Your Advertising Budget. What Is Right For You

Business

I just bought 4 more books from Amazon.com, All about Retail Store Marketing. One looked promising. It was written by someone who actually had a Retail Store. She sold gifts. She had useful information on inventory control, hiring, location and taxes. But what she said about advertising sent chills running down my spine.

She talked about an Advertising Budget. In other words, setting aside a specific amount per month just for advertising. Usually this is in the form of a percentage of gross sales. Eight percent is common. Ive heard up to 15% of sales as your best budget. These figures are given by sincere, educated people as some kind of fact. NO, NO, NO!

This shows a complete misunderstanding of what advertising really is. Advertising is an investment made to generate new customer sales. These people are treating it like advertising is an expense. If you track ad performance, this difference in perspective will pay really big, really fast.

Lets say you mail a flyer, or put an ad on TV or the Radio, and the ad (or series of ads) costs you $1000. Is $1000 your budget? It shouldnt be. If the ads bring in only $500, what will you do next time? Hopefully not spend it again, even though it was your budget.

If you run an ad for $1000 and it generates $5000 in new business ($2500 in profit) do you stop just because you already reached your budget? No. If you can double your money in thirty days you do it as often as you can.

If you test new ads and track your response, you will quickly see that you just keep re-investing in proven ads and dump the losing ads. Thats how you grow. Are you guessing about what works and not analyzing your losers? Thats guaranteed to keep you in the “Ad Budget” group. In other words, not knowing what works.

Ads either generate a profit or they dont. If they do, keep doing the ads as long as they are generating a profit. When they eventually die, bury them. All ads eventually die. The only people that keep saying that you need to repeat an ad to make it pay are ad salespeople.

If your ads work, who cares what the budget is? Dont stop! If your ads dont work, who cares what the budget is? STOP!

This is the real advantage of tracking ad results: Youll know which ads pull their own weight and adjust accordingly.