“We’re doing great with the radio ads,” he said. “Our revenue went up by more than what we’re paying the radio station,” he told me. Those are the final words I heard right before my head exploded and brain matter went flying everywhere.
It took the medical personnel days to clean up the mess.
Okay, maybe that’s an overstatement. My head didn’t literally explode.
But it could have.
The Math of Advertising
You shouldn’t decide that a marketing expenditure is acceptable when you recover the cost of the ads. That’s not sufficient.
Here’s the deal (simplified):
- Spend $1 on ads.
- Get calls from clients.
- Those clients pay you at least $8 and preferably $20.
You need to collect far more than you spend because you’ve got to pay for doing the work plus the related overhead.
I know I keep saying this, but I’m not feeling heard.
Listen. Please. Spending $1 and generating $1 is not a “break-even” proposition.
You are LOSING money if you spend $1 and the resulting clients pay you $1. If you keep doing that, you’ll go broke.
Each marketing dollar needs to generate many times that dollar in revenues. Think 8 times to 20 times what you’re spending. Do not allow some radio ad salesperson to convince you that spending a dollar in exchange for a dollar is a good thing. It’s not.
