Advertising: An Investment In Your Business’s Future

Many products or services have failed in the market, not because of their quality, packaging or pricing, but because potential customers didn’t know they were there, and if they did, they didn’t know what they were or how to use them. In order to sell your product or service you must promote it. One effective method of promotion is advertising.

What Is Advertising/What Will It Accomplish?

Advertising is communicating a sales message to potential customers. Advertising is one segment of a well organized, continuous marketing plan. Effective advertising is a cumulative process that maintains current customers, attracts new customers and establishes a favorable position for the business with competitors. Advertising will not cure slow business growth or low profits, nor will it create a better business person or a well-organized business. Advertising offers specified benefits to a specific or target audience. As part of a sound marketing plan, advertising becomes an investment in the future of the business, instead of one more expense. An effective advertisement is based on a careful analysis of the situation before money is spent.

Setting Advertising Goals

The first step to an effective advertising plan is to define the advertising goals. Decide what advertising goals will be achieved by the dollars spent. The primary goal of advertising is to get the right message to the right audience at the right time. A related goal might be to build or create a business image in the customer’s mind. This may be an image of quality, friendliness, customer service or perceived value. Another advertising goal might be to increase customer information about the business such as location or product and services offered at a given price. A fourth advertising goal might be to attract customers who are passing by the business to stop. The number of advertising goals is almost endless. There is no one best advertising medium for achieving all goals. The prudent advertiser decides which advertising medium works best for each goal.

Who Is the Customer?

What are the personal characteristics of customers to whom the advertising is targeted? Knowing current and potential customers and what product or service benefits appeal to each customer segment is the first step in developing a successful advertising program. The media chosen should be directed to target customer groups. For example, if the majority of customers of a particular business do not read the local newspaper, a local newspaper ad will be ineffective.

One of the best methods for determining the customer base is to develop a customer profile. Customer profiles ensure effective advertising by targeting a specific customer audience. Customer audiences may be determined by age, gender, income, marital status, occupation or other characteristics relevant to the nature of the business. See fact sheet, CDFS-1253, Finding Customers, for instructions on how to develop customer profiles.

Consider why a group of customers would want to buy the product or service. Then ask, “Why should customers buy from me instead of the competition?” This process helps to determine the competitive advantage of the business’s product or service in relation to projected target markets. Competitive advantages become the basis of a customer benefit package. Once the customer benefit package is determined, select the most unique customer benefit to highlight in advertising. An ad should depict the one benefit perceived by the customer to be the most important. Benefits include price, convenience, service, atmosphere, quality, value or reputation. In advertising, as in all marketing efforts, the customer is the central focus. Advertise the benefits that the targeted customer perceives to be important. Advertising based on business owner opinions rather than perceived customer benefits is wasted effort.

Selecting a Medium

After choosing a target market, select the best medium to reach that specific market. Carefully consider each advertising option. Develop a score sheet to help in the selection of the advertising medium. For example, rank each advertising option from best to worst.

Select the best medium, taking into consideration market coverage, type of audience, cost per advertisement and advantages and disadvantages of each medium. Page four shows an example of a score sheet of several common media.

Different customers respond to different types of media. Consider each target customer group and the most effective medium to reach that group. Develop a mix of types of media. Be cautious of putting all advertising dollars into one effort. Develop an advertising budget. Advertising allocations should be carefully considered to achieve specific goals and to reach specific customers.

The Advertising Budget

How much should you spend on advertising? There is no easy answer. One way is to allocate a percent of sales. For example, if in the past, two percent of sales had been spent on promotion, then two percent of forecasted sales would be budgeted for advertising. The major shortcoming to this method is a tendency to spend more when sales are increasing and less when sales are declining. If advertising stimulates sales, then the reverse would be desirable.

The second alternative is to spend what can be spared. In other words, spend what is remaining after other obligations are met. In the absence of an advertising budget, spending may occur when a medium representative presents a good deal to the business owner. Try to avoid this piecemeal approach to advertising that implies advertising is a luxury. In reality, advertising is a necessity.

The third way is to spend as much as the competition spends. This works for special short-run efforts but is not realistic for planning an advertising budget. This method may only be mimicking the competition’s errors.

The fourth, and most successful, way is to spend what it takes to get the job done. This method requires a complete analysis of the market and advertising alternatives to determine the amount that truly needs to be spent. Business objectives should be established for the year and the cost of accomplishing each objective reflected in a budget plan.

An advertising budget should be planned to cover a 12-month period that helps the business look ahead and gives enough time to measure results. Since the cost of advertising must be paid by revenue produced from sales, the dollar amount designated for advertising should always be expressed as a percent of anticipated sales. The amount or percent used must be determined by each individual business.

First, prepare a budget based on sales goals. Project how much the business will sell in a month, a season or a year. Setting goals may be a form of a guessing game. Basic research in past sales performance, the quantity and quality of the competition, economic forecasts and the changing characteristics of a population all go into the equation.

Use Worksheet 1 to establish a yearly advertising budget based on a percent of gross sales from the previous year. Worksheet 2 breaks down the total advertising budget and sales on a monthly basis. This gives the business the advantage of determining the advertising dollars to be spent each month based on the sales per month and helps determine any other special promotions on a monthly basis. If properly developed, this worksheet can be a valuable tool in the success of a business allowing the business to plan for special events or holidays, develop an advertising and promotion budget and review the previous year. Whether or not the exact forms presented are used, take time to prepare a written advertising budget for the business based on future sales goals rather than the past year’s expenses.

Evaluating Advertising Dollars

The final step in an effective advertising plan is the evaluation of the advertising package and the advertising dollars spent. Record keeping is vital as an indicator of what was spent and how the money was spent. Records show whether a business increase occurs after an advertising campaign and if the increase is permanent. Tracking an ad’s success can be accomplished by using a coupon or offering a discount to those who bring in or mention the ad. Code coupons with a specific department number for each ad. As requests are filled, tabulate the department numbers and monitor the response rate of the ad.

Another idea is to keep a record of day-to-day circumstances that surround the business such as unusual weather that may make a difference in advertising efforts. Community-wide promotions may also affect sales on specific items. These can change from one year to the next. Note the number of weekends in a month. An increase in sales may be experienced in a month that has five weekends as compared to four the year before. Additional record-keeping techniques include asking new customers how they learned about the business, and asking repeat customers what brought them in today. Keep a tally of the mediums mentioned, including word-of-mouth advertising.

Ask customers to evaluate the product or service. Did they find the article they desired? Would they like a better selection? Are the prices higher or lower or the same as a competitor’s? Was it difficult for the customer to locate the business? The answers to these questions help decide short-term changes, as well as advertising for the future. The answers given are clues to the perceived benefits customers receive and help create repeat business-one of the objectives of any advertising effort.

Conclusion

Successful advertising depends on knowing the business goals, customers’ characteristics and what the business is willing and able to spend. Consider the different advertising medium available and decide which will do the best job for the business. When selecting a type of medium, know which job needs to be done and how much the business is willing to pay. Advertising should be constantly reevaluated as business goals and customer needs change.


Worksheet 1
Sales Last Year Goals This Year* Actual This Year**
Sales Last Year % of Year’s Sales 100% Adv. Last Year % of Year’s Adv. 100% Sales This Year % of Year’s Sales 100% Adv. This Year % of Year’s Adv. 100% Sales This Year % of Year’s Sales 100% Adv. This Year % of Year’s Adv. 100%
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total 100% 100% 100% 100% 100% 100%
* Check these figures every month: if you’re not reaching your goal, check and find out why.
You may want to revise your sales goal for the balance of the year.
** Remember, in setting the goal, if you increase your sales by the amount of inflation,
you aren’t making a gain but are only holding your own in constant dollars.
Source: More Sales and More Profits for Your Advertising Dollar,
By: Author Unknown.


Worksheet 2
Monthly Advertising Planning Sheet for:__________________________________
Month:____________________ Budget:________________________________
Special Events or holidays to consider:*_________________________________
Other Considerations:_______________________________________________
Weekly Budget Breakdown
Week 1 Week 2 Week 3 Week 4 Week 5
Medium and Cost
Total each Week
Other notes
* Special events to think about should be ones that involve your target customers;
or, the ad should be constructed to appeal to the target group. Remember, the
most effective special ads will be similar in design to your regular ads as a way to
maintain and reinforce your business image.
Source: Advertising: An Investment in Your Business’s Future
By: Jim Nuss, Carol Ouverson and Joy Banyos, NCR 299


MediumMarket CoverageType of AudienceSample Time / Space CostsParticular SuitabilityMajor AdvantageMajor Disadvantage
Daily Newspaper Single community or entire metro area: zoned editions sometimes available General —
Trends more toward men, older age group, slightly higher income and education
Per agate line, weekday open rate Circ:
  7,800 : $0.25
 16,500: $0.35
 21,300: $0.60
219,200: $2.10
All general retailers Wide circulation Nonselective audience
Weekly Newspaper Single community usually; somtimes a metro area General —
Usually residents of a smaller community
Per agate line, open rate. Circ:
5,400: $0.35
20,900: $0.55
40,000: $1.20
Retailers who serve a strictly local market Local identification Limited readership
Shopper Most households in a single community; chain shoppers can cover a metro area Consumer households Per ¼ page black and white open rate. Circ:
 13,000:  $45
 22,500: $185
183,400: $760
Neighborhood retailers and service businesses Consumer orientation A giveaway and not always read
Direct Mail Controlled by the advertiser Controlled by the advertiser through use of demographic lists Production and mailing cost of an 8 ½ x 11 inch 4-color brochure, 4-page 2-color letter; order card and reply envelope; label addressed; third-class mail: $0.35 each in quantities of 50,000 New and expanding businesses; those using coupon returns or catalogs Personalized approach to an audience of good prospects High cost per mailing
Radio Definable market area surrounding the station’s location Selected audiences provided by stations with distinct programming formats Per 60-Second morning drive time spot, one time pop:
400,000: $45
1,100,000: $115
3,500,00 $200
13 million: $385
Businesses catering to identifiable groups; teens; commuters; homemakers Market selectivity, wide market coverage Must be bought consistently to be of value
Source: Advertising: An Investment in Your Business’s Future by Jim Nuss, Carol Ourverson and Joy Banyos. NCR 299.

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