155: Why Businesses Advertise Backwards
When someone says “Super Bowl commercial,” your mind probably imagines one of the whacky or sentimental spots that Forbes reports costs $5 million per 30 seconds in this year’s Super Bowl. This creative ad, though, won’t be shown Sunday night. It’s a commercial about Super Bowl commercials.
The moral of this short story is that Super Bowl commercials are big gambles for the vast majority of brands in our country. Most of us get that; so, the ad plays as an inside joke.
That said, I regularly see auctioneers fall for the same line of thinking: that a bigger audience is a better audience. I’ve seen auction marketers try to hedge their bets with the assumptions that a bigger mailing list is better than a small one, that a metro newspaper with 300,000 subscribers trumps the local paper with fewer than 5,000 weekly readers, or that a boosted Facebook post to everybody in a radius beats a demographically-targeted post to 1,200 people.
Maybe sometimes. Not usually, though.
Media is typically sold to advertisers using a measurement called “cost per mille.” The basic idea is to take the cost of an advertisement and divide it by the quantity of potential audience impressions. So, if you pay $500 to reach 10,000 subscribers, you’re looking at cost of $50 per thousand.
In the auction industry, my clients are regularly marketing to smaller audiences.
So, I like to take that one step further and determine the cost per person. In the example above, you as an advertiser would be looking at an investment of $.05 per person. This number can be helpful, when budgets are tight; and you’re looking for the most efficient media possible. We all want the most bang for the buck.
The problem with both cost per mille and cost per person, though, is that they distract from a more important metric: cost per prospect. Cost per mille asks, “How many people can I reach with my money?” Cost per prospect asks, “Who are my most likely buyers (or sellers)? What will it cost to reach them?” Cost per mille promotes scale. Cost per prospect promotes efficiency and effectiveness.
Size of the audience is less important than relevance of the audience.
Whether it’s a mailing list or a publication, a website or a social media platform, the primary question marketers should ask is not, “How big is its reach?” but “Are these the right people?” It’s the difference between spectators and participants. (Helpful tip: we want participants.)
Once you know you have the right people, divide your budget by the number of those prospects to determine what you can spend per potential client. If you don’t have a budget big enough to make a good impression to all of the prospects, maybe sift those prospects down to a quantity you can. Some auctioneers work it the other way, cutting the size or impact of the media. So, they send a postcard instead of brochure or an email instead of direct mail.
For company promotion, I’d keep sifting until I can make an impression that can’t be ignored. It’s not uncommon for me to spend $150 to $500 of my time and resources per potential client I pursue, but I only work for 15-30 auction companies per year. I’ve helped auctioneers spend hundreds and even thousands of dollars on a single proposal presentation to a single client. The nuclear company in my area probably spend tens of thousands of dollars to convince a power company or municipality to buy one of their eight- and nine-figure reactor systems. Your effort should be proportional to the value of their business.
That might mean you’re looking at mailing a package instead of a postcard, arranging a free seminar instead of an advertorial in the business journal, or drafting hand-written notes instead of form letters. Discover what would impress a client; then do it.
A media sales representative can’t tell you your cost per prospect.
Only you can do that. Whether you’re actually taking a calculator or spreadsheet to it is less important than operating from the prospect mindset. Start with the audience and work backwards. If you’re going to gamble, improve your odds. Work to find the valuable few instead of the risky many. No matter how many people see your advertising media, you want the ones who do interact with it (1) to relate to the content and (2) to be impressed.
Feature image purchased from iStockPhoto.com.