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| | The Minding Your Own Business Network is not currently active and cannot accept new posts | | How much should I budget for advertising? | Views: 1218 | | Nov 03, 2006 5:02 pm | | How much should I budget for advertising? | # |
Norman Kalin | | I am a small business owner who is the exclusive USA distributor of a line of products made in Europe. (I need to be vague since I want to post information that my competitors should not know.)
My company name is the brand name of this European manufacturer, and my advertising is done nationwide to promote this brand. So although I am really a distributor, I advertise as if I were a manufacturer. Additionally, this European mfg makes a significant (>50%) monetary contribution towards my ad budget.
I am budgeting for 2007 and I want to know if there is a typical percentage of sales that businesses spend on advertising/marketing? Or is it all over the board?
2005 was our first year in business and I had sales of approx. $465k and spent about $40k on advertising. 2006 was $750k sales and $60k advertising. 2007 I hope to do $1m.
I'm trying to figure out how much I should spend on advertising in order to continue promoting the brand and increasing sales. Any advice on how to calculate that number would be greatly appreciated.
TIA,
NormanPrivate Reply to Norman Kalin | | Nov 03, 2006 5:24 pm | | re: How much should I budget for advertising? | # | 
Dorian Blagg | | Usually Advertising, PR and other promotioanl activities should not cost more than 5% of sales Private Reply to Dorian Blagg | | Nov 03, 2006 6:10 pm | | re: How much should I budget for advertising? | # | 
Colleen Connery | | Unfortunately, it's not an easy question to answer because there's many other questions to ask yourself.
(don't answer...this is for you to think about and write down and do your research with)
First, where do you advertise currently? Can you track your sales efforts vs your advertising dollar (not just ad placement, but designing of the ad, copywriting, producing, etc.).
Tracking will tell you your ROI. If you're not getting AT LEAST a 2:1 return, you're not making money from your advertising.
Next, if you're not tracking, you need to...develop a system for tracking depending on how you're advertising.
Who is your target market? What kind of advertising do they respond to? Do they listen to radio or watch TV? If so, when...what channels/stations?
Does your target market respond to advertising in general? Or are they the TIVO nation that fast forwards thru ads because they're bored with them?
Are you internet based? If so, are you doing analytics on your click-thru's and purchases? Are you making a good ROI?
Are you able to fulfill all orders that come in if all the sudden you are flooded with purchases? Is your infrastructure solid?
Have you surveyed your target market on how they respond? How they purchase? What incentivizes them to purchase? When are they most likely to purchase? How are they most likely to purchase (internet, store-front, phone order?).
Once you have all this information, you can start to look at the advertising medium that is best suited to make you money and then form a budget. If you haven't surveyed folks, take a look at Zoomerang.com...it's a great convenient way to obtain data in order to create marketing plans and budgets.
Hope this is helpful. Without knowing more about your products/services, it's difficult to help more specifically. If you want to chat privately, feel free to PM me...
Best of luck with 2007 and breaking your $1M mark!!
Cheers, Colleen
President/Creative Director
CoCo & Associates, Inc.
www.cocoassociates.comPrivate Reply to Colleen Connery | | Nov 04, 2006 12:23 am | | re: How much should I budget for advertising? | # | 
Kurt Schweitzer | | Norman,
You've already got two years of data to work with, telling you that for your business, 10% of sales is spent on advertising. Or to put it another way, every dollar of advertising results in $10 in sales.
Is this a good number? Depends!
Are your margins such that, with this rate of expenditure for ads, you're profitable? If so, this is a good number.
Could you do better? Again it depends.
Try new things, and track how well they do. If your tracking data says that a new approach is working significantly better than an old one, try dropping the old one.
Constantly trying new things and tracking how well they do is the way to getting the best results from your advertising dollars.
Good luck!
Kurt SchweitzerPrivate Reply to Kurt Schweitzer | | Nov 06, 2006 2:27 am | | re: re: How much should I budget for advertising? | # | 
Gisela McKay | | The other algorithm to use for generating your advertising budget is to figure out how much it costs you to acquire and keep a new customer, and then multiply that out by the target number of clients you want to attract this year.
Anyone in the Toronto (Canada) area might want to join us for this month's Learn at L'Espresso, as it focuses on exactly this - Your 2007 Marketing Plan (including the Calendar).
Gisela Private Reply to Gisela McKay | | Nov 06, 2006 6:15 am | | re: How much should I budget for advertising? | # |
Ralph White | | Go to the following site to see what other successful online business owners are doing. Maybe this information
will help you.
http://www.marketingtips.com/t.cgi/829138 Private Reply to Ralph White | | Nov 08, 2006 9:26 pm | | re: re: How much should I budget for advertising? | # |
Norman Kalin | | I really appreciate the advice from everybody.
My situation is a little unusual, because it's almost impossible to track results. The reason is that since I am the exclusive distributor for the USA, with the same company name as the mfg, I act as a manufacturer and my sales go through dealers. So I don't actually know who the end-users are, and whether they saw my ads, and whether the ads made a difference.
I am really just advertising to promote the brand and products, rather than soliciting an actual sale directly from me. (Although I suppose the ads do result in new dealers.) I guess tracking ad results is one of the biggest challenges in advertising.
My other unusual situation is that the mfg, in lieu of a volume discount, pays a big chunk of my advertising instead. So it might look like I'm spending 10% on advertising, but most of that is transparent. Although if I were paying it myself I'd get a bigger buying discount, and have a bigger selling profit margin, so I guess it's all a wash.
Anyway I appreciate the advice and I think I'll spend one more year (our 3rd) spending a lot of money on advertising, and after that I'll try to edge down towards the 5% amount, which sounds like a reasonable figure to me, just off the top of my head.
BTW, in case it's relevant, our advertising $$ are spent for print ads in trade pubs, and ads in trade email newsletters.
Thanks . . .Private Reply to Norman Kalin | | Nov 09, 2006 3:43 am | | re: re: re: How much should I budget for advertising? | # |
Kurt Schweitzer | | Can you control the content of the ads?
If so, you can track the ads by including a different "manufacturers" coupon in each one. The coupon offers an incentive to the customer to tell the dealer which ad they responded to. The dealer has an incentive to report that information to you, so that the dealer can be reimbursed by you for the cost of honoring the coupon.
Kurt SchweitzerPrivate Reply to Kurt Schweitzer | | Nov 20, 2006 9:43 pm | | re: re: re: re: How much should I budget for advertising? | # |
Norman Kalin | | That's a good idea and I will try that.
We did do a "ask about our special (name of magazine) discount" once, but nobody ever asked. However, that was at the very beginning, before we were known.
Thanks,
NormanPrivate Reply to Norman Kalin | | Jan 04, 2007 5:00 pm | | re: How much should I budget for advertising? | # | 
Katryn Dougherty | | You need to budget an amount that you are comfortable with and can be consistent about.
i.e. don't spend a bunch in advertising one month and nothing the next.
You can do a lot with just a few hundred dollars a month is you plan it out well. Private Reply to Katryn Dougherty | | Jan 04, 2007 10:03 pm | | re: How much should I budget for advertising? | # | 
Fred Keller | | Hello Norman,
Great question! I know more specific advice would be of help...but we'd really need to know what the product is all about.
Since this is not an option ... you are basically throwing $$$ into advertising and hoping it will attract customers. It's interesting that you are focused on Trade publications....but what about the larger market? What are you missing out on that you don't know about? (Ouch - that could be a painful answer.)
Well - let me toss this out and perhaps you can weave it into something that works.....
Have you considered appealing to your target market more directly? Did you know you can make your products visable to the larger market? There are people looking for what you have for sale.
At this point let me state that you can draw out your end-users and channel them to your dealers.....or....maybe cut the selling price by selling direct at some future point.
Face it - you have a niche! and a captive product! (again - I have no idea what you do)
But... consider the C-T-P-M method that will allow you to deliver great Content (your products info/availability and all the wonderful solutions it offers) to a Targeted market (people who need that solution) to whom you can Presell (tell them where they can get them) and finally Monetize ....to supplement sales of regular distribution channels.
How? Glad you asked. :o) http://ctpm.first411.com
Hope this helps you, Mr. Secret.
Keep Smiling!
Good Fortune to You.
Fred
Oh - you might be looking at an investment in the low 3-figures.
PS: Want Monetizing Ideas? http://youtube.first411.comPrivate Reply to Fred Keller | | Jan 04, 2007 10:36 pm | | re: re: How much should I budget for advertising? | # | 
Angelo Cerase | | Rather than asking how much you should be budgeting towards advertising, there are several other questions you should be asking yourself.
What do you want to get out of advertising? Do you want it to lead directly to new/increased sales, or do you want it to increase brand recognition?
If you want it to directly lead to new sales, then it all depends on how effective the advertising is.
For example, if you knew that for every $1 spent on advertising, you would receive an additional $5 in revenue, then you'd probably want to spend buckets of money on it.
However, if you knew that for every $1 spent on advertising, you would receive less than $1 in increased revenue, then even spending $1 is too much.
One suggestion I have is spend some money finding out who your target market is, and find a few effective ways to reach them.
Also, I'd recommend increasing the amount spent on cultivating relationships with existing clients - both to increase sales to them AND to get referrals from them. For many industries money spent there would help the bottom line a lot more than money spent on a newspaper ad.
AngeloPrivate Reply to Angelo Cerase | | |
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