Albert Einstein once said that the definition of insanity is “doing the same thing over and over and expecting a different result.” Think about that and then ask yourself if your current advertising strategy is based in insanity.

I’ve spoken with several local small business owners this past week who, like many others, have cut their ad budgets due to the economy and declining foot traffic in their stores. The interesting thing is that they were all very frank about the fact that their advertising wasn’t producing great results even before they scaled it back. My question to them was: “if your tactics weren’t effective when you were spending $5,000 per month, what makes you think they will be effective when you’re spending $2,500 per month?”

The problem is not the amount of money they were spending. The problem is the tactics they’ve chosen. If they don’t work, then doing more or less of the same thing isn’t going to change that.

We had a meeting with a client yesterday to discuss a performance-based advertising campaign. As I was explaining the difference between performance-based tactics and traditional tactics, I found myself wondering, “shouldn’t all advertising be performance-based?”

With performance-based advertising, you only pay for measurable results. How many prospects called? Walked through your door? Sent you an email? With this data, you can reduce your campaign to a cost-per-contact figure. This makes it very easy to determine whether or not it’s worthwhile and working. Historically, pay-per-click advertising online has dominated this category, but it is rapidly expanding into other media as well.

On the other hand, with traditional advertising, you pay regardless of the results. You’re going to write a check for that TV spot or print ad whether you gain new prospects or not. Traditional media has typically covered this gaping hole in logic by labeling traditional advertising “awareness advertising.” What John-Doe small business owner knows how to measure awareness? Sure, it’s logical - plaster billboards all over town, folks see it, and become aware. Sounds reasonable enough, in a very non-scientific sort of way. But what does the consumer do with that awareness? And, more important, how can you measure it and assign it a value so that you’ll know when you’re getting a good buy or getting ripped off?

Here’s the rub: why would you pay thousands of dollars per month for this nebulous idea of “awareness” when you can pay the same amount of money for actual, real-life customers who come to your place of business to buy stuff? Do you know what your cost-per-awareness is? Or, would you sleep better at night knowing your cost-per-customer? Hmm…

In my opinion, the performance-based model is the way of the future. ALL advertising should be performance-based. If it doesn’t perform well, STOP DOING IT.

During times of economic boom, you can get away with touting fluff and flair as points of differentiation, because consumers have more discretionary income and they don’t mind spending it. Not so in a recession. Income is down. Spending is down. Confidence is down. As a result, consumers focus on value in an effort to get the most out of every dollar spent. And, therein lies the opportunity…

The knee-jerk reaction to a sales slump is most often a price cut or a discount or some sort of incentive. And it’s contagious- if your competitor slashes prices, then the temptation for you to do the same is significant. But don’t be fooled. No one wins a war of discounting, especially in times of economic turmoil. Prolonged discounting may give you a bump in market share, but in the intermediate and long term, it only cheapens your brand and erodes its equity.

Instead of discounting, get back to the basics…back to your roots…back to what really drives you. What kind of real value does your brand provide and how can you increase it? The brand that focuses on value rather than discounting will emerge from economic downturn with greater brand equity and market share.

Each of the many ways in which to establish an advertising budget has its problems as well as its benefits. No method is perfect for all types of businesses, nor for that matter is any combination of methods. The following are the most usual methods in use today.

Percentage of sales or profits- The most widely used method of establishing an advertising budget is to base it on a percentage of sales. Advertising is a legitimate business expense and should be related to the quantity of goods sold. What percentage should you use? You can guide your choice of a percentage-of-sales figure by finding out what other firms in your line of business are doing. These percentages are fairly consistent within a given category of business.

Unit of sales- In the unit-of-sales method you set aside a fixed sum for each unit of product to be sold, based on your experience and trade knowledge of how much advertising it takes to sell each unit. Thus, if it takes two cents’ worth of advertising to sell a case of canned vegetables and you want to move 100,000 cases, you’ll probably plan to spend $2,000 on advertising them. You’re simply basing your budget on unit of sale rather than dollar amounts of sales.

Objective and task- The most difficult (and least used) method for determining an advertising budget is the objective-and-task approach. Yet, it’s the most accurate and best accomplishes what all budgets should- it relates the appropriation to the marketing task to be accomplished, and it relates the advertising appropriation under usual conditions and in the long run to the volume of sales, so that profits and reserves will not be drained.

Purchasing stream- The budget for advertising to attract new customers is often based on expected total income - called a purchasing stream - from your new customer. A purchasing stream is the total gross volume of new business you can realistically expect to generate from an advertising effort. For example a grocer might attract a new customer who will spend $125/week for six years. That’s a $39,000 customer. So, your budget would be derived as a percentage of that number.

If “brand” is a common word, or a set of experiences, memories, emotions, images, and reactions, then “branding” is the act of intentionally creating those things. It’s the steps YOU, as a business owner, can take to encourage positive interaction with your consumers. It’s the act of building a relationship between an idea (your business) and your consumer.

This act is best exemplified when you stop to consider what a successful brand looks like. There are countless definitions, I’m sure. I ran across one this morning that I like better than any other I’ve ever read: a successful brand is a brand whose self-esteem value far exceeds its utility.

Whenever I hear that someone’s primary goal is to “raise awareness” about their brand, I pause. Saying that your marketing strategy is designed to raise awareness is sort of like saying that your primary goal in exercising is to sweat…or that the primary goal of eating is to chew.

Awareness shouldn’t be viewed a goal. Awareness should be viewed as an effect…as in, for every cause, there’s an effect. When you advertise, consumers will become aware. But the real question is: what good is that awareness? What does that awareness achieve?

It doesn’t matter what the politicians say. It doesn’t really even matter what the economists say. Some say we’re in a recession. Others say we aren’t. Still others say we aren’t now but one is looming in the near future. None of that matters.

What does matter is what YOU think. You are going to act and spend according to your belief. If you believe we’re in a recession, then you’re probably looking for ways to cut expenses and shore up assets. For you, the recession is real. If you don’t believe that, then you’re probably carrying on business as usual. However, you’re still feeling the effects of others that do believe it.

So, let’s talk about how to handle a recession or an economic slowdown when it comes to marketing and advertising expense.

Marketing is given a lot of definitions…most of which are lofty, pie-in-the-sky industry terms that mean very little to a small business owner. The bottom line is that marketing impacts every decision you make. Here are a few thoughts to illustrate this point…

Imagine it’s the year 2000 and you ask the executive creative director from your agency—the same agency responsible for the re-design of your transactional site, if he/she purchases online regularly. The answer surprises you when they say that although they like the idea of making a purchase online—they have security concerns and prefer to do their shopping in the real world. Sounds silly I know. Now fast-forward seven years. What kinds of answers would you get if you asked these 10 questions of your agency execs?

Retailers are experiencing some exceptional growth in their eCommerce business. While competition is high, many retailers are growing at an exceptional clip, with 20% online growth commonplace. Because of this growth, retailers are now addressing their multi-channel retailing businesses as core to their growth strategies.