Plan Your Advertising Budget

The Nature and Types of Advertising

Advertising
Paid non personal communication about an organization and its products transmitted to a target audience through mass media Promotes goods, services, ideas, images, issues, people, and anything else that advertisers want to publicize or foster
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Advertising Objectives
Specific Communication Tasks Accomplished with a Specific Target Audience During a Specific Period of Time INFORMATIVE ADVERTISING builds PRIMARY Demand PERSUASIVE ADVERTISING builds SELECTIVE Demand COMPARISON ADVERTISING compares one brand to another REMINDER ADVERTISING keeps 3 Advertising Budgetabout product. consumers thinking

Advertising
It's probably the toughest part of any business. How much to spend, where to place the ads, how often, what message to send, and to who?

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The Five Ms
MISSION sales goals, advertising objectives MONEY factors to consider: a) Stage of PLC, b) Market share and consumer base, c) Competition and clutter, d) Advertising frequency, and e) Product substitutability. MESSAGE message generation, message evaluation and selection, message execution, social-responsibility. (AIDA?) Know what this is? (Awareness, Interest, Desire, Action) MEDIA Reach, frequency, impact; Major media types, Specific Media vehicles, Media timing, Geographical media allocation. MEASUREMENT communication impact and sales impact.
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Major Decisions in Advertising

Objectives Setting Budget Decisions:
a) Message Decisions b) Media Decisions

Campaign Evaluations

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How much to spend?

The most common answer to this question is, "How much have you got?" Advertising has a way of depleting your bank account very quickly. If you asked 100 businesses that question, the most common answer would be, "a percentage of gross sales." This not only works for advertising but most other budgets too.
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Advertising Budget Factors that MUST BE CONSIDERED

Market Share & Consumer Base Competition & Clutter Advertising Frequency Product Substitutability Stage in the PLC (Product Life Cycle)
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General Steps in Developing and Implementing an Advertising Campaign

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Percentage of Sales Method

A specific percentage of that amount is allocated for advertising. Depending on the business this amount may be a daily, weekly, monthly or quarterly expense. The percentage amount will also vary depending on your profit margins, industry, location and market size. Most business operate with an advertising budget of 2-5 percent of their previous years gross sales. If you are new in business, you can obtain industry standards from associations or trade magazines devoted to your type of business.

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Cont.,
One of the main reasons most businesses like this form of budgeting is the safety factor. Rather than having to "predict" the future and adjust, they are always dealing with a "known" amount.

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Sales objectives method

Using this method, advertising managers will set sales objectives they feel are attainable in the current business climate. Advertising and promotion is then used as needed to help realize the sales goals regardless of what happened in previous years.
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Up side
The up side is that if the advertising is done correctly it becomes an investment, not an expense and can fuel more advertising at later dates. The company grows and expands at a faster rate than it would with the percentage of sales method.

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Down side
The down side is that advertising based on a bad promotion or incorrect advertising can be very costly. Suddenly future advertising becomes an expense not an investment. Costs like this cannot always be recouped quickly and may start a downhill slide that can destroy a company.
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Save money by unadvertised testing

Ever go to a store and find an "unadvertised special?" This is the store's way of testing the waters for a specific product or service. If the product tests well, the store can run future ads promoting the product. Another advantage: Several products can be tested against each other and the winners are promoted later with a greater expectation of success. Service businesses can test additional services at a discount to customers when the primaryAdvertising service is purchased at full15 Budget price.

How to budget for an individual ad

Advertising is like eating an elephant. It's done in small bites not one big one. You will run several ads over a period of time rather than one large ad. How much the ad will cost depends on the answers to the following questions.

All advertising must accomplish a specific definable goal. What will this ad do for your business? What is the short-term benefit to the company for running this ad? The long-term benefit?

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Cont.,
Is this ad financed by the percentage of sales method or a sales objective percentage method? What is the dollar amount allocated to this ad? Co-Op funds available? What is the expected revenue this ad will produce? Are comparable ads being run for competitive products? What size ads do they use? Can you run similar size ads? What is the specific time period for achieving the advertising goal? What form of evaluation will be used to assure that the ad is working or not working?

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How to evaluate your ad results

Advertising that doesn't work is like an employee that doesn't work...it's costly. You must be able to track whether the ad is working or not and why. Create a "tracking sheet" for each and every ad you produce in each type of media. This sheet will be filed with a copy of each print ad and the script for each radio or TV ad. Each sheet will contain two major tracking areas.
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First tracking area.

The history of the ad. When was it run? What media? What days? What was the cost of each run? What was the cost for the entire run of this ad? What amount was paid by co-op advertising, if any? Art and design charges?
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Second tracking area

The goal of the ad. Who was the ad directed toward? New customers? Regulars? Were projected sales met? If so, why? Adequate inventory? Proper staffing? Weather? Other events that drew traffic to your area?

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If projected sales were not met

why? Competing sales by competitors? Better promotions or products available elsewhere? Conflicting civic events? Other events that drew traffic out of your area? Error in the ad? Weather?

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Conclusion
Advertising doesn't have to be hard. But, it does require study, testing and planning. The most important lesson in advertising that almost everyone misses is, tracking customer response and income produced by advertising. Does it pay to advertise in the media you've chosen?
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