Well that's the easy part to answer. Bike shop owners and operators are not always the best budgeters. Many shop owners got into owning a bike shop due to their love of cycling and are not always coming from a background steeped in best business practices.
Shop owners and marketing managers know that they need to spend money on marketing and advertising, but they don't always know how much to spend on what and when to spend it.
The National Bicycle Dealers Association (NBDA) annually releases A Study called The Cost of Doing Business. Each year they interview hundreds of dealers to find out how they run their business. Th NBDA takes the data to create industry benchmarks for shops to follow in order to achieve to sustainable profits.
The data point that interested us the most was the marketing and advertising category of expense. The NBDA Notes that the industry average for marketing expense is 3% of a shop's Gross. We'll get into how that figure plays out in the budgeting Builder in just a moment.
The large part of the budgeting problem is that bike shops are inundated by service providers trying to sell them services that will grow their shop's bottom-line. And complicating matters is the fact that shop owners typically incredibly busy and thus don't have the time necessary to research which opportunities will help them make the most money.
Many shop owners have friends who have told them about the newest latest and greatest way to make money via marketing and advertising. They've heard of things like text messaging , for SMS marketing, remarketing, Google AdWords, Facebook ads, and other paid marketing campaigns, but they don't know which to focus on, and how to connect them all together in a cohesive way.
I recently read an article called Sequencing the Marketing Stack for Local Businesses by David Mihm that speaks to this very challenge. He lays out all the the different types of marketing and operational tools that small businesses can employ to grow revenues. As businesses increase in size, theycan add more complex marketing programs into the mix.
This got me thinking about the bicycle industry, and how much it could bike shop owners improve how they approach their marketing.
So I decided to build a tool that would boil down the lessons learned from David's article and apply them to the bike industry in a clean organized manner.
The budget builder works by taking your shops annual gross and breaking it down into a monthly Gross. It then takes the monthly gross and multiplies it by the NBDA's figure of 3% mentioned above to provide your marketing budget.
Once we have a marketing budget of 3% we're already making hay because a lot of shops don't even take this step in order to spend money in a cohesive manner.
Cool so now what?
We take that marketing budget and start to think about all the different types of investments we could make in order to yield the greatest return.
A commonsensical way to approach all of your marketing choices is to split them up and toss them into one of two different buckets: "Essential" and "Extras".
This category includes the cost of running your website(e-commerce software subscriptions, the Site hosting Domain name registration etc.)
Search engine optimization is critical in age where 80 4% of people use the Internet in order to make their purchasing decisions and in the world where the first position in any search results get over 30% of all of the traffic it is critically important to optimize your website and you're position across the web in order to rank is highly as possible.
This is critically important because each new customer you has a lifetime value of between $8,000 and $12,000. Waiting new customers is the difference between growth and stagnation.
Search engine marketing (SEM) or pay per click (PPC) advertising is an integral part of your online marketing. Often times when we look at online purchases what we see are a large variety of paths the people take to buy.
These paths include multiple touch points. A customer's first visit might be from organic search, their second visit might be from typing in your website's domain into the address bar and their third visit might be from clicking on an ad that displays on a search results page. Each of those visits was important to cementing the purchase and each of those pathways is important.
An especially important piece of the search engine marketing puzzle is something called remarketing. Remarketing is a type of SEM where you serve ads to users who have already visited your website. It is super targeted because you're speaking to people already showed interest in what you're selling.
Spending on print still has its place. Especially when promoting your biggest sales of the year and can still drive traffic to your brick-and-mortar store.
Sponsorships? Yep, they absolutely belong in the must-have bucket for two compelling reasons:
Consumers now more than ever expect the convenience of being able to schedule your services. And since bike repairs and custom bike fitting are some of the highest margin parts of your business, it makes total sense to make this as easy for your customers to take advantage of as possible.
Bike rentals are another high margin part of running a bike shop and so you should make it as easy as possible for your customers to reserve bikes in advance. Having personally rented over 500,000 bikes to people from all over the world, I know that making advance reservations as easy as possible will have a hugely positive impact on your business's bottom line.
These are campaigns that are run by manufacturers (Trek Connect is the largest one) or other organizations on your behalf. We have them in the like to have column because we haven't seen these campaigns drive enough business to justify the sizable expense.
Coupons are an age-old tool Drive traffic to your store. The problem with coupons as they absolutely destroy your margin. Used judiciously they're great idea, But if overused your customers Will only think of you in relation to the deals think again versus the service in value add did you provide.
We have placed these in the like to have Bucket but over time might see this move into the must have bucket. The pro is that they enable you to network with other business owners in your community and this can often drive business. The major Con is that they're often quite expensive to join.
This list includes television, radio, billboards and other marketing. This category of marketing should be dealt with last. David Mihm put these expenses in the realm of businesses that are spending more than $12,0000 on marketing each year. You should allocate resources to this category after you've spent a sufficient amount of your budget on everything else.
The reasoning is simple: all of these types of advertising are typically very expensive and have been shown to drive less business than other forms of marketing. They're generally great at building awareness. And with the possible exception of television and radio, they're not great drivers of revenue.
This tool, Version 1.0, should serve as the blueprint to start your shop's internal discussion so you can rationally allocate your marketing budget. Your bike shop might need to spend more money on specific categories of marketing expenses based on the specific nature of your market. You know your business better then we do, so you should adjust your expenses accordingly.
You should use this tool because the alternative, winging it, is significantly less effective. The tool allows you to think about what's really important and to budget for it. If you don't budget for what's really important, you'll find down the road that you no longer have funds to spend on something that will positively impact your bike shop's profitability.
Head over to the Bike shop marketing budget builder and get to work!
As you fill in left column of the form, the tool will auto populate the right hand column.
After you've filled in the form, click the "send me the results" button.
And make sure to sign up for our newsletter the Check box below the button so then we can let you know about other free tools and marketing ideas help your shop these profitability.
Use our Free Website Audit Tool.
If you want to manage your Search Engine Optimization yourself, use our Ultimate Guide to Bike Shop SEO.
If you want to turn it over to the pros, send us an email or give us a call at (720) 773-1776 and we'll get to work!