Advertising is a major industry, and for good reason. Businesses cannot flourish if no one ever hears about them. They must get their name under the nose of every consumer, making their business name a household name. As a business owner, you know that this comes at a tremendous price. It’s easy to blow your budget on advertising, and often reap very little return on your investment.
As you seek to determine a sound marketing strategy and budget for your business, you need to assess your goals for the coming year. Are you a new business, still experiencing startup struggles? Obviously, you will need to allocate more funds than an established business would toward marketing. Like launching a vessel, more energy is exerted in getting started than in maintaining that momentum.
Another thing to concentrate on is your market niche. Who will likely use your business’ service or product? Once you know your target audience, it becomes easier to develop a plan to reach them. The next step is to determine how you will reach them. Are they television watchers, radio listeners, billboard readers, or Internet users? What medium will best speak to them, and can you afford to advertise in that fashion? These are all questions you need to be asking.
Competition is also on the consideration list. If you own a pizza joint, how much will your closest competitor be advertising this year? You can estimate this by how competitive they were last year. If you felt a bit drowned out by the competition, it’s time to ramp it up this year and gain the upper hand.
As you draw up a marketing plan, it’s important to note what has worked for your business in the past. It’s also important to note what has not worked. Advertising dollars can easily be thrown away on ineffective programs. You want to find what will give your business the most bang for the buck. Sometimes the more obscure forms of advertising are the most effective. Don’t discount ideas like coupon book listings and neighborhood newspaper ads. Bigger isn’t always better.
Of course, budgeting always boils down to mathematics. How much money can you afford to spend? You can determine this by looking at last year’s sales figures. Print out a balance sheet so you can see all the areas of your spending. Realistically, what percentage can you carve out for marketing? What percentage did you allocate to advertising last year? Did it yield a good return in the form of sales? If your business; growth rate is steady and climbing, you may want to replicate last year’s budget with a few tweaks on where you put your advertising dollars. If your business growth was poor, you need to reassess your marketing approach before you apply any numbers.
If you want to compare your budget to that of competitors in your industry, there are web sites dedicated to publishing industry averages. Adage.com is one such site, where sales-to-advertising ratios are listed by industry type. Ten percent is a good base number when figuring advertising from sales figures. Some business analysts will recommend 20 percent, depending on the medium your business plans to utilize. Television advertising is much more expensive than print marketing, so you will need to take this into account as you find a figure that works for you and your business.