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Wednesday, December 10, 2008

What advertising works? (2)

As I waited for my flight back home from Washington (D.C.) Dulles Airport today, I reached consultant Michael Stone across the country in Camas, Washington to find some answers to questions about his consistent recommendations that contractors should advertise, advertise, and advertise some more.

After all, my business sells advertising for a living. However, much money thrown into advertising is wasted. Worse, a contractor facing desperate hard times will easily be sucked into spending money on advertising not knowing what works, and why, and could lose a fortune.

Stone and I, it turns out, are not so far apart in our thinking. Stone certainly has no problem with your business encouraging and developing referrals, he just doesn't want you to be one of the majority who rely passively on word-of-mouth. Contractors who simply accepted in-bound referrals in good times, now find their phone has stopped ringing, while contractors who advertised effectively are stepping up their marketing, and attracting profitable business regardless of the difficult economy. In other words, relying on referrals is not wise; building systems to encourage and develop your referrals makes a lot of sense, and could be one of your first and most important strategies during hard times.

So what works, and what doesn't?

First, Stone says you should have at least six different forms of advertising to reach your market.

Second, he advocates you spend upwards of five per cent of your annual sales on advertising. This means if you are a contractor doing about $500,000 in business, your advertising budget should be in the range of $25,000.

Third, and most important, he suggests your advertising be geared to the demographic of your ideal clients. Spend some time with your best clients. See what magazines they read, what things they enjoy, what marketing approaches 'reach' them. (This conversation with your best clients, of course, givs you a chance to capture some repeat and referral business, as well.)

Now, lets get over the bad news -- what advertising should you avoid?

"Banish all Yellow Page advertising . . . it doesn't work," Stone says. "You have to have a long-term identification in business before Yellow Pages advertising will work for you, perhaps 10 years in business." In other words, if you have a long-established reputation (and I would add, are trying to reach an older demographic), you might use Yellow Page advertising, but if a Yellow Pages representative calls you, hang up on him.

Similarly, "unless you have long term name brand reputation, stay away from radio and television," Stone says.

Leads services are generally a waste of time, unless you have the good fortune to find one that "delivers on what they say." "They are all in it for themselves -- they are in business to make money, rather than for contractors."

Okay, now what works.

Business cards -- yes, handing out business cards is cheap and effective;
Your website -- spend some money (perhaps $1,500 to set it up), and you will be in a better position to find business.

Home and Garden Shows -- "They are excellent now," says Stone.

What might work?

Stone says the other media and advertising you would use will depend on local conditions, your client demographics,and what you find they are using. He says, for example, a high-end magazine in Atlanta works really well there for many clients, but a similar publication in New England is ineffective. The key to discerning what works and what doesn't is to spend some time with your ideal clients, and to really know who you will reach.

So how do you deal with the pesky advertising sales reps who call you. "Ask them to put in writing a performance guarantee -- that they will actually deliver the leads and clients they promise," Stone says. Most of course won't do that; because they cannot deliver on their claims.

Stone says he hounds his clients to advertise -- and the clients who listened to his advice and built systematic advertising into their systems, rather than passively relying on referrals in good times, are still thriving even in the recession. Others are struggling.

I think there is wisdom in these words, but caution you to be very careful if you haven't tested or validated your advertising in good times, before spending your scarce resources now.

While Stone is advocating advertising for the business-to-consumer markets, I think it is also effective in the business-to-business market; as long as you apply the principals of knowing and understanding your clients before you spend your money and relate it to other marketing methods including association participation, public and media relations and effective networking (the sort of stuff we do in our own business).

Remember, as well, that building your brand with great service and built-in-follow up systems to encourage and develop your word-of-mouth and referral marketing is probably your wisest and most effective form of marketing. This is not a passive activity. It is a systematic initiative. You are not relying on referrals; you are developing them. Go there first.


kenc said...

Makes a lot of sense to me to reject Yellow Pages advertising since the books are used by over 85% of adults each year and were referenced over 13 BILLION times last year. Yep, real smart. Their competitors will be happy that did.

Construction Marketing Ideas said...

kenc, some variations of the Yellow Pages offer a Pay per Call service -- you only pay for the advertising if anyone actually responds. I'm sure neither Michael Stone nor I would object to contractors using that form of advertising (providing absolutely no up front fees of any kind are charged, and the cost per lead is reasonable, and the service can be cancelled any time.)
But who these days would be crazy enough to lock in high monthly payments for an ad you cannot change for an entire year, especially when fewer and fewer people are reading printed directories since the same information is much more easily available on the Web.
There are some conditions where Yellow Pages ads may work, but like Stone, I believe these days they are more the exception than the rule. If you think otherwise and are willing to stand behind your product, please guarantee your advertisers specific meeasurable response levels, or they should not need to pay.