The Single-Client DAV Business Model
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The first time you saw a multi-image DAV on the road, you may have been fascinated with the light-up, changing ads. The impression is so effective, that many motorists can recall the names of specific advertisers long after the DAV campaign ends. But for some, seeing a DAV represents the spark of a new business venture. You’re probably reading this blog because you’ve experienced that spark.
Building a Rolodex full of satisfied advertising clients is challenging under the best of conditions. But this post is not about building a thick portfolio of customers quickly. It’s about launching a profitable mobile advertising business with just one great client relationship. World domination comes later.
Pigs get fat
If an ad is designed well, and a mobile advertising company does its job displaying the ad in high traffic areas, it will deliver results for the client. When their initial investment pays off, it’s natural for a client to want
more of a good
thing. They’ll ask, “that ad we ran on your DAV worked so well,
we’d like you to quote all
the
ad space next time.” It doesn’t take a sales training expert to
tell you that this is a clear buying signal from your
customer.
No problem. You just get out your rate card or calculator. “Let’s see, last time, you paid $400 a week for 13 weeks for one of the side ads. The truck can display 12 ads... (long pause, calculator keys clicking) ... that comes out to just under $250,000 with an exclusive annual contract, and we’ll even toss in production for free.”
We’re aware of many DAV owners who pitched that deal but don’t know a single one who closed it. Pigs get fat, hogs get slaughtered. If you make that pitch to your client, the next call they’ll make will be to us, to buy their own truck.
A car dealer will gladly spend $250,000 a year on TV ads, and a similar amount or more to buy newspaper advertising. But you can’t buy your own TV station or newspaper for two-fifty large. A single billboard in many cities costs over $5,000 a month. A page in the Atlanta Journal-Constitution’s Access Atlanta magazine costs over $15,000 and appears only once. It doesn’t matter. You still can’t publish your own magazine for $15,000. An advertiser that gets good results with your mobile advertising at $200 - $700 per week (typical rates) knows that they can’t buy their own truck, hire drivers, deal with maintenance, and cover their overhead for that price.
A brand new Spark Exhibitor DAV costs around $70,000. Most competing brands sell for a similar amount, too. Now how much was that quote for all the ad space? Hogs get slaughtered.
Clients want high visibility and the other benefits that your mobile advertising company can provide. But they don’t want to feel like they’re paying so much that they could do it for a lot less on their own.
How to win with a single client
The yearly operating cost of owning and operating a DAV ranges between $46,000 (operated 20 hours a week) and $77,000 (operated 50 hours a week). Hold on to that number.
Forbes published an article that tracked the gross profit margin of 333 companies in six industry sectors. The average gross margin, or the percentage of profit realized before items like fixed costs and interest expense are considered, was 39.1%. If you had a client that guaranteed you a gross profit margin of 40% would you do business with them?
Here’s the formula.
Here’s how the math breaks down:
Monthly advertising revenue: $6400
Deduct Expenses:
Gross monthly profit: $2,689
A gross margin ratio of 42% results from this plan. (Gross margin = gross profit divided by gross revenue). It's important to note that even if your customer learns how much the trucks cost (easy to find out), and can piece together your overhead, your profit margin is reasonable, respectable, and probably similar to what they might charge in their own business.
Some may argue that this plan does not represent the true value of ad space on a dedicated mobile advertising vehicle. We agree that mobile advertising has tremendous value — it's what we do. It’s OK if you choose to stick to your rate card for the individual ads when a client asks you to price them a program for a dedicated truck. You won’t get the contract, but you’ll still have your principles.
A Win-Win formula
You won’t get rich on the $32,000 of annual gross profit you earn from one DAV with this deal. But here’s what you will get:
All of this can happen with just one successful client relationship. It’s not the only way to achieve success with a DAV, but it’s a business model we like very much.
Next time, we’ll take a look at the most widely used business model, the Shared Space DAV Business Model.
No problem. You just get out your rate card or calculator. “Let’s see, last time, you paid $400 a week for 13 weeks for one of the side ads. The truck can display 12 ads... (long pause, calculator keys clicking) ... that comes out to just under $250,000 with an exclusive annual contract, and we’ll even toss in production for free.”
We’re aware of many DAV owners who pitched that deal but don’t know a single one who closed it. Pigs get fat, hogs get slaughtered. If you make that pitch to your client, the next call they’ll make will be to us, to buy their own truck.
A car dealer will gladly spend $250,000 a year on TV ads, and a similar amount or more to buy newspaper advertising. But you can’t buy your own TV station or newspaper for two-fifty large. A single billboard in many cities costs over $5,000 a month. A page in the Atlanta Journal-Constitution’s Access Atlanta magazine costs over $15,000 and appears only once. It doesn’t matter. You still can’t publish your own magazine for $15,000. An advertiser that gets good results with your mobile advertising at $200 - $700 per week (typical rates) knows that they can’t buy their own truck, hire drivers, deal with maintenance, and cover their overhead for that price.
A brand new Spark Exhibitor DAV costs around $70,000. Most competing brands sell for a similar amount, too. Now how much was that quote for all the ad space? Hogs get slaughtered.
Clients want high visibility and the other benefits that your mobile advertising company can provide. But they don’t want to feel like they’re paying so much that they could do it for a lot less on their own.
How to win with a single client
The yearly operating cost of owning and operating a DAV ranges between $46,000 (operated 20 hours a week) and $77,000 (operated 50 hours a week). Hold on to that number.
Forbes published an article that tracked the gross profit margin of 333 companies in six industry sectors. The average gross margin, or the percentage of profit realized before items like fixed costs and interest expense are considered, was 39.1%. If you had a client that guaranteed you a gross profit margin of 40% would you do business with them?
Here’s the formula.
- Develop a mobile advertising proposal that includes every single ad space on a DAV, and an optional custom wrap of the vehicle, all dedicated to one client.
- The client chooses whether they want just two ads on each side or ten different ads on each side. It’s their space.
- Client may approve specific driving routes, or request special routes or parked locations.
- Customer pays all design charges, printing, and installation charges at the actual cost.
- DAV owner agrees to operate the vehicle 5 days a week for 4 hours per day during the busiest traffic periods.
- Client may request GPS proof of performance reports to guarantee that the advertising was delivered as agreed.
- Client must commit to an annual contract, preferably longer.
- Rate does not include operation at special events, but those are available as needed at an extra cost.
- Extra hours of coverage are available for an additional charge, during special seasons.
- $6,400 per month. It totals $76,800 per year. Undeniably a far cry from the $250,000 price quote from our earlier calculator exercise.
- Assuming that the client selects a series of four different ads scrolling on all four sides, this program is priced at just $18.46 per ad (per day).
Here’s how the math breaks down:
Monthly advertising revenue: $6400
Deduct Expenses:
- Lease payment: $1500 (60 month lease on a $71,190 Spark Exhibitor, nothing down, $1 buyout at lease end)
- Insurance: $300 (ranges from $150 to $500)
- Drivers Payroll: $1125 (20 hours a week, $8/hr pay, $5/hr taxes & benefits)
- Fuel: $606 (80 miles per day, 10 MPG, $3.50 per gallon)
- Maintenance: $150 (oil changes, tires, brakes)
- GPS service charge: $30
Gross monthly profit: $2,689
A gross margin ratio of 42% results from this plan. (Gross margin = gross profit divided by gross revenue). It's important to note that even if your customer learns how much the trucks cost (easy to find out), and can piece together your overhead, your profit margin is reasonable, respectable, and probably similar to what they might charge in their own business.
Some may argue that this plan does not represent the true value of ad space on a dedicated mobile advertising vehicle. We agree that mobile advertising has tremendous value — it's what we do. It’s OK if you choose to stick to your rate card for the individual ads when a client asks you to price them a program for a dedicated truck. You won’t get the contract, but you’ll still have your principles.
A Win-Win formula
You won’t get rich on the $32,000 of annual gross profit you earn from one DAV with this deal. But here’s what you will get:
- A very satisfied customer that is getting remarkable results from his advertising investment with you
- A long term client relationship
- A great testimonial from your client
- Increased credibility for your new business
- Ongoing visibility and branding for your business
- A complete sell-out of available advertising inventory
- Guaranteed profitability
- Increased awareness of the availability and effectiveness of mobile advertising in your city.
All of this can happen with just one successful client relationship. It’s not the only way to achieve success with a DAV, but it’s a business model we like very much.
Next time, we’ll take a look at the most widely used business model, the Shared Space DAV Business Model.
