Small Business Advertising and Why New Companies Need It

Some say that advertising is a waste of money and that small businesses do not need it at all. Proponents of this point of view rely solely on word of mouth: they say that if the product is good, then there will be a buyer. Is it so, or such logic sooner or later will lead the company to failure? In fact, you need to promote not only large projects, like gambling online at Playamo or new Netflix movies, but also new companies that don’t have as many goods and services, and here’s why.

Movement Is Life

It’s not only healthy to be in motion, it’s also good for business. The competition is growing every year in most areas of commerce.

Here is a hypothetical example. A local store has been renting space for several years and sells an average of 250 items. The company makes a small profit and does not spend money on advertising its store. A few years later a large chain appears in the same shopping center, which deploys a large-scale campaign for its opening. The appearance of such a neighbor threatens the existence of the local store. Advertising would help build a broader and more loyal customer base, and an even broader audience to introduce their store to. By investing in advertising every month, instead of 250 regular customers, the local store would get 1,000 customers, and the perceived impact of strong competitors entering would be reduced several times over. Besides, with advertising, the store could form a unique positioning that would provide it with immunity against customers leaving for competitors.

For small businesses on the Internet, the problem of competition is even more acute, as it’s almost unrealistic to get the first customers without investing in the promotion of the site. In order for an unknown site to give customers, you need to have an established customer base or to receive strong media support from influential partners. In all other cases, you need to give impetus to the promotion of the site in the form of advertising and SEO.

How to Check the Effectiveness of Advertising

Effective advertising returns every dollar invested with a profit. This effect is measured with the help of ROMI (Return of Marketing Investment). It shows how much the budget you spent on advertising brought in and is calculated using the formula:

(Advertising Revenue – Advertising Campaign Expenditures) / Advertising Campaign Expenditures x 100

Revenue from advertising is the profit from sales after advertising. For example, you run an advertising campaign for a new product and spend $1,000 during the month. During the month, you received 80 new product orders for $50, the advertising revenue in this case is $4,000 and the advertising campaign expense is $1,000. That means the ROMI is 300%. Every dollar invested brought you $4 in profit. Use this figure to check the effectiveness of your company’s advertising and marketing investments.