Three Sure-Fire Ways to Reduce Your Advertising Costs

Monday, June 21, 2010 Posted by John Tabita
Everyone in business want to decrease their costs, so here are three sure-fire ways to reducing your advertising costs:

  1. Increase your close ratio
  2. Increase your response rate
  3. Decrease your cost per month

In my previous post, we looked at two ficticious business owners and compared how the cost of their advertising stacked up against these three factors. Let’s see how Advertiser A would fare by improving in these three areas.

Increase Your Close Ratio
If Advertiser A could close two people a month, instead of just one, he would more than double his return on investment and cut his cost-per-sale in half. (Although this doesn’t involve increasing the cost of your adverting, it may require spending money on sales training for yourself or your sales staff.)

Increase Your Response Rate
Even if Advertiser A’s close ratio remained the same, he could achieve the same results as above by doubling his response rate. If six people a month called instead of just three, he’d close two sales a month, increasing his return and cutting his cost-per-sale.

What most businesspeople don’t want to hear is this: the only way to increase your response rate is to increase your advertising. For direct mail, that might mean a larger mailing. On the Internet, it would mean achieving a higher ranking on the search engines. For yellow pages advertising, it means a larger ad. We know from independent research that just doubling the size of a quarter-column ad produces 5 times the response, and quadrupling its size produces 15 times the response.

Decrease Your Monthly Cost
Many people who want to decrease their advertising costs do so by decreasing their advertising. Unfortunately, this is the only method that negatively affects your bottom line, because it decreases your response rate and ultimately, your sales.
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