The ROI Problem

The ROI Problem

by | Jan 8, 2024 | Marketing and Advertising Insights, Sound ADvice, The Not-So-Secret Writings of ScLoHo

I’m going to start off the new year with a story.

In 2023 I was invited to be a guest speaker at Trine University and ended up presenting information to a class in October and was invited back to be on the judges panel for the students final project.  The students had been divided into 4 groups and each group was a make believe advertising agency.  The judges were to evaluate each group including asking questions as if we were the company that was looking to hire one of these four ad agencies.

Students were given certain guidelines and requirements and along with the judges, Professor Snider was going to be grading their final project.

When it came time for me to ask the students a question, I asked the first three groups to explain the Return On Investment that I (as the business owner) would receive on their plan. This was kind of a trick question.  Each of those groups promised a dollar amount in sales volume.  But here’s why that was a trick question and why I didn’t ask that question to the 4th group.

The last group’s presentation started off with a keen understanding of the big picture goal and while they gave us specifics of how they were going to spend the money, they also created and shared a bigger picture plan that didn’t need to be justified in short term sales revenue.

The problem with justifying most advertising and marketing expenditures is that it’s simple impossible to accurately track even digital ads.

Readers of my Sound ADvice newsletter got a perspective recently on ROI that went like this: 

In normal day life, the meaning of “cause vs effect” is fairly simple. It’s the relationship between two things when one thing makes something else happen. For example, if we eat too much and do not exercise, we gain weight. Eating too much without exercise is the “cause”, and weight gain is the “effect”.

When it comes to advertising, it isn’t quite as simple, or is it?

The quest to measure advertising’s ROI (Return on Investment) and what was and wasn’t successful has been going on ever since the late 1800s when department store magnate John Wanamaker said, “I know half of the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

Over the years, businesses have put coupons in their newspaper ads, Yellow Pages and magazines have issued separate “traceable” phone numbers, and some misguided radio and TV stations have run ads that said, “Say you heard it here”, to prove the advertiser was getting a return on investment.

In the late 1990s, it was the dot com kids in Silicon Valley who made millions capitalizing on marketers’ thirst for measurable advertising results, promising measurable click-throughs and responses.

But online marketing expert, Ari Rosenberg, wisely says that online media taking credit for consumers’ actions is “like taking credit for the sale of coffee because you work the cash register at Starbucks.”  

Human action is always preceded by a complex chain of influences that take place over time, long before action is actually taken. Before any action or purchase, our minds travel from unawareness of a product to awareness, from awareness to interest, from interest to liking, from liking to preference, and on to finally actually taking action.

The dangerous and underestimated irony in this process is that the closer we get to measurable action or response, the less opportunity marketers have to influence or change that action. 

Marketing and business consultants agree, “Once the consumer has clicked on the Ford truck website or has their checkbook out to buy the Ford truck, it is difficult to persuade them that the Chevy might be a better truck.”

Our problem is that consumers don’t really know why they do the things they do, so the last point of contact, a Google search for a product or service, or a search for a specific business website, receives credit for the purchase decision. Again, it’s like giving the person at Starbucks’ cash register credit for the coffee sale.

There is an old saying, “The game never changes, only the names of the players.” 

The marketing game really has not changed since Wanamaker’s famous quote, only the names of the media available to advertisers have changed. But it is a chain of players and platforms during the game that results in a goal. And the player that scores that goal could not have done it without the other players on the team.

If you would like to discuss how to build a marketing chain that covers the entire decision-making process from pre-awareness to measurable results, contact me.

Send me an email to start getting your weekly copy of my Sound ADvice newsletter.  My email is Scott@WOWO.com

The Effectiveness of Your Advertising

The Effectiveness of Your Advertising

by | Aug 25, 2021 | Marketing and Advertising Insights, ScLoHo's Collective Wisdom, The Not-So-Secret Writings of ScLoHo, WOWO Fort Wayne Radio Advertising with Scott Howard

I recently got into a bit of a “discussion” with the owner of an advertising agency regarding a client that we both have.

It was interesting because the owner of the advertising agency didn’t understand the effectiveness factor of the ad campaign we’ve been airing on WOWO Radio the past few years.

What was also eye opening to me, was the differences in the goals that the agency had compared to what our goal has been at WOWO.

The agency’s buying power is what they like to use as the reason to sign up with them if you own a business.  In the meeting, the agency owner kept emphasizing the price of a commercial, saying he could buy it at a lower price than buying directly from WOWO.  I had to point out that this was not true, at least with WOWO radio, and the owner of the company, our client, was also sitting in this meeting watching this exchange.

Meanwhile, I pointed out the emphasis of what we do at WOWO is Results.

Return on Investment.  Not how little an advertisement costs.

The owner of our client company has been telling the agency owner to leave his WOWO campaign alone because it is working.  And I had to point out to the agency owner, he can’t buy ads for the prices he was claiming on WOWO without throwing away the advertising campaign that has been working.  It would actually cost more for the business owner to have the advertising agency place the advertising schedules that we’ve been airing on WOWO.

That’s enough about this particular meeting I had earlier this month, but because of that meeting and a story I’ve been saving about the effectiveness of radio ads, I have some interesting information to share with you today.

There was a study conducted in January by Edison Research and National Public Radio that concluded:

 AM/FM listeners are more engaged with ads on radio than TV viewers and social media users are with ads on those platforms… Nearly two-thirds (64%) of people who reported listening to AM/FM in a week prior to the survey say they typically stay tuned in for the ads…They are doing more than just hearing ads, they are engaging with them.

Nearly 1/2 the listeners to commercial radio stations and non-commercial public radio stations learn about new businesses by listening to the radio.  Meanwhile less than a third of TV viewers are learning about new businesses.

At WOWO radio, we are a news and talk radio station located in Fort Wayne, Indiana and we also have a special, unique and effective way for advertisers to build engagement with our audience that is the “secret sauce” of success that the previously mentioned advertising agency cannot buy from us.  It’s Live Testimonial and Endorsement ads from our morning news host, Kayla and afternoon talk host Pat. There are all kinds of stipulations and requirements associated with them, ask me personally if you want to know more. Scott@WOWO.com is my email.

Next week, I’ll share more information from this study and point to a few more reasons all the advertising on WOWO is more effective than on typical music based radio stations.

In the meantime, reach out to me if you would to learn how we can help your business grow by inviting WOWO radio listeners to become your customers.

 

Return On Your Advertising Investment

Return On Your Advertising Investment

by | May 16, 2018 | Marketing and Advertising Insights, The Not-So-Secret Writings of ScLoHo, WOWO Fort Wayne Radio Advertising with Scott Howard

Return On Investment is a common term, but often I run into business owners who have no idea that they can calculate a Return On Your Advertising Investment.  Do you know how to do this?

First of all, I’m not going to assume that you know what Return On Investment means.  In a world filled with lingo, Return On Investment is also know as R.O.I.

Return On Investment is a simple math formula.  In simple terms, if I give you $100, and a year later you give me back $105, I had a 5% Return On Investment.  The $100 plus 5 bucks.

In the business world, the profit margins and mark-ups percents are the terms that business owners I talk with usually know off the top of their heads, which is important too.

If a business owner buys an item at $100 and sells it for $200, then his mark-up is 100% and profit margin is 50%.

Keep in mind that I’m only talking about the gross dollars, not net dollars.

Net Dollars are what you end up with after paying for everything, like taxes, wages, the electric bill and everything else.  Most businesses set themselves up to not have any money left over, which is fine.  I’m not an accountant or tax attorney so we’ll leave that alone today.

So let’s dig into this concept of a Return On Your Advertising Investment.

Step back and think about why you need to advertise in the first place.  It’s a real simple concept.

You advertise to bring in paying customers.  That’s it in 7 words. I’ll say it again:

You advertise to bring in paying customers.

Why?  Because without paying customers, you will go out of business.

But some folks look at advertising as an expense and do as little as possible.  Their businesses also grow as little as possible.

Others look at advertising as an investment and realize that the more they spend the more they get back.

A few years ago, the marketing research firm, Nielsen did an in-depth study of nearly a dozen brands and companies to determine the outcome and results of advertising.  They compared ads on radio, on television and online advertising.

The results showed that the average Return On Advertising Investment for Radio is double that of online ads and also twice as good as television advertising.

Brands averaged a sales lift of more than $6 for every $1 spent on radio ads.

And…

One retail brand delivered an almost unheard of $23.21 in sales lift for every $1 invested.

Warren Buffet would love to have a 6 to 1 return on his investments.

I’m going to wrap this up with a story from a conversation I had recently with a new business owner.

Paul instantly knew his mark-up and profit margins when I asked him, but was surprised to see how easily it would be to make money on a $2000 monthly advertising investment.  Just one or two jobs each month for his business would make him money above and beyond his advertising expense.

Return On Your Advertising Investment is a subject you need to know about and I can help.

Let’s talk!

 

Is Advertising an Expense or an Investment?

Is Advertising an Expense or an Investment?

by | Nov 28, 2017 | Marketing and Advertising Insights, The Not-So-Secret Writings of ScLoHo, WOWO Fort Wayne Radio Advertising with Scott Howard

The question that every business owner has to come to grips with, “Is Advertising an Expense or an Investment?”, because it can determine the success or failure of your business.

Your view towards advertising is one of the keys to success.

Let’s jump in and take a look at these two expenditures.

The term investment implies that you are going to earn money back.  Even if it is a 5% increase or 1% increase.  You give me $100 and I give you $101 dollars in return.  You give me 100,000 dollars and I give you all your money back plus an extra thousand bucks.   That’s what a 1% return on your investment would look like.

The opposite is an expense.  You give me $100 and I give you $95 back.  You just lost 5%.  The challenge is knowing if your advertising is an expense or an investment and honestly it is impossible to know with absolute certainty the complete answer.

And that’s okay.

We can’t measure the true return on everything we spend money on.  You pay the electric bill in your business because you need power to light up your store or office.  You need power to operate your computer.  Those expenses are really impossible to measure your return on because you need power, right?

But advertising and marketing, those are also important.  Those are the tools to invite people to spend money with you. Unless people spend money with you, you are not likely to last very long.

I originally wrote most of this article in 2015 and I included a couple of stories from that year which I’ll update right now.  I  had just finished helping a 70 year old company organize their $100,000 plus advertising budget for 2016.  They are now looking at it strategically, with a method to measure every advertising offer someone tries to sell them to see if it fits.  But as we reviewed the previous 5 years they had set a budget each of those years too.  But instead of spending all of it, they looked at the money they didn’t spend as savings.  They were looking at advertising as an expense because they didn’t have a plan.  It was just something they knew they were supposed to do like pay the electric bill.  2016 was different because know they committed to spending what they said they were going to spend because then know when to say yes and when to hold off.  I serve as their marketing coach and review every couple of months everything they are doing.  2017 was a bigger year than previous years and as we plan for 2018, there is more growth because we now have a marketing strategy that guides us.

The other story from 2015 is a small company that was only advertising when he needed new leads.  Throw out a bunch of postcards or newspaper ads every once in awhile and then do it again a few months later.  He decided to invest the money he would have spend on some of those ads and mailers and use WOWO radio on a consistent basis.  When he started, I had no idea if he would be successful.  But he was willing to treat that initial commitment as an investment that could produce a return, or lose money.

Initial return on his investment was huge compared to the hit and miss advertising he was doing previously.  He decided to increase his investment, and we are watching the growth occur as a result. Three years have passed and you can hear about his company every week on WOWO because it works.

Bottom line on this is if you treat your advertising as something you have to do but expect to lose money on it, you are looking at it as an expense and probably not making good choices because you are trying to spend as little as possible without a return.

But if you treat your advertising as an investment and talk to someone with some know-how and marketing smarts, it is possible to get a positive return on your investment and watch your business grow.

Want help? Lets talk.

Measure What Matters

Measure What Matters

by | Jun 1, 2017 | Marketing and Advertising Insights, The Not-So-Secret Writings of ScLoHo, WOWO Fort Wayne Radio Advertising with Scott Howard

How do you know if your advertising is successful?

Most business owners I know would prefer not to advertise if there was another way to get customers that was free.

But free isn’t really free.  It’s just that we value some things more than others or perhaps we are used to measuring certain things with different expectations.

I titled this piece, Measure What Matters and it’s a peek into a Return On Investment or R.O.I.

Usually the R.O.I. discussions I have involve the Return On Investment of money spent on advertising.

If I was in the financial industries business, the Return On Investment would look pretty basic. A ten percent R.O.I. on a 100 dollars is 10 bucks.  In other words that $100 becomes $110.

That is an easy money measurement.

So is this next one.

Hourly wage.  If you work 40 hours and get paid $800 for those 40 hours, then your Return On Investment of your time is $20 per hour.

Running a business is a different animal to pin down the R.O.I.  You don’t have a strict correlation between the hours you put in and the dollars you receive.  It takes capital to get started.  Real dollars that are not quickly translated into earnings.

There’s also time spent planning and organizing that business owners put in that go beyond typical business hours. 90% of entrepreneurs don’t have an accurate figure of how much time that have invested in their business or what the dollars are that are associated with that time.

Does that prevent them from doing the work?  Usually not.

Let’s talk about Return On Investment relating to advertising and marketing. This is a very difficult calculation to figure out accurately, with the types of details that you see in your 401K portfolio.

I’m used to asking questions that create an R.O.I. formula, it was easier 30 years ago when I worked for a Christian radio station in Detroit and we had a very loyal audience that would often tell our advertising partners that Robin Sullivan of WMUZ told them to shop there. This was before the internet and social media.

See, Robin really did tell her listeners to mention her when they shopped for a mortgage or got their car repaired or any number of other things that were advertised on her radio program.

And we often get similar situations with WOWO radio, where our listeners will tell our advertising partners that Charly Butcher or Pat Miller or Rob Winters or Rick Wolf recommended them which is fantastic.

But it’s not accurate.  That’s anecdotal information.

Some people who sell digital advertising products will tell you that it’s easy to track the results.

Bull.

It’s not and those that pitch things like, “We can track every visitor to your website and prove the Return On Investment,” either don’t know what they are talking about or are simply lying to you.

I offer digital advertising solutions along with the radio advertising solutions we have at WOWO radio. The one thing that some digital advertising can do is track SOME of the traffic to your website and tell you SOME of the ways that traffic got there, but this does not make it better than the anecdotal info you hear about your radio ads.

If I do a digital advertising campaign for your business, no one is going to tell you that they are buying from you because they saw your ad on their laptop.  And they are not going to tell you that they clicked on your ad either.  However the tracking I can see will show me that yes, people are clicking on that silly display ad and while that is nice, we still haven’t determined if you are getting a positive Return On Your Advertising Investment just from those numbers.

I’m going to point you to an article I read recently about this, click here or if you are listening to the podcast go to ScottHoward.me and this article Measure What Matters to find the link. The article is about Janet & the Cows.

So how do you Measure What Matters?

Depends.  There is no one size fits all.  One of my clients came up with a formula that we use to measure the success of or our digital advertising campaign that he came up with based on his success with other online marketing and it pertains to a cost per lead formula.  He wanted to see anything at or below 50 bucks and we are beating that.  Most weeks his cost per lead is in the 30’s.

Another client of mine simply has annual sales goals.  They continue to increase each year and we help her hit those numbers.  We don’t have a true R.O.I. formula but we do have anecdotal information from her radio and digital campaigns that are reassuring.

The most important take away today is: You need to determine what success looks like and pick some ways to measure the results from your advertising and marketing efforts that fits you and your business. Period.

Want help?  Ask me.