If you own or run a small to medium-sized business, costs weight heavily on your shoulders. And of all costs, advertising expenditures typically prove the most mysterious. How much should you dump into that campaign? The answers often elude.
Why is it easier to pinpoint funds for standard operations such as production and maintenance? Because the bulk of these generally are governed by fixed costs. A business owner knows how much expenditure is required to generate a certain output. Advertising results, on the other hand, are not as easily gauged. Therefore, proper costs are harder to pin down.
Does this mean ad budgeting is left to the intuitive powers of budget gurus? Hardly. Marketers can tap into many established guidelines for developing sound expenditure plans.
Consider, for instance, the ‘3-5% rule for the small and medium-sized business’. This rule states that such an enterprise should project gross revenues and earmark 3-5% of this expected haul for advertising.
As with many other ‘rules’, this can be broken if circumstances warrant. For example, your business sector might require an adjustment up or down on the above figures. Typically, however, these percentages define a solid bulls eye range.
Advertising is Not an Afterthought
Whatever your gross revenue, don’t count on leftovers. Many owners spend freely on company operations, salvaging the remainder for advertising. This approach will limit much-needed exposure and ultimately stifle revenue. Remember, if you’re a relative unknown, wide exposure is critical. Advertising, therefore, should be treated as any other operational component, not an afterthought. Your ROI depends on it.
Before You Open the Budget Tap
No matter what your advertising budget, hold back all spending until you’ve formulated a customer profile. Among the important customer definers are: area of residence, age, income, and preferred product (s). This info enables marketers to channel funds with maximum accuracy.
If you have questions or comments about advertising budgets, or about any other brand-related topic, feel free to send them our way.