“How To Avoid A Common-As-Dirt Advertising Strategy Mistake That Cost One Manager $119,000”

I could see the anguish in his face. It all related to his advertising strategy, although he wouldn’t have identified it in those words.

This owner of a southern home improvement business came to me after a Maverick seminar and said, “I’ve been fighting a problem for six years and nothing gets any better. What am I going to do?” We agreed to meet two days later.

A business nearly dies

In our consulting session, Tex shares his woeful tale. When “big oil” went down the tubes in the Texas-Oklahoma-Louisiana area in the early 80’s, his business went with it.

The company had topped $1,000,000 gross volume before the crash. When the recession hit, sales dropped to $300,000.

I still marvel he survived at all. In the following six years, this company’s sales stay flat. It’s now 1990 and all area business is still in the doldrums.

By this time, of course, Tex’s company runs “lean and mean.” He’s trimmed operations and tightly controls cash flow. He’s honed his survival systems to a razor’s edge.

That’s an excellent strategy – even more so if you remember to keep tight rein on expenses when the good times return.

Lack of advertising success
stems from lack of focus

Many local businesses perennially make the same mistake. They scatter an already small advertising budget over multiple local media. Their rationale for it? They believe they must talk to everybody.

I recommend Tex use an advertising idea that employs the management principle of CONCENTRATION: Don’t try to sell everybody. “Concentrate your resources to sell prospects you can reach effectively.”

Tex will limit his media purchases to just two:

  1. Core customer direct mail to current and former customers only (he has many other items to sell or core mail would not work for him).
  2. No more than one radio station.

Here’s the principle: sell and create customers by talking repeatedly to the same people. Despite the gut feeling that overwhelms you, you don’t need to reach everybody (you couldn’t if you tried).

That means you deliberately ignore the rest of the population. You accept their business when they come to you but you don’t solicit it. (Of course, I never turn down a legitimate order that appears on my doorstep, but I don’t consciously chase it).

If you try to reach everyone, you only fragment your efforts and dilute effect in all your advertising.

What should you do when sales rise a little and you have additional advertising dollars? Pour them into your current media until you are using them optimally.

Let’s say your sales jump substantially. Only then do you add another medium to go after a larger chunk of prospects. And, by “medium” I mean one radio station, one newspaper, etc.

This is just one of several proven strategies we practice at Maverick Strategy.

Determine the balance needed between size of budget and number of media you can afford within that budget. Maverick endorses this strategy for two reasons. We partly base our conclusions on . . .

  1. Research across several hundred like businesses.
  2. Cataloguing results from our own customers.

The plan we construct for Tex details exactly the number of ads and “core customer” direct mailings his business can use through the year – plus in-house merchandising suggestions.

Good news at the
first result

Halfway into the execution of his plan, Tex calls with joyful news. At the six-month mark, business has jumped a little over 30%. A year later, the owner reports a total 39.9% increase. His sales rate soared from $300,000 to $419,000.

Why good news
turns to bad

Happy ending? It is. But six months into the second year, that happy ending turns sad.

After such success, I’ve observed some managers forget the lessons they learn and get reckless. Strangely, it’s almost as if we say to ourselves, “That worked. Now, let’s do something else.”

When I first began testing different strategies, I sometimes tried as many as six or eight before a winner emerged. Once I found one, I virtually enshrined it so I’d never lose it.

Finding the thing that works is often incredibly difficult.

Because a winning strategy is so hard to find, I’m amazed when managers stop after achieving success. Instead, they veer off into some other totally untested arena.

Tex has forgotten the principle of concentration. He reasons that if one radio station is good, two will be even better. He doesn’t ask Maverick so I have no chance to offer counter reasoning, even though he’s paid for it.

Although his business has increased by a third, he holds to the same ad budget. He misses the point that you need more budget simply to sustain added sales volume. In his rush to save a few dollars, he loses $119,000.

By adding a second radio station, he tries to span too many media with too small a budget. His advertising fragments so much he no longer sells effectively on the station he started with.

Revenue gains disappear. Sales shrink right back to $300,000. The little money he saves by not increasing his ad budget proportionate to sales increases triggers a loss. Why? Because, with higher sales, expenses to creep up. But, when sales drop, the higher expenses eat him up.

To summarize, here’s what we suggest:


Your Strategy Of Concentration
With Advertising

 When you manage a sales increase with your advertising, keep the pressure on. Budget adequately to support your gains. To employ a new medium with power you must muster sufficient extra budget.

 If you can’t afford the new medium, increase budget in the media you currently use. You nearly always do well by talking more with the prospects you already reach.

 Concentrate your resources on a few media. Keep them focused there.

 If another vendor comes along with one of those “surefire” ideas, don’t steal resources from your current advertising strategy. Don’t succumb to the siren call, “It won’t hurt to cut that media a little.”

 That small cut may be just enough to gut the pulling power of your first media.

 If you can’t resist the new thing, add a few dollars to your budget and risk only those few.

 If you’ve earmarked and allocated those added dollars specifically for the new idea, when the ploy fails, you’ll know what to cut next year.

 And, you will have learned something.


Do you belong to a trade association or have a company with several locations?

You and your managers can learn a whole proven system that eliminates guesswork and increases your success odds mightily. Click here for the Maverick Executive Advertising Seminar. You’ll learn all about it and get a free Speaker’s Kit to show to your group.

We pass on new findings to all our customers every month. If you’d like more advertising strategies, sign up for the Maverick Strategy Newsletter at the top of this page. You receive it every month free of charge. Try it. If for some unfathomable reason you are disappointed, you can always cancel instantly.

We wish you well.

Rod Rademacher
Maverick Strategy
4148 S.W. Emland Drive, Suite 7
Topeka, Kansas USA 66606
Phone: 785-783-7756 or
Email us here

____________________

Comments are closed.

Maverick Strategy Newsletter
Sign Up Today -- for free!
Name:
Email: