I would love a dollar for every time I have been asked this question. Moreover, I would not mind a dollar for every time I have found ways of reducing a business’s advertising budget.
In the early 1960s an advertising guru was reported to have said: ‘50% of advertising does not work, thank God the client does not know which 50%’. Many advertising agents swear by this.
Reducing advertising costs will certainly involve reducing waste and trying to identify the 50% (or more in my view) that is wasted. Consideration should be given to:
- Reviewing your target market with a view to making it smaller
Venture Capitalist, Mark Cuban, makes the point that the smaller the market, the better. Investor Peter Theil talks of the importance of owning a small market rather than having a share of a broader market. There is no doubt that this can reduce marketing costs and increase returns.
- Better understand your market and the purchase process
At its best, traditional advertising is akin to firing a shotgun and hoping that some pellets will hit the mark – without really knowing who that mark is. Understanding the customer better provides for more customised communication, and understanding the journey provides for more contact points.
- Develop a product that addresses the needs of your market
Rather than developing a product and then finding a market, which most businesses do, there is economic merit in identifying a problem in a market and solving it with a remarkable product. The one thing that the big brands have in common is a product that almost sells itself.
- Have a tangible strategic competitive advantage
Expenditure on advertising is very often inversely related to the level of product differentiation. The more tangible your strategic competitive advantage or point of difference – the lower will be the cost of advertising and promotion. A relevant SCA sells itself.
- Rely less on advertising
Advertising can directly impact enquiries but has a much lesser effect on conversion rates, average sales per customer, repeat business rates, and referral rates. Increasing these last four elements can boost sales with no impact on advertising. Business is too reliant on advertising.
- Make your advertising more accountable
It is notoriously difficult to make traditional advertising accountable. How do you accurately measure its impact? Digital advertising, while far from perfect, is much more accountable. Further, the data provided can be readily applied to develop strategies to reduce waste.
- Consider the alternatives to advertising
Native advertising or the use of content is becoming increasingly important and, indeed, potent. It can be an excellent alternative to paid advertising. Social media can also be used to supplement advertising or, in some cases, replace it as can media relations. Look at other strategies.
- Don’t get hung up on creative
Advertising agencies sell what they call ‘creative’ (smart words and pictures that are rarely, if ever, original) as a secret weapon possessed by the very view and worth mortgaging your house for. Well, if you divide their claims by 50% and then halve them, you might be closer to the truth.
- Avoid large advertising agencies
I struggle to see the added value of larger, more expensive advertising agencies. The fact is, while marketing can be complicated, advertising is far from rocket science, and smaller more agile groups without a history of outdated practices can often add more value with less cost.