How much to spend on marketing — and what to spend it on
Business expert Ellen Rohr talks to small business owner Lisa Carter who shares tips on how she markets her plumbing service company.
Lisa and Jamie Carter and their son Kelson are the owners of Carter's My Plumber, in Indianapolis. Their service company has six plumbing trucks and is consistently profitable. I've known them forever and I have come to regard Lisa as a super savvy marketer.
I sat down with Lisa to find out how much to spend on marketing and she shared her advice on what's worked for her.
ELLEN: Lisa, you and your family have built and sold multiple companies, and you have become super savvy when it comes to marketing. How much do you spend on marketing?
LISA: Marketing is supposed to make the phone ring. It should cause someone to reach out to you to solve their problem or provide something they want. In our first year, we spent about 18% of total sales on marketing, which is more than we spend now. Our initial branding was truck wraps and signage, so I included those expenses as part of our startup costs.
As we increased sales, we held to the percentage. It's easy to cut marketing dollars when you are just getting started. However, that approach won't help you grow.
ELLEN: What do you spend your marketing dollars on? What lead sources work for you?
LISA: In addition to our initial branding push, we advertise in Yellow Pages. We don't advertise there like we used to, but our older customers will still flip through the book.
I use direct mail, primarily for branding, as I don't expect a big return on the postcards. People will spend a few seconds looking through their mail, and I hope to get their attention before they toss our postcard into the recycle bin.
I look for ways to lay claim to that piece of a customer's brain that is connected to "plumber" so that they call us on the day the toilet doesn't flush or the kitchen drain clogs up. I also make sure I can be found when they start looking around. I update our contact information on search engines, and I spend on pay-per-click (PPC) campaigns, hoping to get listed in the top three search results.
ELLEN: Do you create a marketing budget?
LISA: Yes. Now, I aim for 12% of total sales. I maintain a network of other service business owners with whom I don't compete. I learn what's working for them and how much they are spending and share my good ideas with them, too. I aim for 12% but will spend more if the phone isn't ringing enough to keep our team busy.
The 12% roughly breaks down like this:
Direct mail: 4%
Web search: 4%
Newspaper and local publications: 2%
Yellow Pages: 2%
I start the budgeting process with the percentage and dollars. Then I pick the lead sources. I consider the number of calls I need, which is three calls per plumber per day. Then I put the puzzle together.
I don't know if I am right until I run the ads and campaigns. So I am obsessed with tracking the statistics. I focus on the number of calls per lead source and the cost per call per lead source. We use separate phone numbers for our ads so we can review the phone records. And we have our customer service rep ask every caller, "What prompted you to call us today?"
With statistics I consider, "Which lead sources are pulling the greatest number of calls at the best cost per call?" Pay-Per-Click ads can pull a lot of calls, and you can ramp it up if needed. However, the cost per call can get really high. I'll do A/B testing to compare two different approaches by tweaking a headline or offer to see if it impacts the results. If I can attract a new customer for less than $50, I consider that a winner.
ELLEN: That's a lot of marketing planning and activity. How do you get it all done?
LISA: I dove headfirst into online marketing. I read up on it, I watch the webinars, and I am still learning. You have to focus on it, or you have to hire someone. Updating your site, posting on social media — these things may not have any hard costs, but they take time. I hire interns: college students who are marketing majors. It's great experience for them, and it's fun to work out our marketing plan together.
I post something every day. We paid for a Facebook campaign, and it helped us get to a few hundred fans right off the bat. That got our online community jumpstarted. My branding and my messages are designed to help customers refer to us as "my plumber." So we let our customers get to know us. I post about our family and our dogs, as well as social issues involving water and plumbing.
Marketing works when you find that magic combination of the right message, at the right time, for the right customer — at the right price.