When to cut the yellow apron strings.

As yellow page advertisers are seeing calls come from the Internet, the urge to tell the yellow page rep where to go is getting stronger. 
Yellow Pages have been a necessary evil for most plumbing businesses and many contractors are hesitant to stop advertising in the printed books. And, then there are those that despise the yellow pages and would be happy to see them go.

Of course, Plumbers didn’t know how lucky they were. Okay, stay with me for a second. Many industries would love to be able to have such a simple advertising formula. Face it, all we really have to do is place an ad, answer the phone, do the work, and follow up. We had at the worst, five publishers to choose from, and at best one publisher. 

Now this small selection of antique search tools, i.e. printed yellow pages, have mushroomed into their online equivalents and a myriad of other branded search tools from Google, DogPile, Yahoo, and service specific sites:  ServiceMagic.com, FindAPlumber.com, and EveryContractor.com. There are as many search-related sites to advertise on as there are potential customers. Plumbing customers have access to resources nationwide instead of just in their local area.

So when does one call it quits in the print directories? When the revenue generated from both new AND repeat customers is lower than the bench mark cost percentage. For instance, if your cost percentage bench mark is 10%, your revenue received needs to be 10 times higher than the cost. Here’s an example:

Pomroy Plumbing spends $1000/month and receives $6000/month in revenue from the yellow pages. That means the cost percentage is 16.6%. Wait… there’s more. If that $6000 per month is coming from new customers, you’ll need to determine if the lifetime value for a customer is worth 16.6%. 

If you measure repeat customer marketing tactics, you’ll probably get a 1 – 7% cost percentage which balances your new customer cost percentage.

How do you get you benchmark cost percentage? By dividing your budgeted marketing expense by budgeted revenue. If you spend 10% of your budget on marketing, then 10% is your benchmark cost percentage. You can also compute your benchmark cost percentage by reviewing previous periods. If you spent 12% comfortably on your marketing last year to achieve the revenue for last year, you can use 12% as your benchmark cost percentage.

Sales = $3,000,000
Marketing Expense = $300,000
Bench mark Cost Percentage = 10%