No Shame In Buying Ads

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Paid Advertsing
A while back whilst I was staying at the YMCA in Cape Town, I had an acquaintance of mine ask me how I market my business. My response at the time was that I had no money to pay for Facebook advertising. His response to that however took me aback.

He said there is no reason why I should be paying for advertising. He made it sound like that activity was beneath him. He went on to mention that one only needs to reach out to their network on social media and things start to happen.

He claimed that he had a lot of followers on Facebook, I don’t recall how many exactly, but it was an impressive figure. My friend then proceeded to offer to share my business’s Facebook page with his numerous network.

His conviction that simply sharing my business’s Facebook page to his network would find lot of clients for me got me very excited. As it turned out, after he shared the page with his network the response was at best disappointing. 

The Unfounded Shame

For some reason, people seem to have this inherent shame when it comes to paying for advertising. It is very strange because it does not make sense at all. But then again a lot of human idiosyncrasies do not make sense.

I think I have a clue however where this shame comes from. It all boils down to the ego. The human ego can get so big that it gets in the way of growth. When someone understands the need to market their product but are not prepared to pay for marketing and trusting that their popularity will see them through, then they are missing the point.

People think that if they spend money on advertising, then it somehow reflects badly on who they are. They want to promote their product or services with the knowledge that they did it on their own. That it is basking in the knowledge that it is their personal gravitas that drives the engine of their success.

The Fact Of The Matter

Whether you promote your business through your charismatic persona with the popularity you may have or you pay for your advertising, what really matters is that you get the desired result. People tend to waste so much time concentrating on the means when they should be paying particular attention to the end.

Your business will not care whether you found your customers by paying someone to acquire them. The only thing that matters is that you are getting the customers needed to feed your business’ growth.

The Social Network Factor

Going back to the conversation I had with my friend at the YMCA; he was probably right that his social network was impressive but we missed two points that should be considered when making use of your social network to promote your business.

The first point is that social networks are very personal by nature. These are connections that are built around shared interests and not an interest in your business or someone else’s for that matter. Naturally therefore, it means that people in your social network are unlikely to respond favourably to business promotions they don’t feel connected to.

Social networks built around a business idea on the other hand, such as the network around a Facebook page, are very different. By default, the people in those network are already open to receiving your business oriented information.

The second point to note is the numbers issue. In order for you to leverage your personal social network to promote your business, you have to have a really large following. What people tend to miss is that often, our friends are unlikely to be our customers even though they are our strong supporters.

For marketing and promotion to work, it must be highly targeted. So, even if you have 5,000 friends on Facebook, you are unlikely to make an impact because only a small proportion of these will actually buy from you and also because your reach is significantly smaller than your number of friends. If you pay for advertising on the other hand, you are using the services of someone or a platform that is specialized in marketing and the outcome is different.

Customer Acquisition Cost, Customer Lifetime Value

Even if I am advocating paying for your advertising, this should not be done willy-nilly. Like I always say, it is important and in fact crucial to always measure. By putting a yardstick to your progress, you are in position to gauge your progress.

Metrics is the term that describes a system or standard of measurement. If you have a standard by which to measure your efforts and the progress arising from them, you are in a better position to strategize and make plans. How else can you make plans if you have no clue how far you have come? 

One important metric used when paying for advertising is the Customer Acquisition Cost, CAC. Customer Acquisition Cost is the cost associated with convincing a customer to buy a product or service. This is the costing for all the money spent to acquire a single customer.

For example, if you spend P100 on Facebook advertising and end up having 2 qualified customers, then your CAC for your budget is P50. Simply put, a qualified customer is a customer that is a solid lead that ends up buying.

A second and also important metric is the Customer Lifetime Value, CLV. This is a prediction of the net profit attributed to the entire future relationship with a customer. 

What this means is that if you you are in the business of selling airtime credit for mobile phones and someone regularly buys airtime for P30 in profits a week and they remain your customer for a year, their CLV is P30 multiplied by 52 days which comes to P1,560. This is the amount of money you are going to make for the duration of your relationship with the customer.

Going with the earlier example of spending P100 on Facebook advertising with a resulting P50 Customer Acquisition Cost, and saying that money was spent to to acquire the customer discussed above who goes on to bring in a profit of P30 a week; clearly the P100 was money well spent.

Weighing Things In 

This is the secret of buying ads or spending on advertising of any kind. You should first weigh the scales to see how the Customer Acquisition Cost compares with the Customer lifetime value.

If the CAC is lower than the CLV, that is a green light to spend on advertising for that particular CAC. If the CLV is higher than the CAC, then do not even try to advertise for that CAC. The idea is that you should always be spending less in acquiring customers than the value that customer is worth to you for the duration of your relationship.

So, putting shame aside  and also pride aside, you should look at buying and paying for advertising as a necessary part of growing your business. It’s not a popularity contest and ultimately what matters is the end result. Definitely, there should be no shame at all in paying for and buying ads.

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