Which Advertising Method Has the Best ROI?
Each passing year, more and more options for advertising crop up. From traditional media, such as print, TV, and radio ads, to new media, like Cost-per-Click and social media advertising, there’s a wide range of options to consider when advertising your small business. Each one has pros and cons, and there isn’t any ‘right’ answer for your business. However, some forms of advertising are simply more efficient than others, in terms of dollars per new customer. Let’s take a closer look at advertising return on investment.
1. Old Media: Costly But Powerful
American politics are a fascinating theatre through which we can explore marketing. Elections are all about parties selling themselves to the biggest coalition of voters they can, and in an unrestricted market with near-unlimited campaign budgets, no marketing event in the world competes with a U.S. presidential election. It’s interesting to note that, despite all the gloom and doom about traditional advertising media dying, US political parties spend more on broadcast (national) TV ads than any other medium, followed by cable TV ads.
The world may be trending digital, but there’s no doubt that TV, radio, and print still have a place in today’s advertising world. Each one reaches audiences that phones and computers just can’t. While most of the population is online, older generations often haven’t adopted the internet as thoroughly as younger ones have. TV and radio have the benefit of reaching almost everyone. TV ads can be especially potent, as many popular (or infamous) ads get uploaded and shared online, meaning they can reach almost anyone, including cable cutting millennials. Print media has the benefit of being widely accessible combined with some of the targeting power of digital ads — mailers and fliers can be distributed based on demographics data collected online, allowing you to more carefully target your ad spend. However, each of these old media are subject to one problem: inefficiency.
Huge Spend, Good Returns. But is TV Right for You?
Old media is expensive. Its reach may still be unparalleled, and it is an authoritative way to advertise — not many small companies run TV ad campaigns — but it’s economically inefficient. Part of the reason why TV spending remains so high on the U.S. presidential campaign trail is that it costs a lot to get anything on TV. $5 billion in TV ads may only reach and convert as many people as $1-2 billion in digital ad spend would. The reason it’s still worth it is twofold: one one hand, it reaches people who may be unreachable online; on the other, it helps a brand — or politician, or news story, or celebrity — to infect the public consciousness in a way that Facebook ads are less likely to do.
How TV Ad Spending Works
TV ad spending is based on a few factors. One is the ad’s expected reach, often expressed as CPM, or Cost per Mille (thousand). This cost varies based on the time of day, location, and program that the ad is featured on. Prices are charged per second, So, the equation for determining the cost of your TV ad is CPM multiplied by run-time in seconds. While some local channels can have CPMs as low as $10 — perhaps even less — national TV often has CPMs of $30 or more. Sometimes much more: last year’s Superbowl ads cost an average of over $160,000 USD per second.
TV Ads for Small Business
Local businesses still have the option of localized cable channels to advertise somewhat affordably, but like all old media, its reach is shrinking. Fewer and fewer people have basic local cable. Those who still watch TV often have packages from larger providers that don’t include this local option. Still, for some businesses, local TV advertising can be a worthwhile investment. TV shouldn’t be any company’s first choice, though. Any other standard advertising option is cheaper.
Print Advertising Is Still Worthwhile
Print media is everyone’s favourite punching bag. As more and more newspapers and magazines shutter their windows, it becomes ever easier to talk about print as if it’s already dead and gone. In fact, print’s death has been dramatically overstated. Print advertising is a flexible, direct and effective form of marketing to this day, and it will likely remain effective for decades to come.
Why Is Print Advertising Still Effective?
Print still works because it’s real. Displays can be turned off. Websites can be clicked away from. Print materials may get ignored, but they exist in our reality. They don’t instantly vanish from view. High quality print materials also impart a sense of scale and authority on the business using them. The cost of print materials is both a benefit and a drawback: many very small businesses don’t invest in print due to cost, making you look larger and more established than tiny companies just by being able to afford print advertising. On the other hand, it’s not cheap to print decent materials. Never skimp on your printing budget — skilled designers and reputable print shops will produce effective ads. Cheaping out will make your ads look amateur and reduce their effectiveness.
An Intro to Printing
The world of printing is infinitely complex. Printing costs vary so widely based on the printed material’s size, the weight and type of paper, the inks used, and the number of copies ordered. Design costs should be factored into all print advertising campaigns. Unless you’re very confident in your ability to design effective ads for print, it’s unwise to ‘wing it’ or outsource it to a cheap service like Fiver. Graphics and logos from these sorts of websites tend to be rushed, low-quality, and of dubious originality. Many designs are ripped off or duplicated across dozens of clients, and may not be formatted properly for print. Design rates vary, but often begin around $50/hour for student or beginner freelance work, and can costs hundreds of dollars an hour for well-established agencies and recognized veteran designers.
Reputable print shops are important, as well. There are many great printers in the Okanagan. Do a Google search and compare reviews to find one right for your print job. Many print shops don’t list prices for their work, and instead ask you some questions about your print job before providing a quote. As tempting as it can be to go for the cheapest option, printing is an industry where you get what you pay for. Cheap print companies tend to make mistakes or simply do a poor job, leaving you with a thousand poor-quality fliers or booklets.
What Will it Cost?
For an example of what a run of 1,000 fliers could cost, assume it will take 4-8 hours of design time for a good flier. Let’s say you’re paying $75/hour for design work. That’s $300-$600 for the initial design. Printing could cost anywhere from $100 for very small fliers or coupons to $1,000 or more for posters or full-page fliers. That’s a minimum investment of $400 for a basic 1000 copy print job, with a large variance in price for bigger projects.
Radio BroadcastsAM and FM radio are still alive, even with the advent of streaming and satellite radio. In fact, the Okanagan still experiences high numbers of radio listeners – numbering in the tens of thousands on average. Radio advertising can be an effective way to get your brand noticed within your community. To some extent, you can target demographics by advertising on specific radio stations at specific times. Sun FM, for instance, is more popular among young women than any other station in Kelowna.
The Cost of Radio Ads
Radio advertisements are cheaper than TV advertisements, by quite a large margin. The cost does not account for reach, like the price of TV advertising. Local stations offer advertising spots for between $0.50 and $2 per second, sold off in 30 second increments. Costs may increase during peak listening hours. Note that this is only the cost for your ad’s air time; you will also need to hire someone to record and possibly write the ads, plus a voice actor if you don’t want to represent yourself. Assuming you can find recording services for around what a graphic designer may cost, you’ll likely need several hundred dollars of up-front investment to record and mix the ad, in addition to ongoing payments for radio airspace. As you can imagine, a long-running radio campaign can add up quickly, but it could be a great, cost-effective option if you need to promote a huge one-time or annual sale to tens of thousands of locals.
Other Forms of Advertising
Advertising comes in so many forms that it’s hard to cover all of them in great detail. In some cases, billboard advertising may be effective, though many consumers have a certain distaste for roadside advertising. One form of high-cost, potentially high-return advertising is direct sales. Cold calling, community outreach, and other labour-intensive forms of marketing can be extremely effective, but also may consume a great deal of resources. This form of advertising is extremely situational: if one sale is worth enough to your business to justify the labour involved in producing a lead, talented salespeople can be of great value to you.
2. New Media: Data Driven, Budget-Conscious Results
Online marketing is a game-changer. The advent of online advertising has eroded the spending and effectiveness of every traditional advertising medium due to the cost-effectiveness of search engine and social media advertising. Demographics targeting has been an important part of effective marketing for decades; only in the last decade has it been so affordable and accessible for small business. For instance, Facebook ads display only for the demographics that you want to sell to. Trying to sell a product intended for men aged 18-25 with an interest in natural health supplements located in Kelowna? No problem. While big data has its downsides, including privacy concerns, the level to which ads can be targeted helps reduce consumer fatigue and improves the efficacy of online advertising.
Demographics targeting isn’t the only advantage to online advertising. Most, if not all forms of online advertising allow you to delve into your ad’s analytics, identifying ads that work particularly well and helping you to improve underperforming ads. Once you’ve committed to a television, radio, or print ad, it’s done. You have to wait until the ad has run its course to see if it worked well or not. Digital ads can be adjusted on the fly, quickly and for little to no cost. There are a few types of online advertising, ranging from more traditional email newsletter and content marketing to cost-per-click and social media promotions. Let’s look at them in a little more detail now.
Newsletter marketing is among the most straightforward and traditional forms of online advertising. You simply compile a mailing list (anti-spam laws in Canada dictate that you must receive explicit permission to send promotional emails to each recipient. Don’t skip this — it’s illegal!), design an email newsletter, and write content for it on a recurring (weekly, bimonthly, monthly) basis. The barrier for entry here is slim. Popular services like MailChimp allow anyone to easily set up automated emails. Their layout tool is quite powerful and has many templates you can get started with quickly. Costs on this form of marketing range from free (MailChimp’s basic services cost nothing and are quite flexible) to as much as $199 USD/month for large enterprises. The biggest investment is time — time to design, write, and send newsletters, as well as the time it takes to gather email addresses.
Newsletter marketing is one of the most effective forms of marketing, despite its relatively low-tech approach compared to techniques further down this article. Small businesses can use email marketing to more directly communicate with their customer base and maintain brand loyalty.
Strictly speaking, this isn’t advertising, but it can have the same effect. Many online businesses skimp on the quantity and quality of content they produce. Not only do bare, poorly written websites look cheap and amateurish, they also hurt your SEO. Google’s looking for relevant, high-value content, so websites with minimal or low-quality content just don’t get seen. Consider content production a form of passive advertising and conversion optimization. Blog posts and up-to-date site information instills trust in your customers and helps you get seen in search engines. If you have an in-house writer (or do the writing for your business yourself) your cost is simply labour or wages. If you outsource it, be absolutely certain the writer you hire is fluent in English and knows how to write. Many overseas businesses offer extremely cheap copywriting, but these services typically result in awkward, low quality content.
Cost-Per-Click Search and Display Advertising
CPC advertising is arguably the most popular (and one of the most effective) forms of online advertising. Basically, you use a service like Google’s AdWords to produce text or graphics-based ads that appear either in Google’s search results (search network advertising) or on some of the millions of websites and apps that use Google’s advertising platform for revenue (display network). Search network ads appear when users in your targeted areas search any terms on your keyword list, an index of search keywords you compile as part of your ad campaign. Depending on a number of factors, including the quality of your ads (determined by your keyword relevance, the quality of your website, and your click-through rate), you’ll pay a certain amount per click on your ad. That means views that don’t result in a click (impressions) are free, for whatever that’s worth. Average costs-per-click vary depending on industry and targeting, but you can expect to pay between $0.75 and $2 per click. That’s very good value for a lead.
What About Display Ads?
Display ads work similarly, except they appear on Google’s display network, and are often set to appear for users based on interest groups and demographics rather than based on keywords. Display ads have a dramatically lower click-through rate than search network ads, but they also cost much less. Average click-through rates are usually between a quarter and half a percent for display ads, but their cost can be less than 20 cents per click. Display ads are valuable for some businesses because they can get your brand noticed by tens of thousands of users within your target demographic for very low costs, but may not be as good at generating conversions as search network ads.
Social Media Advertising
Social media advertising can be similar to Google’s CPC advertising. Often, you pay for an action or at a certain benchmark, whether that’s a like on your Facebook page or a certain number of users viewing your ad. Some platforms like Instagram, Pinterest, and Facebook allow users to promote their posts. Currently, users often won’t see everything someone in their network posts. Promoted posts increase the ‘spread’ of your social media posts, costing a few dollars per day to reach as many users as possible. All social media platforms offer detailed demographic targeting.
Facebook in particular also offers Google-style CPC ads. These ads aren’t necessarily connected to your Facebook page, and can link out to websites. They can be designed to incorporate video, photos, and even image carousels. Costs vary depending on the quality and targeting of each ad. Facebook ads tend to be slightly more pricey than Google AdWords ads, but may have a similar conversion rate.
The Bottom Line
There’s always a right and wrong situation for each major form of advertising. While digital advertising is overtaking traditional media, television, radio, and print advertising still reach demographics Google and social media may miss, and have a different type of impact and brand-building ability. That said, digital marketing is more affordable and highly effective, and should be the entry-point for nearly any small business looking to advertise.