I was fishing with a buddy recently who was showing me his really expensive new lures that he had purchased. I’m not an avid fisherman so I really didn’t understand what made them so great, but he was confident that these lures would allow him to catch more and bigger fish. Sure enough, a few minutes after dropping a line, he started catching one fish after another. Shockingly, after he would catch each fish, he would inspect it, take it off the hook and throw it back in the water.
“Why aren’t you keeping the fish?” I asked.
“Because the lake is filled with them, there are so many I’ll never run out. I just keep buying better lures so that I’m sure I’m catching more and bigger fish than anybody else.”
Ridiculous, right? This story couldn’t possibly be true, could it?
Yes and no. Yes, I made it up – I haven’t been fishing in probably 20+ years. But no, this story is totally true – just replace “advertising” for “lure” and “hyperlocal business owner” with “fisherman”.
I’ve had several conversations with local business owners in the past month that chart a similar path:
1. SMB pays for online advertising. The reason for this purchase is often either “it’s a really low price so I’ve got nothing to lose”, or “my friend told me they got tons of leads from a single ad!”
It’s interesting how the psychology of either approach works. The “low price” approach plays into the fact that the business owner views that money as disposable on its own merit – but that means they aren’t thinking much about their overall marketing strategy and how/if this fits in. The “tons of leads” approach plays into FOMO (fear of missing out) – that if it was so easy for a colleague to get tons of new customers from an ad, they’d be a horrible business-person if they didn’t try it too.
2. Next, the SMB does literally nothing to track the people who take action on their ad – either online (by coming to their website) or in their store itself (if they are a retailer).
This is where the business owner is “throwing the fish back in the water”. Savvy businesses know it costs 5-10x more to acquire a new customer than to upsell or leverage word of mouth with existing customers. The owner’s goal should be to get to know as many of their customers and how to reach them as possible. The cost to market to people you “know” is much cheaper than marketing to relative strangers. Realize that every time you let a visitor to your website or store leave without giving you contact information about them (email, cell phone, Facebook, etc) you are throwing the fish you just caught back into the water.
- The business then complains that the advertising they did was a “waste of money”, and then decides to try it again with a completely different site.
The take-away from steps 1 and 2 should be:
- Random online advertising is a low probability effort.
- I’m not maximizing my results since the few people that do engage with me come and go without me ‘catching’ them.
Instead, the mistaken belief is that “the previous advertising I did didn’t work because those avenues were bad. This new one should be much better.”
This approach takes the business owner back up to Step 1 and they repeat this vicious cycle, always chasing the next “better” advertising scheme. Even worse, they may actually find an advertising avenue that “appears” to work and so they double down on that approach, only to find out that the success was not consistent.
Key takeaway? No small business should do any hyperlocal advertising until they have figured out how they “keep” the fish they catch.