Advertising is a necessary part of any business. However, to be effective it takes more than just putting ads in every state newspaper and hoping for the best. Often businesses spend too much money at the wrong time, wasting their valuable resources.
However, you can make advertising work for you. You must first analyse your customers spending patterns, when they are most likely to purchase your goods and services. You can then work out what you can spend and when, and what you should promote. You must also consider whether your current advertising budget is reasonable.
An obvious place to start is to consider the costs incurred by your benchmarking associates. If your figures are well above or below theirs, you will have to do some serious analysis of your past advertising and promotional strategies to see where you can make adjustments.
However, you must also bear in mind that the nature of your associate’s business may mean that they need to spend more, or less, on their advertising and promotional strategies.
If such is the case, you should try to identify a realistic and appropriate figure for your own business.
Hopefully, your figures will be similar to theirs, which would indicate that you are already budgeting correctly and just need to fine-tune your strategies.
In this case, you must now decide whether to keep your budget as it is and see if adjusting your strategies will increase your profits, or whether you should allocate more money to promoting your business as a whole.
Increasing your advertising budget
If you feel that you really do need to increase your advertising budget, we suggest you work out what sort of increased profit you want to make and increase your budget by a similar percentage.
In other words, if you are looking to make an extra 10% increase in profit, you should increase your advertising budget by 10% over what you spent the previous year.
Whatever you decide, your next step is to determine how much money should be allocated to which months.
Work out the percentage of sales achieved for each month in the past year and allocate that same percentage to that month’s advertising budget.
For example, if in May you usually have a quiet period and only make 3% of your yearly sales, May should be allocated 3% of your annual advertising budget.
Likewise, if December sees you achieve 18% of your annual turnover it must be allocated 18% of your advertising budget.
Next you must compare your sales by product or product-type. You need to focus your advertising strategy on those products or services that are going to sell well at that particular time. Perhaps you can make a feature of a particular product in the months you know the product will sell well.
Be careful here, however. If you normally make good sales of a particular product at this time of the year, you don’t want to lose money through a heavy discounting program.
It is wiser to advertise your range of products rather than to undercharge.
What is important is that you spend money on the product that is going to provide you with the best return. There is no point in wasting money on a low yield item. The idea is to advertise smart, after all!
How to tell if your marketing is working
In order to do this, you need to keep close watch on your performance — but this is good business practice anyway.
We cannot emphasis too strongly how important it is that you to know exactly what is going on in your business.
The more you know about what is happening, the better able you will be to make decisions to keep the business on track. Likewise, the more up-to-date your information is, the sooner you are able to fix problems or take advantage of unexpected opportunities.
The two main areas you will need to concentrate on here are:
Keeping track of your stock
Your monthly sales and advertising figures.
Keeping track of your stock
Many POS systems can track your stock turnover rates and patterns. If you use one of these systems, we suggest that you make a point of regularly monitoring it.
If you don’t, and do not have regular stock checks set in place, we suggest you start immediately.
It is important for you to know what you currently hold on stock and what you may be running short of. By doing so you can:
Track what items turn over quickly
Which items tend to sit on your shelves
Keep abreast of current trends
Adjust your advertising to take advantage of popular demand.
Your monthly sales and advertising figures
Keep track of your current sales and advertising figures, comparing these figures to last year’s figures should give you an immediate indication as to how you are doing.
But don’t only do this. Compare your advertising and sales figures against those of last week and last month, as well as with those of last year.
However, a word of caution here. Not all improvements are immediate and dramatic.
You might have to initially rely, to some extent, on your “gut instinct”. In order for your business to have survived, you must have had to follow your instincts on a number of occasions.
When trying different advertising strategies, as with all types of marketing, it is important to try something you feel will work, and then check by testing its effectiveness.
This practice of trying and testing should be ongoing. If you realise that something is not working, whether this is a product that is not as popular as expected, or an advertising strategy that is not producing an appreciable rise in income, it must be changed in some manner.