HOW MUCH TO PAY FOR ADVERTISING How to Budget for Advertising

How much you can, will, or must spend on advertising should be decided as objectively as possible; that is, base your decision on reasoning rather than luck or “hoped for” results. To do this, take your advertising goals and calculate, as well as you can, both the “static” percentage-of-sales and the “dynamic” objective way of establishing your overall advertising budget. Both methods are explained below and have devoted followers. After you’ve become familiar with them, begin by using the one with which you feel most comfortable—but stay with it only as long as it gives you the expected results! A case history. Gaining additional profit by not advertising has been attempted by a number of companies and brands, usually with disastrous results. The nonchocolate milk flavoring, Ovaltine, my childhood favorite, never recovered from such a decision. Not advertising to gain dollars to fight, or profit from a corporate takeover is not an advertising consideration.

1. “Static” percentage-of-sales method. Historically, “percentage of sales” was the way to establish advertising—and most other—budgets. In many businesses it still is. A specific percentage of last year’s gross sales, often suggested by industry standards, is allocated for promotional activities. Objectives are proposed but must be modified by the reality of such budgets. Despite the static aspect of percentage-of-sales budgeting, many managers welcome its protection from unrealistic sales projections. Most of them recognize that it “protects” them from realistic projections as well. They simply prefer the relative safety of the known to the projected.

2. “Dynamic” objective method. The objective method is more dynamic and requires a certain daring by management—especially if it’s spending its own money. Unlike percentage of sales, which locks in budgets regardless of the current year’s goals, the objective method expands promotional budgets to meet what management believes are realizable objectives, regardless of previous years’ sales.

Budgeting for Individual Ads Using some of the advertising goals suggested earlier, an individual ad plan might look like.  It charts four points to consider in planning:

1. Advertisement goal.

2. Percentage of total ad dollars allocated to your goal.

3. The dollar value for achieving the goal.

4. The time allowed for achieving the goal.

Evaluating Advertising Results

In evaluating the success of your ad, the calculation might seem quite simple; however, what if your overall goal is reached but your individual subgoals are not? Does it really make any difference? The answer depends both on the type of establishment you have and the reasons you set your goals. If you are advertising loss leaders to bring new customers to your store, and only regulars show up, you’re in a different position from having a sale where your inventory costs have been reduced by a manufacturer, leaving profits the same as at the regular price. These and similar considerations should enter into developing your advertising goals. You want sales, of course, but it requires a different perspective to plan advertising for a funeral home or accounting service than for a hardware store or a farm equipment dealership. In fact, without prohibitively expensive research, how can you get a short-term fix on advertising that aims at long-term results? Fortunately, there is a fairly easy, practical, and inexpensive way to do just that.

Getting a Preview of Short-Term Results

Where there is high customer traffic, such as shopping malls, individual stores, banks, and so on, display large-enough-to-read copies of possible future promotions and track the results. These can be fairly simple “nonadvertised specials” or copies of complete possible ads. The preview secret is to give your prospects a benefit for acting now! Your reward is immediate positive, negative, or neutral test results. Two examples show how this works. 1. Ad previewing in a bank. Three possible ads, offering what the bank believes are benefits wanted by its customers, are mounted and placed in the bank’s windows and high-traffic lobby. Each ad offers in-person or written information. Each test produces a clear winner, which then becomes part of the bank’s advertising campaign. 2. Offer preview. A talk with the sales representative brings a free coffee cup personalized with the prospect’s name as Executive of the Year. Hundreds of office managers listen to the sales pitch. Far too few buy for the time spent by the sales force. A different offer is previewed and proves a winning success—both in producing sales and in earning a major advertising award.

Getting a Preview of Long-Term Results Although the need you fill may lie months or years in the future, try for some immediate response to your advertising now. If you establish a good relationship before the need arises, you’re much more likely to get the call when it does. So do what the movie moguls do before they spend millions on promoting a film: Check it out with a sneak preview.

How to Sneak a Preview Purchase or produce a helpful hints flyer along the lines of “10 reasons why you should meet your banker before you need a loan” or “10 things to look for when you’re ready to buy a house.” The help should be specific rather than general and be directly related to what you do (where to look for dry rot and how to tell it’s there rather than “check for dry rot”). The more valuable the advice, the more likely that it will be kept and consulted when a service such as yours is needed. Informational flyers may be available from your trade or professional organization and often are advertised in trade journals. They tend to be inexpensive and may be customized with your name, address, and telephone number at a small additional cost. You can, of course, also produce your own. If several suitable flyers are available, offer a different one free each time you advertise, to see which one gets the best response. Then use that flyer as long as the level of response continues. If your budget is limited to fewer ads than the number of different kinds of flyers available, ask the supplier which one has gotten the most repeat orders. Then use that, providing that it meets your other criteria.

BUT MICE DON’T BUY MOUSETRAPS: HOW TO FIND THE AUDIENCE YOU NEED Targeting by Building Profiles Profile building can be critically important for many different kinds of business and the success of their advertising and promotions. If you are a retailer, your customer profile may seem obvious, but there is a simple and inexpensive way to make sure: Ask your customers why they bought what they did at your shop. Since they may not want to tell you, use the same approach suggested for getting help in defining advertising objectives. Ask the marketing department of a nearby college or community college for help in wording the questions and doing the actual interviews. For instance:

• Did your customers check advertising before purchasing a product or service and if so, in which medium?

• Which publications do they buy and/or get delivered, actually check the ads, read, or just skim?

• Which publications do they like best? (This is a check against the “which they read” answers.)

• Demographic information, where appropriate, such as age, education, and income, given in approximate ranges. As stressed in the article on telemarketing, it is astonishing what people will tell you, when they are asked politely. Often the answers are not at all what you expected and lead to changes in advertising plans. Perhaps equally important, it never hurts to show professional concern for your customers’ wants and needs! Manufacturing may require more sophisticated research—and often gives equally surprising results. For example, when a film company produced a series that would explain upcoming surgery to patients, the company “knew” its customer profile. It consisted of family doctors who make the initial diagnoses and surgeons specializing in those fields. But before the filmmaker’s advertising

agency did anything about creating ads, it did a routine check to corroborate the customer profiles. It took only a very brief telemarketing survey to learn that the true customer—ready and eager to order, immediately, over the phone—was not the doctor. It was the hospitals’ senior floor nurses, who were responsible for putting the patients at ease before surgery. The client saved tens of thousands of dollars in two ways: by not advertising to the wrong audience and through earning profits by advertising to the right target audience. Even more important, the company gained insight into the importance of verifying a customer profile—even when you “know” that you know the result before you begin. There’s much more about profile building and its use in the article on direct mail. So decide to whom you will be advertising before you write a single word. Often, it’s not as obvious as it seems. Suppose you have a baby product. Will you advertise to parents, grandparents, pediatricians, toy store owners, supermarket buyers, and so on? Don’t work on what to say until you’re absolutely clear about two things:

1. The audience you’re trying to reach. This may, in fact, be a variety of audiences. The question then becomes one of how many different messages you can get into one ad. Generally, you are better off to concentrate your advertising on one specific target—the “rifle” rather than the “shotgun” approach. To repeat: Don’t expect any one ad—or any one medium—to do 10 different things or you’ll get one-tenth the results . . . or none at all.

2. What you want your audience to do. Rush to your shop . . . call for an appointment . . . invite you to their office or home . . . send money . . . send for information . . . authorize a trial subscription . . . Vote! Buy! Try! Call! Write! Drive! Fly! Run! Walk! Taste! Imagine! Sleep! And that’s just a sampler to get you started.

DESIGNING THE AD This article will guide you in writing a competent advertisement; however, only God can gift you with the talent to be a designer. Therefore, in the hope that we will be forgiven, we do what real designers do. We borrow. Or as a number of great designers are credited with saying: “The art of creativity is not to reveal one’s sources.”