How do you get the word out about your business? You've probably thought about social media, SEO and how your business does on review sites. But as your business grows, you'll probably wonder about other advertising avenues, too. You need some advertising 101.
Many small business owners worry about advertising expense, especially when they see multimillion dollar commercials during a major televised sporting event. But that concern is unfounded. There are tons of ways to advertise, no matter your budget.
Advertising is a great way to get your products and services in front of a new audience, and it reminds customers to come back. Done right, advertising pays for itself. In this post, we'll explain advertising 101 so you can do it in an affordable, sustainable way:
Understand Your Cost per Acquisition
Each advertising channel will have a cost per acquisition, which is how much it costs to get a customer on that channel.
Before you test advertising channels, ask yourself how much you can spend to acquire a customer and remain profitable. This will help you figure out whether your advertising efforts are working.
You'll need to do some fairly simple calculations:
- Figure out the average lifetime value of a customer, which is the average amount each customer spends while with your business. A customer might spend $1,500 over a year-long period, for example, before that customer concludes doing business with you.
- Choose an advertising channel, such as pay-per-click (PPC) ads on Google. You might spend $1,000 on ads, resulting in three customers, for example. Because your average lifetime value is $1,500 per customer, you have $4,500 in potential revenue. Once you subtract the $1,000 spent on advertising, you'll see that you'll make $3,500 from PPC.
Decide on Channels
The advertising options that work best for you depend a lot on what you sell and who you sell to. The following advertising channels often work well for small businesses:
- Social media: Your customers are probably on social media, and almost all sites offer advertising options. If you sell to other businesses, try LinkedIn. If you sell to consumers, Facebook might be a good fit. Other options include Twitter, Yelp, Angie's List, and Pinterest.
- Pay-per-click ads: To show up on such search engines as Google and Bing, you can pay for PPC ads. When a potential customer searches a certain term, such as "plumber in Albuquerque," your ads will appear.
- Traditional channels: Billboards, print advertising (flyers and postcards) and wrapping a car are traditional advertising channels that still work for many small businesses. These are worth a try, but they're less easy to measure.
Don't put all your money into an advertising channel before testing the waters to see if it's a good fit for you. On most social media sites, you can spend $100 to figure out if the platform brings in any customers. Keep in mind that you may have to spend a certain amount before acquiring customers, and how much you can afford depends on your customers' lifetime value.
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