Or you could review and improve all your procedures to improve quality of work so that quality work does not take any extra time. But it would still require time to review the procedures, which is another cost.

Lastly, I'm going to give BNI a good effort for a year and then look back to see if it was worth it. I like the community and have gotten some good personal benefit from the relationships in addition to the business revenue.

Another factor to consider with advertising methods is the type of customer they attract and if they are recurring customers. Attracting a small business customer who is likely to become a recurring customer is much better than attracting "one-shot" home user who brings in a small job and is never likely to need your services again.

BNI can possibly bring in some good small business customers. But it uses up a lot of time. You could alternatively use that time to walk round your local business area and introduce yourself to the local businesses.

 

[HCHTech]

Great tips, thanks! I'm going around in circles about the referrals ROI - If my "cost" of doing a better job in order to get the referral is .5 hours, but I actually get PAID for that extra .5 hours, then it isn't really a cost, is it? I'm not going to debate that though, I understand what you're getting at.

 

[Eagle21]

With a fixed price service. If you take longer to do a good job, then it does cost you that extra time.

When charging hourly, you are correct. If you do a good job which takes a little longer than usual then the customer pays the extra, so there is no extra cost to you of getting a referral. Provided the customer is happy about the time taken and price charged.

So charging hourly for everything is ideal, which is what I do for most work.
But it can be difficult when the customer wants to know up front exactly how long it will take, and exactly how much it will cost, and they sit behind you looking over your shoulder, saying "how much longer?" every five minutes. I don't think that those situations are very good referral opportunities.

 

[HCHTech]

- That's for sure. I always try to have a 5-minute chat before I even touch the computer. "Tell me in your own words about the problem" or "Show me what's wrong". Something like that. This helps immensely in planning the work. Some folks don't want to waste time on that, though. They pull out the chair for you and want you to get started since you're on the clock. "Tell me about the problem" questions are met with a gruff "You'll see!". I hate those.

I don't mind the over-the-shoulder stuff so much, I'm used to doing the play-by-play. I'd rather the customer stay anyway - it let's them know what I'm doing and proves to them I'm not wasting time. When doing a cleanup, I can ask directly - "Do you use Skype?". If the answer is "No, my daughter put that on when she was still living with us", for example, I uninstall it.

It's more difficult when they just walk out and say "call me when you're done". Faster, maybe, but not as efficient.

 

[bigmike2974]

Great thread, It made me reevaluate my business.