This is a common concern of all businesses who are trying to generate and increase sales. I have seen so many people who throw money at this problem without having a clue what the outcome would be.
When I was in business school, we had a guest lecturer who was the retiring CEO of the Bank of America and I asked him the same question. He said 2% of gross sales and that’s what I might expect a conservative businessman to say.
For starters, I always say, “It depends.” The situation varies from business to business and from market to market and depends on the competition as well as several other factors. I’ve watched too many small businesses go under because they had no budget at all. They spent advertising money based on their gut feelings. If you would like to avoid that outcome, I recommend the article at the end of this story by Roy H. Williams, for a great example of exactly what you can afford. And that’s the message here, you should not spend more than you can afford. Just like your budget at home, you must take more in than you send out.
Having a plan and stated goals will make it easier to create your budget. Budgets for advertising and promotion usually are broken into different segments and are based on the kind of business and the greatest influencers of customers in your target market. If you absolutely have to come up with a number immediately, stick to the 2%. You will see, after reading the article at the end of this, that if you stick to 2%, chances are, you will not be spending too much.
2% of a small number, isn’t very much, so that will certainly limit what you can spend it on. The better your system of capturing what caused your customers to buy, the less risk you will be taking. If you like to gamble, all bets are off.
Calculating you ad budget Ad Budget Calculation by Roy H. Williams
I read an article the other day that claimed, “Everything you know about marketing, is dead.” I had to let that sink in and I do understand that things are changing all the time. I know marketing has changed with the advent of mobile devices and social media, but I thought I would resurrect some old rules and ideas and see if you think they’re dead.
Rules of Thumb
I always liked those rules that lead me to the promised land, even if they are rules I deliberately wanted to break and the people who believe everything I used to know about marketing is dead, are breaking them all, all the time. The first lesson I learned about design was about Typography. You know, the fonts and letter types used in everything we see.
For starters, I agree that typography got its start in the print business, specifically the newspaper business, and I will grant that newspapers, even printed books, are out of favor just now. The first rule I discovered is there are two types of fonts, serifed and sans-serif fonts. The serifed fonts have feet and embellishments while the sans-serifed do not. When using headlines and body copy, you should use either one for the headlines and the other for the body. Now I can imagine you are saying to yourself, “But he didn’t follow his rule here, his headlines are sans-serifed as well as his body. That is true, and one of the rules I have deliberately broken.
Within the realm of typography, style is used to convey feeling, emotion, and tone. For example, a new, forward-thinking company would do well to use Avant Guard, a sans-serifed font to convey its modern approach to
business where traditional (dare I say old-fashioned) businesses might rely on a serifed font like Times Roman or Palatino to demonstrate their conservative reliable business style. This list is endless and offers designers infinite possibilities.
Link to an article on Typography by Robin Sentell