How much should I be paying for advertising services?

[Jwan]

Hello all

I got contacted by a small company that does paid advertising (through a family connection who works at the company). We talked and I was asked "Where would you like to be in 12 months", I said, as a first goal post, £500 a week profit would be nice.

£500 a week profit might not be much to some of you, but hey, we all start small. The guy seemed surprised by my "measly" £500 a week profit goal.

The guy seemed confident that he can get me there through non-paid advertising alone (posts in targeted communities ...etc), I'm not really sure how they plan to get orders coming in, we haven't discussed the fine details yet.

He mentioned that their retainer fee was £3000 a month, and that he wanted me to do well so that they can do well too.

I explained that I currently had no money to invest in paid advertising, but he said that wasn't a problem. He said initially he'll get orders coming in through other non-paid advertising methods, no details on how exactly, not yet at least.

I have a question though. If I do manage to get £500 a week profit, what would be a fair amount to pay these guys back? Would it be 5%? 10%? 20%? I'm confused and would appreciate some input on this.

 

[MBE2017]

So to pay their £3k per month retainer, and make your £2k per month profit, let’s say from month one to make things easy, how much sales would you need to make based on your normal profit figure?

What is your product or service? Is it in demand? How many sales are you currently getting after how long you have been going? Could you cope with the increased numbers?

At first glance I doubt your numbers will stack up to make a £3k per month retainer worth it, but happy to be proved wrong.

 

[Mark T Jones]

I’m a bit confused too. Presumably he did some serious research to come up with those numbers. (Only joking those are just numbers spewed out to any punter)

I have a very simple rule with sales people - if they ask serious questions and give considered answers I give them time. If they come in bandying around big numbers without taking time to understand my business, they are on their way.

 

[Jwan]

Each order nets me a profit of £2.50 and no the product is not in high demand (according to my current orders at least). It is a herbal tea product.

So I'd need 2000 orders a month to get £5000 profit. £3000 of that would go to them (retainer fee) and £2000 would be my profit of £500 a week. Please correct me if I'm wrong here.

I could cope with the increased numbers, yes.

 

[MBE2017]

Each order nets me a profit of £2.50 and no the product is not in high demand (according to my current orders at least). It is a herbal tea product.

So I'd need 2000 orders a month to get £5000 profit. £3000 of that would go to them (retainer fee) and £2000 would be my profit of £500 a week. Please correct me if I'm wrong here.

I could cope with the increased numbers, yes.

I would be amazed if they could get you 100 orders per day average. Have you allowed for stock, post and packing etc? I personally think this salesperson is just more interested in signing you up to the £3k per month. They will get their money, you might not get yours. So next question, can you afford to lose £3k? Is it monthly, or are you signing up for 3/6/12 months?

In your place I would ask if they are so confident will they come to an agreement, ie payment decided on how many orders are received from their free advertising? I can guarantee the answer btw.

 

[The Byre]

(through a family connection who works at the company).

You seem to suffer from dodgy family members, keen to improve your business by making you poorer!

I have a relative like that - he gives everyone in the family financial advice but can't get a job commensurate with his enormous talent and total lack of qualifications or achievement.

He mentioned that their retainer fee was £3000 a month, and that he wanted me to do well so that they can do well too.

Now where have I heard that line before [thinks]

Ah yes - now I remember - from the mouth of every dodgy lying bogus advertising salesman that ever walked the Planet Earth!

 

[Jwan]

Stock yes, packing yes.

What if the agreement is, he won't get any money from me unless I reach that profit goal? Would that be fair?

Maybe the £3000 is for big clients? And they'll expect smaller payment from me? I'll have to know more.

 

[MBE2017]

Out of interest, what level are your current sales? What is the cost to you of each order?

I think you could find better sales results and costs to you by giving away a certain amount, to collect client data. I used to promote competitions all the time for various companies, to generate lead banks, it can be very cheap and effective at times.

I once offered a free double glazed door in a competition, which gained £20k profit of sales from those who entered, for a supplied and fitted cost of £250 to myself.

 

[Jwan]

Material/Goods cost me between £6 and £7 (my packing time not included). I sell a bag of the product at £9.99.

Current sales, between Amazon & eBay and my store is something between 50 and 70 orders a month.

How can I promote competitions? Like what? I'm very uncreative in these things

 

[Newchodge]

Material/Goods cost me between £6 and £7 (my packing time not included). I sell a bag of the product at £9.99.

Current sales, between Amazon & eBay and my store is something between 50 and 70 orders a month.

How can I promote competitions? Like what? I'm very uncreative in these things

Do you mean that 1 bag of your product costs £7 in materials and sells for £9.99? What about shipping, your labour? I don't think you need to promote sales, you need to look at your costs/price ratio, as you are merely working for less than minimum wage.

Suggest that you will pay them 50p per sale generated, and see what they say. You cannot afford to pay more than that.

 

[Jwan]

Thanks, the £6 to £7 includes everything (except the packing). So yep, postage is included in that, paypal fees are included, the bag, the shipping box, the actual tea product, everything is in that £6-£7.

50p per sale sounds good! But how would I know that the sale came from them or not?

 

[fisicx]

50p per sale sounds good! But how would I know that the sale came from them or not?

Tracking codes

 

[Jwan]

Thanks, I'll see what there is for WordPress on tracking codes.

 

[MBE2017]

Material/Goods cost me between £6 and £7 (my packing time not included). I sell a bag of the product at £9.99.

Current sales, between Amazon & eBay and my store is something between 50 and 70 orders a month.

How can I promote competitions? Like what? I'm very uncreative in these things

Existing clients tend to be the easiest to market too. Look around for ideas, ie 3 for 2 offers, buy 1 get 1 free, free postage on orders over... etc. As for competitions you could for instance offer a free sample for the best answer to a question etc.

All these ideas are meant to increase sales and profitability, but you need to look into costs etc to make sure you are not going to lose money.

If you take the door example I did years ago, I offered a free door supplied and installed up to £650 in value, anyone ordering that month or placing deposits were entered for free. None of the doors costed myself more than £250, so I only required one extra client to make the promotion pay for itself.

I think you need to look at your price point, you are not making much per sale, even an extra 50p per order makes you an extra £25 per month, £2 extra makes you £100 extra and so on, assuming you can maintain the sales. For yourself if you are supplying by weight you could send out smaller amounts, or instead of 100 teabags send 10 as a promotion etc.

£9.99 is a nice price point, but you are not making good margins.

 

[Mitch3473]

If they contacted you and are asking for £3k, they're only after one thing and it's not your well being.

 

[MOIC]

Can you change your family members?

Not sure (based on your last thread and this one) they are doing you any favours.

Are there any underlying problems we should know about?

 

[billybob99]

Someone getting a kickback.

 

[BusterBloodvessel]

For the position you are in right now, that's an insane amount of money to be even considering. As said, offer them 50p or even £1 per sale, unlimited. See what the response is.

It will be a no - and if you ask why, you'll get some b*llshit about "we have to ensure we have the resources in place to support the work we do / we will be putting in the time and effort upfront to make this happen / this way means your outgoings are capped and any profit above £3000 remains all yours / it wouldn't be fair on our other customers who pay monthly"....blah blah blah.

If you can afford to spend £3000 per month on marketing, there are many ways you can use this to actually guarantee you get your stock to people. From my very limited knowledge of your product and business from this post, it seems like you need to actually get product into customers' hands...if they like it, they'll buy it again. Why not;

- Give it away. Literally. "Sign up to our mailing list and receive a free sample box". You could get over 400 samples out every month at cost for your £3k. And of course with each one you then include a 10% discount code for their following order, or free sample of one of your other flavours (if you have them) etc. Oh, and you have 400 people on your mailing list.
- If you want to get into retailers locally (I guess you don't have the margins but don't know your cost breakdown)....give them the stock. "I'm so confident your customers will like this, I'll give you 10 boxes to put on your shelf and sell absolutely free. All I ask is that if it goes well you purchase at usual price moving forward". Again you could be doing that to 40 retailers a month.
- A bigger giveaway. F*ck it, run a competition that anyone that orders during XYZ period will be entered into a prize draw to win £1000 cash/holiday voucher/something related to your product
- Flash sales / BOGOF offers. Run it as a loss leader.

Just use it to actually get people trying the product. It's a consumable, not a one off purchase - if they like it, they'll buy it again!

Some other general ideas off the top of my head where you could look into marketing yourself rather than paying an agency at this stage;

- Look into running your own sponsored facebook ads
- Paid sponsorships with insta/facebook "influencers"
- What is it related to? If it's a diet herbal tea or something, are there fitness and workout websites or facebook pages that you could sponsor/advertise on, or run joint promotions?
- Think a bit outside the box - if it's just a herbal tea, what about approaching groups/sites for lactose intolerant / vegans / clean living etc. Again can you advertise/promote as an alternative to drinking british builders tea


That's my 2p anyway...

 

[Deleted member 59730]

There are laid down ways of doing advertising. The IPA is the governing body. I have a feeling that this is not ethical or good business. Steer very clear.

 

[BigDreamer]

Sounds like he is running a Social Media Marketing Agency, they tend to charge retainers for prices like that but I do not believe that includes advertising costs. So it could be 3k fee + However much ad spend you want per month and Id assume that would have to be another 3k+ just to possibly cover your costs with the assumed sales.

It is very possible and easy to do your own marketing online as a lot of these people will use another contractor to make ad designs for them and act as a sort of middle man while they just post the ads on Facebook (which is very easy to learn alone and is not worth paying 3k a month).

 

[Alison Moore]

We've had so many marketeers promise the earth, but they will never guarantee any return on investment. £3k a month sounds like a lot to me, if you're only looking at making an extra £500 a week profit. If he's that good, he should be able to start on a lower retainer and demonstrate how much work he can get you on a lower retainer and you can build up from there.