Your business success depends upon attracting profitable customers. Advertising is the tool most companies use to accomplish this, and yet few know how to measure whether or not it is working.

John Wanamaker, the father of modern advertising, said, "I know that half of my advertising dollars are wasted… I just don't know which half."

It is crucial to distinguish which of your advertising efforts are working and which are not. Poor results waste time and money. Ineffective advertising should be stopped immediately.

On the other hand, advertising which produces good results needs to be recognized and increased.

Counting the number of jobs

"How do I get more customers?" is in the back of the mind of most owners when thinking about advertising.

As a result, many measure their success by tracking the number of new customers produced. It is common to hear cleaners discussing their marketing results by comparing how many new customers they get from a particular ad.

The number of new customers is a poor way to measure results. This does not consider the common situation in which advertising causes you to lose money.

It is possible to pay more for advertising than it produces in new work. This measuring approach often assumes that consumers from advertising become lifetime customers. The reality is that few customers obtained from advertising will ever use your service again.

The better question

A better question to have in mind, when thinking about advertising, is "How do I get profitable customers?"

The issue is not how many jobs are done, but are they profitable?

Of course, you hope some of these customers will repeat, but for evaluating results, the important issue is if you make money now.

Return on investment

An efficient way to measure results is to compare the amount of money invested in an advertising campaign with the dollar amount of new work it produces. This is referred to as the "return on investment" or ROI.

ROI is normally calculated as a ratio of results compared to cost. A 2:1 return signifies that two dollars are earned for every dollar invested. A 5:1 return means that five dollars are earned for every dollar of advertising expense.

Three results

There are three categories of results:

1. Stop immediately: Any ROI of less than 1:1 is a disaster. Money is lost on these jobs because there is not enough money produced to pay the cost of the ad. That means that you get no money for the work you do for these customers and you still have to pay the advertising company.

2. Replace as soon as possible: A return between 1:1 and 2:1 pays for the cost of the ad and some of the business and labor expenses of the jobs. An example of this is getting $750 worth of work from $500 of advertising. These are mediocre results, but they can help a startup company pay bills until better advertising returns are found. This advertising should be continued only until enough better sources are found to replace it.

3. Do more: A 2:1 ROI or greater produces profit. After paying the cost of the ad plus the corresponding business and labor expenses, there is extra money. The next question should be, "How can I do more of this profitable advertising?" Maximize the use of this advertising until your schedule is full or the return drops below 2:1.

This rating system is an easy way to determine which advertising is worth continuing. Monitor it closely since there are many variables that can change the results of advertising.

Advertising is an investment

Owners often think of advertising as an expense, such as a telephone bill or machine payment. This limits their growth because they think they can't afford their current expenses and are not willing to expand them. This is often the excuse for not increasing their budget for advertising.

Advertising should instead be considered an investment. Once you determine which ads provide good returns, the more money you can make. The faster you can pump more money into those investments, the faster your schedule fills. A 2:1 return or better should be the target for advertising.

Tracking results

You never want to be clueless as to which of your marketing dollars are working and which aren't. Careful tracking of advertising results is critical. Dedicate time monthly to evaluate the effectiveness of each of your advertising investments.

The quicker, the better

The faster you can find and optimize profitable sources of new customers, the sooner you will succeed. Use the three categories laid out earlier to analyze your current advertising and make the changes needed.

Immediately drop the ads that are losing money and look for ways to expand those that are profitable.

Advertising must be viewed as an important investment, not an expense. Use it well and it will become a great tool for filling your schedule fast.

Steve Marsh is the creator of the Be Competition Free Marketing Program. He is a 30-year veteran of the carpet cleaning industry, an IICRC-approved instructor and a Senior Carpet Inspector. Marsh is a marketing and business consultant who provides a turn-key program for attracting better customers. For more information, log on to www.BeCompetitionFree.com.