Keeping detailed records of all your advertising efforts allows you to see not only where your advertising dollars are going but how those dollars have performed. Once you take a look at your yearly advertising costs and see where you are getting good and poor responses you can then plan for the next years advertising.
Shifting funds around will cost you nothing yet the results might yield you bigger profits!
You can keep up with your competitors by looking at their current advertising efforts, how do they look compared to yours? You can cut out or photocopy every ad you see from your competitors and jot down any specials or extra things they are offering. This is your starting point for your advertising campaign. How do all your existing ads and special compare to your competition? Compare them side by side. How can you improve yours? Keep a folder which contains these items and also any other ads which caught your eye or ideas that can be adapted to your business.
The Advertising Budget:
How much do you spend on advertising annually? Calculate what this amount is and divide by twelve to give you your monthly average. Don’t forget to include yellow pages and any promotions.
Eg: $10,000 divided by 12 = $833.00 per month
Now divide this monthly figure into your monthly sales figures and turn the answer into a percentage to get your average advertising percentage per month.
Eg: $18,000 divided by $833.00 = 21.6
100 divided by 21.6 = 4.6%
The advertising budget for this exercise is 4.6% of sales.
Now that you have your advertising percentage you can factor this figure into projected sales. This figure generates this amount of sales. Increasing the advertising budget should also increase your sales and profits.
If this % figure rises in future and sales remain stagnant, you know your advertising isn’t working as well as it did and it will need serious consideration. If it falls, your advertising is working increasingly well. (No need to change anything)
If you desire to keep your advertising budget at 4.6% of sales and want to increase your sales to $25,000 then you would need to increase your advertising costs to $1,150.00. Of course this is what should happen but there are no guarantees!
Eg: $25,000 multiplied by 4.6% = $1,150.00
Many other factors determine sales and advertising is only one of them. However this method is a good way to keep track of your advertising budget.
Trade organisations can help with information that can be useful, including average advertising ratios for your trade.
Your advertising budget needs to be workable and should be planned each year and revised monthly based on what profits you want to achieve.
The advertising mediums you choose should be based (if possible) on past experience. Where did most of your sales come from last year? Yellow pages, newspapers or off the street? Identify the sources that worked and if you can improve upon them. Can you place the same ad elsewhere? Can you change other ads to the format of the best one? Don’t be tempted to change an ad that is working well. A drop off in response will signal the time for change.
Stop advertising today where it is not working or try a different approach. Can the timing or layout be changed?
Periodically checking the financial success of your advertising ventures will ensure you keep abreast of any decline or successes. Keep copies of all your advertising and the responses they brought. A great Christmas ad can be used again for example.