Advertising as a percentage of gross?

[keniniowa]

Do you guys have any type of formula to determine how much advertising you do?

This is the first year I've advertised much, still feeling out what works.

First quarter spent 2.5% of gross. Gross is up a little over 20% from last year but better weather.

TIA,
Ken

 

[Whale of a Wash]

Just wondering if you see the competitors advertising much in your area. We have a tunnel wash in town that advertises constantly on tv. I have always felt their advertising helps me, as they give away a drip towel with their name on it, and i get tons of them at my wash all the time, so i feel alot of the customers go and use many different washes, so advertising may help but not as much as it costs. What the new generation uses, are cellphones, get set up on google map, it's free. In our area we have like 30 radio stations, I could spend alot of money, without much for results, as the younger crowd has MP3s playing, and CD's. My daughter will change to another station when a commercial comes on, so getting her to listen to a commercial is next to impossible. She has grown up with a DVR in her room, so doesn't see much for tv ads either. The telephone book is a dinosaur also. In my apartment buildings i just threw away 40 of the new DEX directories after 3 weeks laying in entry ways, no one seemed to want one. I don't want to sound like one who hates advertising, it must work or we wouldn't be bombarded everywhere we go, but it seems difficult to make your advertising make you dollars than it costs

 

[rph9168]

Except for starting out the best place to spend your marketing dollars are at your wash to give customers that use the wash a reason to continue doing so. On site promotions and "extras" like complimentary towels, scents or mat washers make your customers feel they are getting value. In most cases the majority of marketing dollars spent outside the wash yield little in the way of results. While ads in local papers or mailers from time to time can be an asset, you get the best bang for your buck making your site the best place to go for a wash.

 

[robert roman]

Ken,

2.5% of gross may be the typical amount carwash operators spend on advertising but that doesn’t necessarily mean it is the right amount.

For example, the last two projects I worked on, the annual budget for advertising and promotion was pegged at $50,000 for one and $18,000 for the other.

I have a client in the southeast that spends $30,000 on advertising. After normalizing the results for weather, he is getting a 175% ROI on some of his marketing tactics.

I also have clients and friends that don’t have much faith in advertising and spend very little. Luckily, their site locations are so good they can get away with this, for now.

One of the challenges in marketing, as one person described earlier, is you have several general categories of people to reach; the silent generation, baby-boomers and generation X and Y.

For example, most of the silent generation still read newspapers and the vast majority of generation X does not.

So, the key to getting results from advertising is to target the money.

 

[dirty harry]

My old number was 2% of gross, not including the charity donations of gift certificates. The neighborhood charities were never sent away empty handed, and this proved to be some our most effective advertising.

 

[parsonii]

it's infinitely cheaper to get someone thats on your lot to come back then it is to find someone new to come to it. delight your customers.

 

[Earl Weiss]

.........................

I have a client in the southeast that spends $30,000 on advertising. After normalizing the results for weather, he is getting a 175% ROI on some of his marketing tactics.
.

How is that measured?

Also with a $30 k expenditure and the 175% ROI on "some" what is the expense figure for the "Some" that gets the 175% ROI.

It's far different to spend $30K and return $37,500 or of that "Some" is $1000 and the return is $1750.

 

[robert roman]

One formula begins by identifying property and business type and what the goals and objectives are.

For example, if property is, highway-oriented conveyor, goal and objective may be to increase exposure to drive higher sales volumes.

Here, some operators rely on highway billboards to help achieve this. In some areas, a basic billboard advertisement may cost $20,000 a year or more.

So, if gross is $750,000, a billboard alone would be 3.0 percent of sales. I’ve seen billboards increase site volumes by as much as 25 percent.

Full-service spends from $18,000 to $30,000 or more on advertising.

If self-serve, goal and objective may be to recover lost business from downturn and /or increased competition.

For example, if the target is 18 to 30 year olds, forget newspaper ads, yellow pages, etc.
They get everything from the internet.

Cost of virtual store varies - website design, monthly fee, merchant account for shopping cart, phone app design and monthly fee, POS integration, etc.

I have also seen survey results for some carwash businesses with zero responses for seniors, people 69 years and older. Seniors typically represent 25 percent of an area’s population.

In this case, traditional marketing works better like direct mail coupons, etc.

So, it’s not how much to spend on percentage of sales basis but rather what are you trying to accomplish and what is the best or optimal way to achieve the results?

This determines how much to spend.

 

[Earl Weiss]

You missed my point. Not asking for your formula on how much to spend.

I am asking about the metrics used to determine ROI, particularly the 175% ROI.

 

[robert roman]

What do you think the metrics were Earl?

They must be gain – investment / investment.

I don’t discuss clients but the operator I’m referring agreed to be the subject for an article published in Auto Laundry News some years back. Therein, he discussed his results in percent improvement. It’s in the ALN archives if you are interested.

I guess one way to proof ROI on billboard would be to pay someone to take their billboard down and then measure car counts to calculate the loss of business.

Hell of a way to prove a point though.

 

[Earl Weiss]

What do you think the metrics were Earl?



I don’t discuss clients.

Not looking for confidential particulars.

Looking for a way to calculate.

Example. I spend $2000 a month on a dollar off coupon. EE Price is $5.00. 500 coupons get returned in a month. All Buy EE at $4.00. So net revenue is $2000. Is my ROI $0? ($2K in $2k Out) Is my ROI 100%. How do I factor people who are regular customers so the coupon was a net loss?

Car count as ROI is basicaly BS unless you count coupons due to variables of weather, economies or jst doing a good job and growing your customer base.

So, I repeat the question. What was the metric used to determine the 175% ROI? Not looking for proprietary info.

 

[robert roman]

EE Price $5.00 less $1.00 coupon = $4.00

$4.00 less COGS $1.25 = $2.75 margin

$2,000 cost / $2.75 = 727 cars breakeven point

So, redemption of 500 coupons would have negative return on investment.

If program cost $500, which is about average for 10,000 homes coverage, redemption rate of 30 percent or 300 returned coupons would have breakeven of,

$500 / $2.75 = 182 cars

300 X $2.75 = $825 - $500 = $325

ROI = 825 – 500 / 500 = 65%

 

[Earl Weiss]

Thanks, (I think you meant 3% not 30%) Even that is optimistic. Did experiments with the 10K direct mail. $1.00 and one time "FREE Wash" no gimmicks - just get acquainted. never even hit 1%. Found grocery store receipts more productive but costs kep climbing and redemptions didn't so it was discontinued.

Based upon your example above the 175% seems phenomonal. That is why I am so curious as to what it was, but it seems it's proprietary.and that's OK.

 

[robert roman]

There was nothing proprietary, Earl, besides confidentiality of owner and location.

Tactic was a highway billboard.

ROI was determined by measuring change in volume and revenue and applying this against cost of billboard.

ROI of marketing is mostly a function of business type and circumstance.

For example, when a highway-oriented business like carwash is first open, the customer attraction rate during first month is near 100 percent and customer loyalty rate near zero.

Once seasoned, say three years, the customer loyalty rate is usually up around 75 percent and attraction rate may be down around 25 percent.

In other words, after some time, loyal/regular customers don’t need to see the front yard pole or monument or building signs to remember where you are.

Who does are the 25 percent that randomly visit, first timers or not, as well as those who don’t or the opportunity cost.

Under right circumstances, the exposure created by a well placed and worded billboard can attract these folks and drive a lot of extra door swings.

 

[Earl Weiss]

......................

Tactic was a highway billboard.

ROI was determined by measuring change in volume and revenue and applying this against cost of billboard.

...................................

For example, when a highway-oriented business like carwash is first open, the customer attraction rate during first month is near 100 percent and customer loyalty rate near zero.

Once seasoned, say three years, the customer loyalty rate is usually up around 75 percent and attraction rate may be down around 25 percent.

In other words, after some time, loyal/regular customers don’t need to see the front yard pole or monument or building signs to remember where you are.

Who does are the 25 percent that randomly visit, first timers or not, as well as those who don’t or the opportunity cost.

Under right circumstances, the exposure created by a well placed and worded billboard can attract these folks and drive a lot of extra door swings.

Fair enough I guess. Using the same rationale would ROI on a billboard tend to diminish over time?

 

[robert roman]

Again, it would be circumstantial.

If the road is a major highway arterial, most likely not because of randomness of traffic whereas with major and minor collector roads it would tend to be a different story because they carry more local traffic.

Then again, everything has a life cycle. Like boring and repetitive TV commercials, we zone out after a while. So, eventually they come up with new commercials.

Likewise, a billboard should be freshened up periodically.

 

[Washmee]

Just over a year ago I purchased a large digital sign for my wash. It is 6' high by 4' wide. I am located on a major thoroughfare with a 50,000 cpd traffic count. I spent $42,000 for the sign. I figure that over the next five years I will be spending the equivalent of $8,500 for advertising with that sign. My own personal billboard that I can put any message I want on it.

[video=youtube;qC6u5cq5nUw]https://www.youtube.com/watch?v=qC6u5cq5nUw[/video]

 

[Earl Weiss]

There is no doubt in my mind that signs are important.

However, when it comes to a claim of "ROI" I think the process is little more than voodoo economics.

Now, in a case such as yours you could determine if ther was a % increase in extra service sales depending on the message. . However, to claim that overall volume increased X% due to a sign would have to weigh factors such as the economy, weather, location maturity, and whatever else you may be doing right to attract repeat or new business. Those elements are difficult if not impossible to quantify.

 

[rph9168]

I can only think of two occasions where an outdoor sign may have made a significant impact on volume or revenue. Personally I think marketing starts right on the site of your wash in the form of a good wash appearance, peak performance of your equipment and giving customers a reason to return.

Getting back to the original question I think the percentage spent on marketing depends on your location, the goal you set for your marketing plan and what tools you decide to utilize. I have seen as little as 2 to 3 percent and as much as 10 to 12 percent It is also sometimes difficult to really calculate what you spend since many washes barter for marketing.

When I was a general manager of several washes we used to trade washes for ads in local papers as well as for some radio and TV ads. We also did some coop marketing with local restaurants as well. One of the best offers we made to maintain and increase our volume was a dollar discount if the customer returned to the wash within 10 days using their receipt as their discount. There was no real cost to operate this marketing effort as far as printing or advertising except for the discount involved.

 

[robert roman]

Economic theory says profit maximization occurs when marginal revenue equals marginal cost. No voodoo here, math is math.

If wash is located on road where traffic is whizzing by at 55 mph and greater, a billboard can make the difference between breakeven and normal profit.

It’s really not that difficult to measure this.

Signs like Mr. Shaw’s are known to have a positive effect on consumers because it helps create a landmark.

This is why banks covet property where they are allowed to erect a sign with time and temperature.