How much do you spend on advertising and how have you arrived at this figure?
We spend about one-fifth of our revenue on advertising. We track effectiveness, and incremental returns from advertising by each channel, tracking where customers hear about us on sign-up, and which sites they have visited prior to ours. Google Analytics has tools that help us track the most effective referral sources. We also use Google Analytics to monitor the cost and returns of bidding on AdWords in each area, and adjust our budget based on this.
Where do you spend your advertising dollar? Why have you chosen those particular channels?
Our most effective advertising isn't really advertising at all - it is customer word of mouth. Customer referrals are our largest and most effective source of new customers, so our prime focus is to give customers a great experience, and we know they then tell their friends.
Of our spend on advertising media, we spend the largest proportion on Google AdWords. Over time we have trialled radio, print, billboards and other forms of online advertising like banner ads and Facebook. Radio works well in terms of building brand awareness, but getting people to transition from the offline world to the online world is not very efficient. For us as a online service, it is more efficient to let customers know about us when they are online already. We manage our AdWords campaigns to ensure we receive a positive return, and Google Analytics is a powerful tool to ensure we can continually improve on this.
In the early days of Facebook it produced very good results. However as more advertisers have started using Facebook, costs have risen, competition for attention has grown, and the return on investment from that channel has declined significantly. When people use Facebook, they aren't probably doing so to find a quality builder. When someone goes to Google and types in 'builder for my extension' then they are motivated to find a good builder, and that's where we can help, of course.
What kind of return have you seen from your investment in advertising and how do you calculate that?
We manage our advertising to ensure we receive a positive return on campaigns over the life of customers acquired. We know what different types of customers are worth to us, and use that to ensure our advertising campaigns deliver a positive return. If they don't, we don't run them for long. We are happy to put small amounts of money to work to try different ideas, and then invest further behind those that work well.
Lastly, what advice would you have for other small business owners when it comes to advertising?
Spend small amounts of money testing ideas, and then put more money behind those ideas that work. The right mix will depend on your business, the stage you are at, who your customers are and your objectives. Some businesses lend themselves well to offline advertising and some to online advertising. It's also very easy to spend a lot of money on advertising with little effect, so careful experimentation of all forms of advertising is key to determine what works for you and what doesn't.
Coming up in Small Business: Employee share schemes are an increasing trend, particularly in the technology sector. Why and how have some small businesses implemented these? If you've got a good story to tell, drop me a note: nzhsmallbusiness@gmail.com
