If you have owned or operated a successful business, large or small, you know that the best business decisions are those based on numbers. Generally, return on investment, whether return on a capital investment for equipment or an investment for advertising, is a key contributor to good business decisions.
With that in mind, let’s look at a case study for return on investment for expenditure of limited advertising dollars for your business. First we need to set the ground rules and assumptions:
The Ground Rules We’ll Use
- Compare the return on investment for use of an outdoor banner to that of print advertising in a local monthly magazine.
- Generate the return on investment numbers based on a six month period of time.
- Use the most representative numbers, especially in the case of the print advertising, but consider that every market is different.
- Use the same assumptions for new customers and revenue generated for both methods (although my experience is that outdoor banner is more localized than print advertising and you will get more new customers through your doors).
The Assumptions We’ll Use
- Print advertising is $600 per month for a 1/4 page published monthly – total expenditure $3,600 over period of six months.
- The banner is a $280 onetime cost and is exposed every business day to local traffic. We’ll assume an additional $100 for hanging or purchasing supports for hanging the banner.
- Both methods of advertising will bring in 6 new customers per month, each spending $100.
Return on Investment Calculation
Print Advertising – investment is 3,600 over six months. Return is $3,600 over six months. The return on investment is 0.
Outdoor Banner – 10′ W x 4′ H with two hour design time, $20 dollar shipping and $100 for hanging adds up to an investment of $380 over six months. Return is $3,600 over six months. The return on investment is $3,600 minus $380 or $3,220, divided by $380, or about 850%.
Again the numbers are assumed and each business is different. You can, though, get the feel of how to make a smart business decision when choosing methods of advertising on a limited budget.
Banner printing ranges in price from $4 to $5 per square foot without design and shipping included. Design costs can range from $25 to $50 per hour and typically require 1-3 hours for a banner. Some internet companies are providing free design services, allow you to upload your own design, and are offering free shipping.