Do You Know What Your Advertising Actually Costs?

Years ago, a restaurant owner contacted me because he wanted help attracting more customers.

I deliberately arranged to meet him at noon.

There was a reason.

I wanted to see the restaurant during a period when it should have been busy.

It had about 75 seats.

When I arrived, I was the only customer in the restaurant.

The owner was also the chef, and unfortunately he had plenty of time to sit down and talk with me.

In reality, I would have been much happier if he'd said:

"Keith, you'll have to wait. I'm too busy cooking."

The empty chairs told me we had a problem before we'd even started the conversation.

$500 a Month Was Bringing in Customers

The owner was spending approximately $500 each month advertising in a local coupon magazine mailed to thousands of nearby homes.

There's nothing inherently wrong with that.

So I asked the obvious question:

To his credit, he knew.

Approximately 30.

That's better than many businesses I've encountered. At least he was tracking responses.

But he'd never taken the next step.

$500 divided by 30 meant he was spending approximately:

Was that good?

Was it bad?

We couldn't answer that question yet.

Then Look at the Offer

The coupon was essentially:

Let's simplify the numbers.

Suppose a couple would ordinarily spend $30 on two meals.

With the coupon, the restaurant might collect only $15 for those meals.

The restaurant had therefore spent about $16.67 advertising to generate a transaction that, before drinks, extras or other purchases, might produce only around $15 in food revenue.

And we still hadn't accounted for the cost of the food itself.

That doesn't automatically mean the promotion was a failure.

There's another question that matters enormously:

What Happened After the Coupon Was Redeemed?

• Did the customers enjoy themselves?
• Did they return two weeks later and pay full price?
• Did they bring friends?
• Did they celebrate a birthday there?
• Did they become regular customers?

If they did, spending $16.67 to acquire that customer might have been an excellent investment.

But the restaurant didn't know.

The customers ate their meals.

They paid.

They left.

And as far as the restaurant's marketing was concerned, they effectively disappeared.

There was no practical system for continuing the relationship.

So if the restaurant wanted to reach them again, what did it do?

That's the Gap

The problem wasn't necessarily the coupon magazine.

The problem was looking at the coupon redemption as the finish line.

It should have been the starting line.

The restaurant had already paid to get that customer through the door.

Why not give that customer a reason to stay connected?

An email list would have been an obvious solution.

Customers could have been invited to join for occasional news, menu updates and exclusive offers for regular customers.

Now the restaurant has something much more valuable than a redeemed coupon.

It has permission to communicate with someone who has already eaten there.

That's a very different audience from 50,000 anonymous households receiving an advertisement.

Stop Renting the Same Customer

This is something I think businesses frequently overlook.

Advertising often means renting access to somebody else's audience.

• You pay the newspaper.
• You pay Facebook.
• You pay Google.
• You pay the coupon publication.

There's nothing wrong with that when it works.

But if you've paid to acquire a customer, try to create a way to communicate with that customer again without having to continually pay somebody else for the privilege.

• Email is one way.
• Social media can help.
• Loyalty programs can help.
• Good customer service certainly helps.

The specific tool isn't as important as the principle:

And What About Those Empty Chairs?

There was another cost the restaurant owner couldn't see as easily.

Seventy-five empty chairs at lunchtime.

• Rent still had to be paid.
• Utilities were still running.
• Employees still needed paying.
• Insurance didn't stop because nobody walked through the door.

An empty restaurant isn't free simply because nobody is eating.

That's why filling otherwise empty capacity with a promotion can make perfect sense.

But the promotion still needs a purpose.

• Are you trying to make money on the first visit?
• Introduce new customers to the restaurant?
• Fill a traditionally slow Tuesday evening?
• Build an email database?
• Encourage a second visit?

Different objectives can justify different offers.

But you need to know why you're running the promotion before you can decide whether it worked.

So What Did the Restaurant Do?

Nothing.

The owner had originally contacted me because he wanted more customers.

But when presented with some relatively simple changes, he preferred to continue doing what he'd always done.

The familiar approach felt less risky.

Even though it wasn't producing the result he wanted.

That reminds me of a line often associated with Wayne Dyer:

"When you change the way you look at things, the things you look at change."

Marketing sometimes works the same way.

Before spending more money, don't automatically ask:

"Where should I advertise next?"

First ask:

• What is my current advertising actually producing?
• What does it cost me to acquire a customer?
• What happens after I acquire them?
• And am I giving that customer a reason to come back?

The answers might be sitting right in front of you.

Perhaps in the form of 75 empty chairs.

…And that's my Two Pence Worth.