I spent the bulk of my life in marketing. My very first paid contract was in 2001 for a coffee shop/restaurant a friend was launching. I built out a website and digital promotion strategy. Since then I have worked with a number of other businesses in everything from tourism to a very long sint in manufacturing.
When I was in the very early stages of building Rock City Eats around four years ago the most immediate thing I noticed was that traditional advertising does not work for 90% of local restaurants and small businesses. The problem isn’t in how or where you advertise, the problem lies with the fundamental foundation of advertising itself.
If you are still with me, let me elaborate.
The Traditional Advertising Problem
Traditional advertising focuses on reaching as many people as possible. That is why (more often than not) cost is based around the number of impressions or people you reach. If you look at print they show you circulation numbers, if you buy a billboard they talk about average number of people driving by, if you go digital things are usually sold in cost per thousand impressions. Reach is, quite simply, the highest measurement of advertising.
Marketing models then work like a funnel, often called a drip. When I spent 5 years helping manufacturers market the way I helped them set up marketing campaigns started with advertising. You learn what you make off an average product, you set up a funnel system to convert reach into customers, and you set your budget around that.
This works a little like this: I worked with a manufacturing company that averaged $1 million (just to give round numbers) per customer added in a year. I would setup a campaign starting with advertising to reach 50,000 potential customers. Out of that 0.1% would take action on the advertising (50 customers). Out of that half would be immediately unqualified (25 customers). From there we would filter out the top half of potential leads (12 customers), and my sales team would end up converting about half of those into real customers (6). So I knew that I had a potential sales of 6 million based on averages, and I could set an overall marketing budget around the cost to acquire that, usually at around 1/10th the potential return so that we start making money off the first customer. From that point you then optimize the campaign to reduce marketing cost further or increase return.
This is how traditional advertising works for a small business. Sales happen by providing a superior product, exclusiveness, a more compelling story, or a relationship.
Large businesses, like chain restaurants, can operate on a different model and do not have to worry about anything beyond reach. They sell convenience and familiarity and all they have to do is remind customers of their existence. Plus chains have a collective buying power where they can all put a relatively small amount of money per store in and experience a massive return thanks to marketing the chain itself collectively.
The problem is local businesses do not have that ability to collectively market, they do not have the staff to set up complex marketing campaigns, and even if they did the numbers do not often work out in their favor. For example, RCE’s base advertising price is $450 a month. With that I can get a restaurant to reach around 25,000 customers. If you ran that through the numbers above a restaurant would get their story in front of about 25 potential customers, and 3 of those would convert into real customers a month. If a restaurant averages $25 per table then they just spent $450 to make $75, which is a $375 loss. Now hopefully they can get those people to come in more than once, but it still is a big stretch to make those numbers work.
How We Changed the Small Business Advertising Dynamic
Last year, after about two years of experimenting and brainstorming, we flipped the script. Instead of holding reach as the highest form of advertising, we shifted the model to hold engagement as the highest form. If small business sales happen on providing a superior product, exclusiveness, compelling story, or a relationship, then the only real answer is to make sure those ideas get in front of a potential customer. Once that happens then we would build everything around that engagement point to help make sure that people who engaged took action and went to visit or visited again.
We very quietly launched a new model to a pilot group of restaurants, who I will forever be grateful for taking a chance with us. We have slowly added on a few over time as we became better at what we do through refinement and careful experimenting with new ideas.
By focusing on engagement we skip reach and focus on engaging potential customers with the story of the business. The ultimate goal is to spread this message to as many people as possible. Then we leverage traditional advertising and marketing as a reinforcement to this story. By focusing on engagement and trying to grow that, rather than overall reach, we have a higher likelihood of converting more customers.
The numbers look like this: Traditional advertising would bring in(for us) an average of 25-30 engagements a month for our base level advertising. The new model brings an average of around 440 engagements a month and growing (the latests preliminary numbers show over 1,000) per business. We then try to make sure people follow up with that engagement through a variety of ways including leveraging new forms of traditional advertising like remarketing.
Then we steal one from the page of chain restaurants and use collective buying power. It allows us to reach more people in more ways for less money, and less cost to the restaurant. We can spread the ideas across multiple regions and audience groups using our different publications, bulk buy promotion in other media and search engines, use our reputation to earn additional exposure for our customers, leverage our highly engaged audience, and more. Thanks to all of that restaurants now get around 20x the return for less than half our traditional cost.
We also focus on the long term success. It works best when we spread out a campaign over a year, that way the restuarants and small businesses receive a steady growth plan, rather than a one time surge. That helps offset seasonal slow periods, properly grow staff, better plan expenses, and more.
The past year has given me a good feel for the type of restaurant and small business that works best in the program, and who does not. We have even quietly upgraded all of our pre-existing restaurant and small business customers to the program. If you would like to visit about getting started please send me a message and I will come visit, we are currently open for all of Central Arkansas and Northwest Arkansas with hopefully some more promotion regions coming soon.
We also want to do what we can to help everyone. So we are going to start a free program that will grow over time to help share some of the lessons we have learned in marketing. This could be food photography tips, types of promotions to run, how to communicate with media, and more. We will also partner with people who are experts in various fields to bring in ideas outside of our own. You can sign up for that by joining this email list.