Managing an advertising budget for your business

Ad campaigns play a key role in most marketing strategies, but to get the best bang per buck you need to spend your money wisely on the target market that's right for your business. This guide takes you through the process of working out a sensible budget through to measure response.

  1. Working out a budget
  2. Measuring results
  3. Responding to results

1) Working out a budget

A good rule of thumb for ad budget is 3% of turnover. Be prepared to spread your budget across a variety of channels (print, online, radio etc) - one type will seldom be enough as each channel has its own strengths and weaknesses. For example, a complex sales message might be better delivered in the trade press, whereas a one-day only sale could be more effectively promoted on local radio. Ad campaigns work best when run over a length of time - customers often need reminding. Commit enough budget to cover the full campaign period.  Media owners will usually drop from rate card - for example, you should get a better deal if you're taking out repeat advertising.

  • Work out your budget
  • Make sure it covers the length of the campaign and multiple media
  • Negotiate hard

2) Measure results

At the beginning of any campaign you need to set a minimum response rate. To work out this rate you can use previous campaigns as a benchmark. If this is your first campaign then any advertising agency you work with should be able to advise you on reasonable response rates to expect.  You also need to work out how to measure response. Cost per target customer reached is a useful metric and can allow you to compare the value offered by different advertising channels.

  • Make sure your staff ask where customers heard about your business, or attach unique codes or phone numbers to ads so you can track response accurately.
  • Agree the metrics to measure response
  • Work out your cost per customer/lead

3) Respond to results

Track the results of advertising in terms of orders placed and enquiries, and readjust your ad spend accordingly.  If the print ads are working but you're getting no response from radio, it could be time to reallocate your budget accordingly. It's also important to keep the campaign fresh - you could consider dropping the campaign for a couple of months. This is especially true for press advertising, which can lose effectiveness the longer an ad runs.  Introduce new campaigns regularly - usually after three months.

  • Analyse results regularly so you can work out the best channel for your business, the most effective size of ad and the appropriate length and frequency of campaign

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