Let’s look at two case studies to better understand the strategic benefits of small business advertising. Our case studies focus on two mythical business owners, Joe and Mary.
Joe, the Restaurant Owner
Joe owns a local restaurant with awesome food.
Like the majority of small business owners, Joe gets most of his new customers from word of mouth spread by happy current customers. He’s been proud of the positive word of mouth, as he should be.
He’s always avoided advertising, thinking he didn’t need it. And he didn’t want to spend the money. But his attitude toward advertising is beginning to soften.
Recently, Joe has started to feel as if his business is stagnant. He’s tossed and turned a few nights, worrying.
Weekends are good, but weekdays are slow. He feels the number of customers has plateaued.
Joe also is worried about falling behind the competition. Another restaurant a half mile away has expanded into new premises. The competitor is now offering customers free WiFi, food tastings, outdoor seating on a 3-season patio and more.
Joe is profitable and is getting by, but just barely. Without some profit cushion he can’t invest in the kind of amenities his customers are asking about.
The restaurant is starting to look a bit worn. He can’t afford the new booths and chairs needed for a facelift — let alone a beautiful new patio like his competitor.
He also doesn’t have the money to invest in new technology. As a result, his business expends a lot of staff time grappling with an ageing point of sale system.
Aside from lack of growth, he’s beginning to worry about his business shrinking.
Mary, the Gift Shop Owner
Mary also owns a small business — a gift shop. Like Joe’s restaurant, her business gets customers through word of mouth. She too is proud of that.
But two years ago she realized she had to reach out beyond her business’s current circle of customers and their referrals. So Mary started to advertise her business.
Admittedly, her advertising budget is small — nothing huge. But through careful planning and clearly understanding her target market, she’s been able to attract new customers and accelerate growth.
Mary has a written advertising plan. She tracks ad expenditures against results to make sure her business gets a good return on investment (ROI). After all, she doesn’t have money to waste.
By taking a calculated spending risk, she’s been able to profitably grow her business in double digit percentages. In turn, she’s earned the money to expand inventory to sell trendy artwork and unique gifts, upgrade the building sign (thereby increasing foot traffic), hold more events with refreshments and invest in a new ecommerce website to grow online sales.
Here’s something she wasn’t expecting: by advertising her business, word of mouth also increased! The more new customers Mary attracts through advertising, the more those customers talk about her business. This attracts even more customers.
In other words, Mary increased word of mouth referrals by advertising.
Mary didn’t just get a one-for-one return for her advertising dollar — she got more.
Seeing the Value in Advertising a Small Business
Can you see the differences between Joe and Mary when it comes to advertising?
Joe isn’t exactly a high-growth kind of guy, but he is beginning to realize the world around him isn’t standing still. He may be a little late to the party, but he now knows he has to make changes just to avoid losing ground.
Advertising will help him take charge to find new customers. He won’t feel the situation is out of his control. Advertising will give him a way to attract more customers.
And advertising will help expand his circle of potential new customers much wider than word of mouth alone can do. The extra money brought in through more customers gained by advertising, will fund the improvements he needs to make in his facilities and technology.
The main difference between Joe and Mary is that Mary realized much earlier she needed to do something. And she also recognized that an initial modest investment in advertising could pay off.
It wasn’t long before new customers were funding her business growth far beyond the modest amount she spent on advertising. She still advertises today to keep a steady stream of new customers.
For Mary, advertising was the first step in her overall strategic plan to make her business stronger.
So the next time you wonder “how can advertising help my small business?” just think of Joe and Mary.