If you're running a business or planning to start a business, you know how important it is to balance your expenses with your sales. Unless you're spending a trust fund (and most of us aren't!), then you have to make sure that your making more than you're spending. But what happens when you have your eye on some new equipment to improve production, or a new computer system to increase efficiency or an administrative assistant to shoulder some of your duties? You have to find a way to grow top-line sales, and this growth usually comes at a cost.
Here's my story on how Botanical PaperWorks took a big risk, invested a large chunk of money and prepared for both the worst and best-case scenarios.
Go back with me about 10 years and Botanical PaperWorks was doing a good business in wedding invitations. We had unique, stand-out designs that we sold through our website, but we knew our sales could be more and so we went looking for ways to grow. After evaluating a number of options, we settled on advertising in Martha Stewart Weddings magazine since it gave us access to an extremely large readership of couples planning their weddings, our exact target market. It was a good fit and promised to have good results.
There was just one problem. It cost $10,000 per issue x 4 issues per year to take out a 1/4 page advertisement (these figures are from the late 1990's; no doubt the cost to advertise now is significantly higher). Of course we had to pay the money, put out the ad and then foster the leads before the sales started coming in. We reasoned that the sales WOULD come, but how long would it take? Four months, six months, a year? For our business at the time, the annual commitment of $40,000 was a princely sum and not to be spent carelessly.
We did ROI analyses, sales projections and cash flow projections. We accounted for every variable that we could think of. We reviewed the numbers up and down, left and right. But eventually, we realized that certainty was not possible and that we'd have to make a decision based on our well-reasoned assumptions. So we signed on the dotted line, committed to four issues across the next 12 months.
Talk about nerve-wracking. We cut a check for the first installment of $10K, sent in our artwork and waited for the issue to come out. The second that issue of Martha Stewart Weddings hit the stands, we were at the store, thumbing through to find our ad. I held my breath as I laid my eyes on it, hoping and praying that the artwork looked okay and was free of typos. There it was! And it looked good!
The next weeks and months were the test. Requests for brochures came in. Many requests. We worked hard to answer the phones, mail out catalogs and provide our most excellent customer service. We tracked the sales as they came in, asking each person "How did you hear about us" and marking down Martha Stewart Weddings when applicable. We could run a report from our database that told us the sales for all MSW customers and we watched the amount slowly tick up.
What did our analysis tell us in the end? We say that we took a big jump in sales that made the advertisement worthwhile for the one-year commitment. But it also told us that once established with that audience, we could switch our advertising budget to other cheaper forms. We were glad that we had made the investment and took a chance. We practiced and improved our forecasting and ROI analysis methods and boosted our wedding sales. All in all, a successful experiment.
- Perform a Return on Investment (ROI) analysis before a significant marketing expenditure
- When reaching out to a new and large audience of customers, be ready to respond to their calls, emails and information requests. As the saying goes, "You only get one chance to make a first impression".
- Don't be afraid to switch marketing dollars from one outlet to another to improve on your results