Added by on 2012-09-25

Nearly every business needs to promote itself to attract customers because few can rely entirely on word-of-mouth, passers-by and referrals.

Obviously, it pays to promote a business, especially just before a predicted “high point.” You should advertise when you know people will want your goods or services rather than when it is a slow time.

For instance, a hairdresser may consider advertising prior to Christmas or Valentine’s Day when consumers want to look good for a special occasion.

Secondly, it is important to target your advertising.

Thirdly, you must use the right advertising medium. A poorly designed advert will not sell anything, no matter how good the product or service, while the best design in the world won’t work if potential buyers don’t see it.

To better control your advertising costs, you must monitor your advertising response:

Record where your enquiries come from and what proportion of enquiries were converted into sales. Don’t rely on customer’s recall, use a separate telephone number or post office box in your ads.

Once you have a record of advertising, analyse your current advertising costs and then project whether you will need to increase or decrease these costs during the year.

Test your advertising copy and graphic design. Often such testing will identify any pitfalls before you commit financial resources to a campaign.

One marketeer tested two separate headlines for a book advertisement: “Car Secrets Revealed – Money Saving Tips on Car Buying, Leasing, Repairs and Insurance Reduction.” And after a customer survey changed it to: “How To Buy A Car At $50 Over Dealer Cost.” The result of the change was that sales increased by over 300 percent in 48 hours!

If you are planning an increase in your advertising budget, remember you must see a likewise increase in sales to make it worthwhile. If you have budgeted an extra 10 percent, you should look for a 10 percent increase in sales or more.

As mentioned previously, this is where an accurate budget can help you. You should chart your projected sales against your actuals to see whether the increase in advertising was effective or not.

To work out how cost effective your advertising is, assess each advertisement/promotion’s merits on a monthly basis and compare costs versus income. Most companies base their advertising budgets on a percentage of projected gross sales, usually from two to five percent.

However, a simple and practical way to analyse the cost of your advertising is the “cost per thousand method” (CPM). This will show you how much it costs to get your message across to 1000 customers.

To work out the CPM, use the following formula:

Cost of sending message x 1000
No. of people reached

For example, if your chosen newspaper’s circulation is 150,000 and the advertisement costs $1000, then the CPM will be $6.67 per thousand. Obviously, when comparing the cost effectiveness of advertisements, a lower CPM means you are reaching more people for your money.

However, don’t forget to take into consideration the size, location and demographics of your target market. If an advertisement reaches less people but sales are higher, this is a better choice.

Leave a Reply

Your email address will not be published. Required fields are marked *

*