ECONOMICS OF YELLOW PAGES ADVERTISING

There are three keys to making your Yellow Pages (YP) ad creative and to making buying decisions:

1. You are not looking for customers, clients, or patients. They are doing the looking for someone to fill their needs.

2. You are unlikely to get a second chance at attracting an individual YP user. You either get that response from your Yellow Pages ad or you don’t.

3. Whatever you decide about YP advertising, you will have to live with that decision for a year.

Extent of Yellow Pages Usage To help in making your creative/buying decisions, you must know the how, when, why, and extent of how the Yellow Pages is used. That is the secret to profitable ad buying. If you truly understand to what extent Yellow Pages is used by your potential customers, clients, or patients, you will have the right foundation to build your Yellow Pages strategy.

A Look at Yellow Pages Usage

Yellow Pages is driven by usage. You are not buying an ad on a piece of paper. You are buying exposure to the usage of your heading(s) and the directory(ies) you are considering. Proof of a specific directory’s usage is its continued financial support from its advertisers. There is a simple rule of thumb: “If an ad pays it stays, year after year.” So if the directory you are considering has been around for some time, go to your likely heading for the past five years and check for consistent support from its advertisers, especially its largest ones. But don’t just assume that being there proves profitable usage. Speak with the advertisers. Ask them (diplomatically) how they know. We’ll tell you how shortly.

Take Advantage of Usage Demand YP “usage” is driven by demand for the various products and services offered by a directory’s advertisers. You know the demand for the various products and services you offer. Analyze that demand. The demand for some of them is growing; for others it may be relatively steady; and for still others it may be declining. Adjust the content of your Yellow Pages ads in relation to the overall demand for each product and service you offer and changes year to year as demand changes.

Adjust for Situational Reality In making your Yellow Pages buying analysis, recognize that demand often is situational. That is, different people needing the same product or service are in different situations that will affect their buying decisions. You also know what those situations are. Some have all the time in the world to make their decisions; others need something in a relative hurry. Some have needs outside of normal business hours, others don’t. Some will look for the product or service as close to them as possible, others will travel a longer distance to get what they need, the way they need it, and when they need it. Some are very price conscious, whereas others are more concerned with quality, and so forth.

Be Your Own Yellow Pages Guinea Pig Before deciding on YP advertising, think about how you use the Yellow Pages. When you are looking for something and there are many ads and listings, chances are you don’t contact every one. In some way, you select those you contact. That is what Yellow Pages usage is, a selection process. That is the name of the game: to be selected as often as possible for the money you are going to spend for the advertising. If you understand what you need to do to be selected more frequently, you will make good Yellow Pages buying decisions and get a better return on your investment as a result. Again, consider your own usage of Yellow Pages. As you are looking at ads and/or listings in your selection process, you eliminate some. As you can see, Yellow Pages usage is more complicated than most Yellow Pages advertisers realize. But not to worry. The remainder of this article will simplify it for you.

YELLOW PAGES AS A “MIRROR OF A MARKET” You can know how much usage there is by the people needing your products and services by studying your Yellow Pages as “a mirror of a market.” For that is just what YP is, and it mirrors a market in many ways.

Looking at the Size of “the Mirror” Yellow Pages mirrors the market by the very size of the directory. That gives you a clear idea about the population covered by the directory. Some directories only have two columns on a page; others have three; most have four; some even have five. In a few cases, they are so large they are split into two alphabetical parts like A through L and M through Z. The directory size also gives you a good comparative idea of how much the ads will cost. Obviously, you would expect a quarterpage ad in the Chicago Yellow Pages to cost considerably more than a quarter-page ad in the Peoria version. The number and size of the ads in your heading also mirrors the amount of income it produces for advertisers like you. Like any worthwhile advertising, it must make more money for its advertisers than it costs. That means you must have a way to determine how much your Yellow Pages advertising makes and increase or decrease your YP budget accordingly. Most YP advertisers are more concerned with the cost of the ads than they are with the income they are trying to derive from that form of advertising—probably because they haven’t figured out how to find out. You don’t have to be in that position, as you’ll learn below!

How to Calculate Yellow Pages Ad Results The “100 Checks” Check To focus on income rather than cost, look at the last 100 checks written by your business or practice. (If you have a huge organization, make it 500 or 1,000.) Separate out all those that produce your profitable income. They will include rent if location is a major factor in drawing customers to your business. They may be checks you wrote for your radio, TV, direct mail, or other types of advertising. If you have a commissioned sales force, they are certainly your commission checks. In truth these income-producing checks were just a relative few out of the 100 checks you wrote. The problem is that they go on the same side of your ledger as all those other checks—the “E” side of the ledger—as an “Expense.” That is a leading factor that causes advertising buying decisions based on how much it will cost. Your income-producing checks should not be treated that way. If your commission “expense” doubles, you’ll hardly cut your sales force in half to save money or move to a cheaper location at the danger of losing your bricks-and-mortar customers. Yet Yellow Pages and other advertising expenses often are treated as if they had no consequences, even when they become some of the few ways to actually keep business afloat and create new customers! So carefully examine the checks that are supposed to produce revenue for you. Only if they are not profitable are they “costs.” But if they are doing what they should, ask yourself it they could do even more. Make your buying decisions to produce income, not just to save money.

Look Inside “the Mirror” Looking inside a YP directory tells more about the market it covers than is told by any other medium. It does so because more businesses and professional practices advertise in their Yellow Pages than any other local medium. Users expect to find all of the businesses and professional practices in their area in their local directory; for the most part they can. Market Quality and Size “The mirror” also tells about the quality and size of a market. For instance, West Palm Beach, Florida’s “Automobile Dealers—New Cars” heading lists many more names of luxury cars than the same heading in Okeechobee, Florida, just 50 miles to the west. The population numbers are not in control, the market “action” is. Relative Usage: Who Uses the Directory and for What What’s true of luxury cars may not be true of discount stores and vice versa. “The mirror” tells about the relative usage of each heading in a directory. Most advertisers tend to look at it as the number of people using the directory. A better measurement is the amount of dollars that flow to the advertisers through the heading. The more dollars of income to the advertisers, the more advertisers you will find under a heading and the larger their ads will be. The majority of headings have no display ads. The usual reason is the income produced by those headings does not justify advertisers buying display ads. But there are exceptions. When you find a heading in your field that contains display ads in most other directories, but not locally, that heading probably is underadvertised and you’ve found a real buying opportunity. “The Mirror” as Yellow Pages Spending Guide “The mirror” also tells you how much you should consider spending. There is a reason why the “Attorneys” heading contains full-page and frequently two-page and three-page ads (known as double-trucks and triple-trucks) in directories all across the country. It also tells us that much of the income flowing through that heading goes to personal injury attorneys as they buy more space because of the potential profit compared to others in their profession. (Of course there are some very profitable legal specialties that do not advertise.) There must be a reason why plumbing contractors and building materials suppliers spend a large amount on Yellow Pages  and notary publics don’t. When you see a lot of money being spent under your heading(s), you know that being selected as frequently as possible from that group can mean much more income for you.

The Exception, Not the Rule Though “the mirror” says there is money to be made, it does not necessarily mean that Yellow Pages advertising by itself will be the key to your financial success. In most cases your other sources of income are even more or just as important as the income you can get from YP advertising. What it does mean is that a certain portion of your market buys through using the Yellow Pages. You must do your best to find out who those buyers are and how your YP advertising can influence them. Although Yellow Pages cannot produce the same income at the same time as your other sources, your other sources cannot produce the same income at the same time as Yellow Pages! In other words, you can only get those Yellow Pages users through Yellow Pages advertising. Your issues are how much usage there is, whether you want to profit from it, and what you have to do to be “selected” most frequently for the Yellow Pages dollars you spend. The rest of this article gives you the keys to the answers.

“The Mirror” as Profit Forecast To a great extent, “the mirror” tells you how much money there is to be made from a given heading in a given directory. If you are a plumber, an auto insurance agency, or personal injury attorney, the money that is spent under your heading in directories across the country is a clear indication of the value of that heading. At that same time, in practically every business or profession, there are additional sources of income as well. Plumbers frequently get a large amount of business in new construction from general contractors. Real estate firms and auto insurance agencies are location businesses; their physical locations draw in a significant number of customers/clients. Plastic surgeons frequently advertise on TV and in magazines, whereas the big personal injury firms use a wide range of advertising in addition to or instead of Yellow Pages. Yellow Pages can bring you only a piece of your total market. It is important that you examine the other advertising and marketing methods covered in this article to determine what they, too, can add to your business or professional practice.

RETURN ON INVESTMENT

Your marketing plan must factor in a return on investment (ROI) from all of your advertising. Unless you are a politician, you do not advertise to keep your name in front of the public. You advertise to get income. Properly done, the process of profitable advertising will help you gain name recognition as well.

Measuring Yellow Pages Return on Investment To measure the return on your Yellow Pages investment,1 the following four-step formula has proven its success.

1. Incoming Calls First, estimate what percentage of your Yellow Pages calls you can reasonably expect to sell. Unless you are in the pizza or other take-out business, most advertisers tend to overestimate their success. Some will be from customers checking on an order. Some will be from people trying to sell you something and are using Yellow Pages as a search for business. For now, assume you will sell one out of five, so it will take you five calls to get one sale.

2. Average Sale Next you need to know your average invoice. Most advertisers use their most frequent sale amount and call that their average. To find a true average, take your last month’s invoices, add them, and divide the total by the number of invoices. That will give you a true average sale. Take the average sale and estimate its tangible costs, including commissions to salespeople (if any) and other labor costs. Do not, however, include “special overhead.” Thus, if you are a florist, your stylist gets paid whether she works on the average order or not, and your restaurant pays its pastry chef, even if everyone orders ice cream. Use only what it costs you to create an additional average order. When you deduct those costs from your average sale, you will have its gross profit. (Using the gross profit figure will be explained in the next section.)

3. Yellow Pages Cost The monthly cost of the ad you are considering.

4. Determining Your Yellow Pages Advertising Expected Profit Be reasonable about the percentage of profit you expect from your Yellow Pages ads. Surely you don’t expect a 100 percent return on your other expenditures.

So THE OCCUPANCY THEORY In some ways, all businesses and professional practices are occupancy businesses. Examples are hotels, air lines, and cruise ships. The hotel industry actually judges itself by its occupancy percentage. They know exactly what percentage of rooms they must rent to reach the break-even point of covering all of their fixed and variable expenses. Once reached, every room rented above that level is almost clear profit. In addition they can quantify the value of their vacancies. If a hotel is at break-even, yet has 30 vacant rooms with a potential gross profit of $100 each, it has $3,000 in vacancies. That’s $3,000 available to net profit. Should such a hotel average 30 vacant rooms 150 nights per year, it has $450,000 worth of vacancies. The key is to determine what additional advertising can fill some of those vacancies. Even if it cost the hotel $100,000 per year to fill just half, its bottom line would still be improved by $125,000!

Translating “Vacancies” to Your Business Four Questions for You to Answer:

• Do you have “vacancies”?

• What are they?

• What is the profit value if you filled them?

• What more can you do to fill those vacancies profitably? Assuming your business or professional practice is above its break-even point, every additional sale becomes all profit, reduced only by the cost of providing the product or service and the additional advertising or promotion. The more costeffective you are at filling your vacancies, the more profitable your business or professional practice will become. You grow a business or professional practice by creating vacancies and then filling them. That means that it is not enough to merely fill your existing vacancies. You must also plan for how you are going to increase the demand for your products and services so you can add capacity and fill those new vacancies as well. Location-oriented businesses, such as restaurant and retail chains, understand this concept. They know the key to their growth is in adding profitable locations. Every new profitable location increases their total profits. If you are truly going to have a successful business and not just a job, you will need to build your business so that most of your income comes from the work of others. That means you had better know how to fill vacancies! To do that, two of your marketing questions are:

1. Can Yellow Pages advertising help you fill some of those vacancies?

2. What do you have to do in the way of Yellow Pages ads to fill those vacancies? You can see how filling vacancies with additional money spent in Yellow Pages or any other form of advertising is a key to your total profitability. Better yet, that advertising continues to produce profits even after you stop paying for it. Some of the customers or clients the advertising brings to you will continue to spend money with you, often for years to come. In addition, satisfied customers and clients often generate no-cost referral income. Effective advertising continues the building process you set in place for your business as you continue it over the years.

THE DECISION-MAKING PROCESS

Once you have identified the number of new customers or clients you need, you can determine the amount of Yellow Pages (or any other) advertising you should consider. The ROI formula on page 160 tells you how many new customers or clients an ad must bring to get your desired ROI. Obviously the more you want from your YP advertising, the more you need to consider spending to achieve that goal. That means larger ads, more ads, or a combination of both.

Getting More Bang for Your Yellow Pages Bucks Though there are some additional keys to getting more bang for your Yellow Pages buck, nothing can truly substitute for ad size. Larger ads produce more calls than smaller ads. It is that simple. They draw more attention and therefore have more people looking at them. Returning to the beginning definition of Yellow Pages usage, you have to be seen to have a chance to be selected. Larger ads also enable you to give a more complete sales message about your products and services. The more useful information you give to people looking at your ad, the less likely a user will eliminate you and the more likely you will be selected.