I want to discuss a common problem with the way most businesses approach advertising.
This is important because as the number of places and ways you can advertise continues to increase, the confusion and waste increases too.
That's why it's worth stepping back and thinking about a smarter, more strategic way to approach ads.
And if you're not currently using ads to bring you new business, this may also give you a new perspective on how to get started.
Starting your ads on the right step
Most businesses start their advertising planning in precisely the wrong way. They think about the media or channel first (like Facebook or radio ads, for example). Or maybe they head straight for Canva.com and start mocking up a design.
But regardless of what they do first, it is rarely setting them up for success.
That's because the 2 most critical factors involved in advertising are often forgotten or ignored. Those factors are:
1. Knowing how much can be invested in advertising
2. Including the 4 most important elements in every ad
Let's dig into each of these factors…
First, let's follow the money.
If I were to ask you how much you want to spend on your ads, the answer I'd expect to hear is “as little as necessary.”
And that would be a shame.
Because the more you're able to spend, the more likely you'll win business from your ads… instead of your competition winning the business.
So before thinking about where to advertise… or what the ads should look or sound like…
You need to consider your numbers, by which I mean you need to know how much net revenue you bring in when you make a sale.
For example, let's say you run a retail business (online or offline).
The two numbers you'll want to look at are AOV and NPM.
AOV is your average order value.
NPM is you Net Profit Margin or the average amount you keep after the cost of fulfilling an order.
By knowing these two numbers, you can now calculate the point at which you will breakeven on your ad spend. This tells you the number you need to hit to justify your advertising investment.
To figure out your Breakeven Return On Ad Spend (B/E ROAS), use this simple formula:
B/E ROAS = AOV / AOV x NPM
If your AOV is $700
And your NPM (Net Profit Margin) is 38% or $266
Therefore, your B/E ROAS = 700 / 266 = 2.63
This means that for every dollar going into advertising, at least $2.63 needs to be returned in order for the ads to be profitable.
And if you sell different products or services which have different profit margins, it's worth calculating which ones might be worth focusing on to maximize a profitable ad campaign.
4 important “reason why” ad elements.
Small businesses don't have money to waste on ads that simply “get their name out there.” Instead, it's important to ensure your ads are structured to get people to take action after seeing or hearing them.
Specifically, ads should have one or more forms of a “reason why” someone should care, let alone take action.
Including one or more of these four elements will help make that happen:
1. It should be newsworthy
The great advertising industry “Mad Man,” David Ogilvy, was said to have asked “If you have no news, why bother advertising the fact that you don't?”
The point being, ads which highlight a reason why are going to attract greater interest than those which simply shows that a business or product exists.
As I type this, I've been thumbing through our local free weekly newspaper. Nearly every ad is for an upcoming event or concert – each highlighting a newsworthy headline like “one night only” or “only Portland area appearance in 2022.”
But I also see a handful of ads for local retailers which fail to leverage newsworthiness. Instead they just sit there on the page, merely displaying the business name, phone number, and address.
At least one of these ads gives me absolutely no indication of what the business does. And I'm not inspired enough by the ad to try to find out.
2. A benefit should be clearly understood
Ads which explain a benefit can tap into existing desires of consumers – without forcing someone to do the mental work of connect what's being offered with what they want.
Benefits can either be relief from negative circumstance… or gain of something positive.
Take this classic ad opener from a direct mail piece, for example:
It sure beats an ad listing the product name and where to get it. Instead, it trades on one of the numerous emotional forces that drives all humans to buying decisions (in this case, greed).
3. Include details that set you apart from others
This is the part of the ad which highlights the positioning of the product, service, or business.
Positioning is a big topic, and one you can (and should) read more about here.
But the basic point is to claim a place in the consumer's mind which no other business has claimed.
For example: Sarasota's only Chicago style hot dog spot or Financial planning for Federal employees.
And, of course, it should be mentioned in the ad. After all, the point is to make sure people know which position is being claimed… and what better place to do it than in your ads?
4. A call-to-action must be included
It could be argued that this element is the most important of all.
Because in the absence of a clear call-to-action, people are most likely to take no action at all.
The best ads, however, will include instructions on exactly what to do, what will occur when they take that action, and why they should do it now rather than wait.
Don't make the mistake of assuming people will know what to do. This thinking will only result in untold masses not giving you money… because you didn't think it important enough to tell them how to do it.