What Will Happen if I Spend More on Advertising?
An advertisers question
Q: I’m a 52-week radio advertiser currently reaching 32% of my area’s 18-34 population with a frequency of 2.9 each week, 52 weeks in a row. (I know you teach that weekly frequency should be at least 3.0, but I figured 2.9 was close enough.) Today I have a very specific question, which no one can answer, so I’m writing to you. Here it is: "How much will my store traffic increase if I increase my spending to reach 48% of the population with similar weekly frequency? How many more sales will I make?"
A: Your question is far more complex than you realize, but I will do my best to answer it: "All things being equal, increasing your reach from 32% to 48% (an increase of exactly 50%,) should increase your ADVERTISING DRIVEN traffic by exactly 50%." And I agree that a weekly frequency of 2.9 is "close enough" if you are achieving it 52 weeks out of 52.
Now for the problems:
1. "All things" are never equal. My answer assumes there will be no change in the number of competitors in your marketplace or in the attractiveness or aggressiveness of existing competitors - yet rarely do these remain static. If your competitors drop the ball, you may experience a significant increase in traffic without increasing your ad budget at all. Likewise, if your "share of voice" increase is matched by similar increases from your competitors, your increase will be effectively nullified and store traffic will remain at current levels.
But what if they increase their ad spending and you don’t increase yours?
You want to do the math on that one?
2. What percentage of your traffic is currently "advertising driven"? What percentage is location driven? What percentage are repeat customers? What percentage are referrals? A 50% increase in reach (without a decline in frequency) should increase your ADVERTISING DRIVEN TRAFFIC by 50%. But can you tell me how much of your traffic is due to advertising alone and would not be coming to you otherwise?
Are you beginning to understand why it would be completely irresponsible of me to predict the bottom-line impact of an increase in advertising?
But this is my day to be irresponsible, so here’s my answer:
My instinct is that 50 to 70 percent of the typical retailer’s store traffic is due to location, signage, repeat customers, referrals, etc., and the remaining 30 to 50 percent of store traffic is advertising driven.
This would mean that a 50% increase in effective reach should increase traffic by 15 to 25%.