SmartEtailing Blog

Marketing, Investing In Your Own Business

By David Wert

Understanding how much of your Bike Shop’s budget to allocate towards marketing can be tricky. On one hand, anytime you’re able to invest in marketing and have a positive impact on net income, you should probably do so; on the other hand, not all marketing investments are good ones and most have a point of diminishing returns. Investments in marketing aren’t just about attracting new customers: the right kind of marketing drives business from existing customers in ways that are often significantly more cost effective. Of course, the best marketing plan in the world won’t help your business if retailing fundamentals like strong merchandising and good customer service aren’t there to support it.

“A man who stops advertising to save money is like a man who stops a clock to save time.”

– Henry Ford –

The NBDA reports that on average, bike shops in the US spend 3% of their annual revenue on Advertising and Promotion. High volume, low margin national chains like Target spend 2% and slightly higher margin retailers like Macy's report marketing expenses at 5% of gross sales. If your store is in a position in which lasting success depends on increased sales volume, you may want to work on getting really good at marketing and once you do, consider spending a little more than the national average. While it worked out pretty well for Kevin Costner in Field of Dreams, an "If you build it they will come" mentality to growing a bike shop won’t cut it in a competitive marketplace. Given the reach of the world wide web, not even the smallest of of small-town shops can survive without a good marketing strategy.

Looking at ROI from marketing in terms of short term-and long-term payback can help put your investment into perspective. For example, expect an immediate marketing payback in the short-term by running ads and creating collateral for a specific sale or event. Expect long-term returns from building your brand by creating a logo, developing a website, and tying all that together with a great in store presentation. Of course, both ROI strategies are linked because having a strong brand may allow you to get more return out of some of your short-term marketing investments.

So how much should you invest in marketing? You can start with the 3% of gross sales benchmark from the NBDA (National Bicycle Dealers Association), but the answer is $0 if you can’t generate any ROI. Local retailers are in a position to understand their target market far better than any national chain ever could, so make this a competitive advantage by learning how your customers shop and what they're buying. Once you understand your audience, invest in marketing that resonates with them and that’s targeted so you aren’t paying for exposure to the wrong people. The days of a set-it-and-forget-it approach are gone; effective marketing requires on-the-fly adjustments and accurate measurements for your business. How much you invest in marketing depends on the store’s goals, its financial position, and perhaps most importantly, what the anticipated ROI might be. One thing is certain: if you have marketing investments that profitably drive sales, cutting back on those expenditures will negatively impact your bottom line.

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