Plan Your Advertising Budget

By V. Mahesh Kumar & N. Manikandan

Advertising Budget

The Nature and Types of Advertising

Advertising

Paid non personal communication a

out an organi!ation and its products transmitted to a target audience through mass media Promotes goods" services" ideas" images" issues" people" and anything else that advertisers #ant to pu lici!e or $oster
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Advertising Objectives
&peci$ic 'ommunication (asks Accomplished #ith a &peci$ic (arget Audience )uring a &peci$ic Period o$ (ime *N+,-MA(*V. A)V.-(*&*N/ 0 uilds P-*MA-1 )emand P.-&2A&*V. A)V.-(*&*N/ 0 uilds &.3.'(*V. )emand ',MPA-*&,N A)V.-(*&*N/ 0 compares one rand to another -.M*N).- A)V.-(*&*N/ 0 keeps consumers thinking a out product.

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Advertising
*t5s

pro a ly the toughest part o$ any usiness. 6o# much to spend" #here to place the ads" ho# o$ten" #hat message to send" and to #ho7

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 MISSION sales goals, advertising objectives MON ! "actors to consider# a$ Stage o" %&', b$ Mar(et share and consu)er base, c$ 'o)*etition and clutter, d$ Advertising "re+uenc,, and e$ %roduct substitutabilit, M SSA. )essage generation, )essage evaluation and selection, )essage e/ecution, social0res*onsibilit,1AI2A3$ 4no5 5hat this is3 1A5areness, Interest, 2esire, Action$ M 2IA 6each, "re+uenc,, i)*act7 Major )edia t,*es, S*eci"ic Media vehicles, Media ti)ing, .eogra*hical )edia allocation M AS86 M NT co))unication i)*act and sales i)*actAdvertising Budget 5

The Five Ms

Major Decisions in Advertising

,

9ectives &etting Budget )ecisions:

a; Message )ecisions ; Media )ecisions

.valuations

'ampaign

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Ho

!uch to spend"

(he most common ans#er to this =uestion is" >6o# much have you got7> Advertising has a #ay o$ depleting your ank account very =uickly. *$ you asked ?@@ usinesses that =uestion" the most common ans#er #ould e" >a percentage o$ gross sales.> (his not only #orks $or advertising ut most other udgets too.
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Advertising Budget #actors that M$%T B& 'ON%(D&)&D

Market

&hare & 'onsumer Base 'ompetition & 'lutter Advertising +re=uency Product &u stituta ility &tage in the P3' BProduct 3i$e 'ycle;

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*eneral %teps in Developing and (!ple!enting an Advertising 'a!paign

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FIGURE 19.1

Percentage of %ales Method

A speci$ic percentage o$ that amount is allocated $or advertising. )epending on the usiness this amount may e a daily" #eekly" monthly or =uarterly eDpense. (he percentage amount #ill also vary depending on your pro$it margins" industry" location and market si!e. Most usiness operate #ith an advertising udget o$ 2EF percent o$ their previous years gross sales. *$ you are ne# in usiness" you can o tain industry standards $rom associations or trade maga!ines devoted to your type o$ usiness.

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'ont+,
,ne

o$ the main reasons most usinesses like this $orm o$ udgeting is the sa$ety $actor. -ather than having to >predict> the $uture and ad9ust" they are al#ays dealing #ith a >kno#n> amount.

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%ales objectives !ethod

2sing

this method" advertising managers #ill set sales o 9ectives they $eel are attaina le in the current usiness climate. Advertising and promotion is then used as needed to help reali!e the sales goals regardless o$ #hat happened in previous years.
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$p side
(he

up side is that i$ the advertising is done correctly it ecomes an investment" not an eDpense and can $uel more advertising at later dates. (he company gro#s and eDpands at a $aster rate than it #ould #ith the percentage o$ sales method.

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?%

Do n side
(he

do#n side is that advertising ased on a ad promotion or incorrect advertising can e very costly. &uddenly $uture advertising ecomes an eDpense not an investment. 'osts like this cannot al#ays e recouped =uickly and may start a do#nhill slide that can destroy a company.
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%ave !oney by unadvertised testing

.ver go to a store and $ind an "unadvertised special?" (his is the store5s #ay o$ testing the #aters $or a speci$ic product or service. *$ the product tests #ell" the store can run $uture ads promoting the product. Another advantage: &everal products can e tested against each other and the #inners are promoted later #ith a greater eDpectation o$ success. &ervice usinesses can test additional services at a discount to customers #hen the primary service is purchased at $ull price.
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Ho to budget for an individual ad

Advertising is like eating an elephant. *t5s done in small ites not one ig one. 1ou #ill run several ads over a period o$ time rather than one large ad. 6o# much the ad #ill cost depends on the ans#ers to the $ollo#ing =uestions. All advertising must accomplish a speci$ic de$ina le goal. Ghat #ill this ad do $or your usiness7 Ghat is the shortE term ene$it to the company $or running this ad7 (he longEterm ene$it7

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?8

'ont+,

*s this ad $inanced y the percentage o$ sales method or a sales o 9ective percentage method7 Ghat is the dollar amount allocated to this ad7 'oE,p $unds availa le7 Ghat is the eDpected revenue this ad #ill produce7 Are compara le ads eing run $or competitive products7 Ghat si!e ads do they use7 'an you run similar si!e ads7 Ghat is the speci$ic time period $or achieving the advertising goal7 Ghat $orm o$ evaluation #ill e used to assure that the ad is #orking or not #orking7

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Ho to evaluate your ad results

Advertising that doesn5t #ork is like an employee that doesn5t #ork...it5s costly. 1ou must e a le to track #hether the ad is #orking or not and #hy. 'reate a "tracking sheet" $or each and every ad you produce in each type o$ media. (his sheet #ill e $iled #ith a copy o$ each print ad and the script $or each radio or (V ad. .ach sheet #ill contain t#o ma9or tracking areas.
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#irst trac-ing area+

(he history o$ the ad. Ghen #as it run7 Ghat media7 Ghat days7 Ghat #as the cost o$ each run7 Ghat #as the cost $or the entire run o$ this ad7 Ghat amount #as paid y coEop advertising" i$ any7 Art and design charges7
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%econd trac-ing area

(he goal o$ the ad. Gho #as the ad directed to#ard7 Ne# customers7 -egulars7 Gere pro9ected sales met7 *$ so" #hy7 Ade=uate inventory7 Proper sta$$ing7 Geather7 ,ther events that dre# tra$$ic to your area7
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(f projected sales
#hy7

ere not !et

'ompeting sales y competitors7 Better promotions or products availa le else#here7 'on$licting civic events7 ,ther events that dre# tra$$ic out o$ your area7 .rror in the ad7 Geather7

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'onclusion
Advertising

doesn5t have to e hard. But" it does re=uire study" testing and planning. (he most important lesson in advertising that almost everyone misses is" tracking customer response and income produced y advertising. )oes it pay to advertise in the media you5ve chosen7
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Any .ueries/"

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