Well, it’s the start of a new year, and if you haven’t already done so, it’s time to give some serious thought to your advertising budget.
Now I’m going to assume you’re not a huge multinational with an unlimited budget, and that you’re going to give the big institutional advertising channels a miss for the time being.
Traditionally, business owners have used a percentage of annual revenue to dictate how much money they can afford to spend on advertising, but there’s no hard and fast rule about how large that percentage needs to be.
If you haven’t done this before, I’d suggest you start with a modest figure of 1-2% of your company’s annual revenue (or projected revenue if you’re a startup).
Then answer the 3 advertising planning questions below to calculate whether your advertising spend is possible within your budget. If it is, great. If not, you either need to increase the percentage of revenue you spend or reduce the amount of advertising you buy.
Question 1 – Who do you want to advertise to?
As part of your marketing strategy you will have identified a number of target markets you want to sell to. The first thing you need to do is decide what portion of your advertising budget is going to be allocated to each market segment, and why.
For example, a target market you’re already active in may not need to be peppered with advertising. If you’ve done your job properly, word of mouth and referrals will be responsible for most of your new business in this market.
Conversely, if you’re about to enter a market that’s new for your company, or that has a number of established competitors, a large chunk of your advertising budget is going to be needed to make an impact.
At this point, things can start getting a bit messy, especially if you’re planning on targeting a large number of markets, so it’s a good idea to use a spreadsheet to work things out. Simply create a column for each target market you’re interested in, and allocate a percentage of your budget to each market.
I usually start with an equal split of budget percentage for each target market and increase or decrease each allocation as I go. After a bit of tinkering, things will start to look right and you’ll be ready to move on to the next question.
Question 2 – Why do you want to advertise?
There are a number of reasons you may want to advertise. Some or all of the following could be good reasons:
- To introduce a your company to a new market.
- To build your brand.
- To let your market know about new products or services.
- To maintain your market visibility.
Bear in mind, the reasons you want to advertise will be different for each market segment you’re targeting. Pull out that spreadsheet again, and list each reason below each target market.
Now take a look at your allocated percentages again, and decide whether you’ve allowed a large enough percentage for the objectives you need to achieve.
Question 3 – How do you want to spread your message?
So, you’ve decided who you want to advertise to, and why you need to advertise. And with a little bit of math, you’ll be able to see exactly how much money you have for each of your target markets.
Now all you need to do is decide what you want to spend your money on. Unfortunately, this part is difficult, and only research, experience and knowledge of your industry will help. There are hundreds of ways to reach people through advertising, but only a few will work for you.
You may want to ask your existing customers what publications they read, how they respond to email marketing, or if they use the Internet for research. You could also take a look at what your competitors are doing to advertise their businesses. Finally, you could just carry out a small trial campaign and measure the results. That way, if it doesn’t work, you won’t have lost much.
Once you’ve answered the questions above, you’ll have the framework for a useful advertising plan. It may not look pretty, but it will be a lot more effective than simply sticking an advert in the Yellow Pages and hoping for the best.
And the good news is that all this work is excellent ground work for next year’s advertising plan.