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How much should I spend on advertising?
Targeting your customer: It's what you say, not where you say it.
The importance of frequency: How often you say it is crucial
Patience, patience, patience
The myth of "media mix"
The dirtiest 4-letter word in advertising
The most bestest advice you'll ever hear
Passive media: What they are and how to use them
Do you have a campaign, or just a bunch of ads?
The problem with advertising just before the weekend
Response or results: Which do you prefer?
The problem with qualitative data, audience ratings, and demographics


How much should I spend on advertising?

First, open the Wizard of Ads'® ad budget calculator. Then open this handy PDF.

There are 3 key elements to consider when planning your ad budget: projected annual sales, average markup (not margin!), and cost of occupancy (rent, mortgage, etc.). Your ad budget and your rent combine for what is called Total Cost of Exposure (TCE). A solid strategy is to budget 10%-12% of your projected annual sales for TCE.

-Projected Annual Sales-

If you've been in business less than a year, this can be tricky. Just use your best estimate. The idea is to project growth in your sales over the next 12 months, not to "play it safe" by using your sales from last year. So, if you're currently a $500,000 per year business and you want to be a $600,000 per year business, advertise like a $600,000 business THIS year!

-Average Markup-

There is a big difference between margin and markup. It's amazing how often business owners confuse the two. Gross sales minus cost divided by cost gives you the percentage of markup. Gross sales minus cost divided by sales gives you the gross margin percentage. When calculating the ad budget, be sure to always use markup %.

-Cost of Occupancy-

What if you have a great location that costs you a ton in rent each year? Think about it. Isn't a major purpose of advertising to increase the awareness of your physical location? You'll be happy to know that this formula takes your rent and/or mortgage payment into account. Ever wonder why none of those small boutique stores in the mall advertise much? Maybe it's because their cost of occupancy accounts for their entire TCE!

If your business has been in the same location since the 1800's, chances are your building is paid off. If it isn't, you've got a whole other problem! Or, maybe you save money on rent with a hidden location in a low-traffic area. In either case, your Total Cost of Exposure (10-12% of projected gross sales) should equal the sum of your ad budget plus cost of occupancy divided by average markup.

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Targeting your customer: It's what you say, not where you say it.

Many advertisers fall into the trap of trying to "reach the right people" in their advertising. Media salespeople contribute to this nonsense by insisting that their audience (listeners, viewers, readers, etc.) matches up perfectly with your target customer. They often try to support their claims with some kind of qualitative research.

Truth is, the best way to target your potential customer is through your message, not the medium (TV, radio, newspaper) through which your message is delivered! That's because mass media is just what it says. It's delivered to the masses and, with few exceptions, does not reach one particular group of people exclusively.

For instance, it's not enough to simply advertise on "female targeted" programs or stations if you're trying to reach women. Your advertising message must speak to women in their language about what's important to them. If you do that, your advertising will work better regardless of the medium. So remember to target with your message, not the medium.

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The importance of frequency: How often you say it is crucial.

You're about to leave for work. Your spouse asks you to bring home a gallon of milk this evening. How likely are you to remember? Suppose they call you around noon and remind you. You're even less likely to forget, right? Finally, they call to remind you again just before you leave work. Now there's no way you're coming home without that milk because your spouse has acheived a frequency of 3.

A "3" frequency basically means that you are exposed to a message a minimum of 3 times within a given time period. Frequency is a must in order to combat the effects of advertising's worst enemy...sleep. When we sleep, the short-term memory banks in our minds are purged of the day's "noise." Much of this noise includes the nearly 2,000 advertising impressions foisted upon the average American each day.

Think about your favorite song. You can easily recite the chorus, right? The chorus stands out to you so much simply because of frequency. In most hit songs, the chorus (or "hook") is repeated more often than the rest of the lyrics. No wonder we sometimes forget the words!

To increase the effectiveness of your ads, remember to schedule them so that you achieve a high frequency. This applies to any radio or TV advertising you do.

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Patience, patience, patience.

Good things come to those who wait, especially in regards to advertising. As a society, we've come to expect instant gratification in all areas of life. Fast food, 24-hour news channels, and diet pills are a few examples. There's nothing wrong with wanting something and wanting it right now. But good advertising just doesn't work that way.

Before you begin an advertising program, you need to ask yourself a question. Do you just want a big weekend, or do you want the name of your business to become a household word? The former can be done pretty easily. The latter takes much more time and dedication, but you'll be much happier with the result.

Too many advertisers give up too quickly. They expect instant results in a short time. Many factors determine an ad's effectiveness, but the most important is your message. If you have the right message, time is the key that will unlock the door to success.

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The myth of "media mix."

It's only natural to want to reach as many people as possible with your advertising. So you put your money into several different things: a little TV here, some newspaper over there, a few billboards here. If you have the ad budget to buy many different media and use each one effectively, great! But too many small businesses try to advertise like McDonald's or Budweiser, who have multi-billion dollar ad budgets at their disposal.

You're saying to yourself, "Sure, they have multi-billion dollar ad budgets, but they advertise nationwide." Still, if you figured the amount of media these big companies buy just in your market alone, it's an enormous number compared to what most small businesses can afford to invest.

Here's the point. Rather than try to reach everybody by buying lots of different media, try reaching fewer people more often with less media. You'll be amazed at what happens after a while. Think about it. Would you rather reach 100% of the population and convince them 10% of the way, or reach 10% of the population and convince them 100% of the way. Guess what? You'll spend about the same in either case!

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The dirtiest 4-letter word in advertising: SALE!

Everyone knows the story of the little boy who cried wolf. Many advertisers cry wolf every time they promote a sale, which is usually more often than necessary. When your advertising consists entirely of promotions and discounts, that's how consumers will identify you. Instead, why not say something in your advertising that causes the consumer to think of you first whenever they think of your product category?

By constantly advertising a sale, you'll find it works less and less the more you do it. You are speaking the language of the coupon-clipping price shopper. Price shoppers will gladly sacrifice quality in order to save a buck. In the long run, they hurt your profit margin because they tend to only buy low-end products with slim markups.

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The most bestest advice you'll ever hear.

Ever notice how many advertisers claim to be the oldest or have the best, biggest, largest, most selection, friendliest, most knowledgeable staff, lowest prices, most tradition, largest inventory, blah, blah, blah? Is it any wonder the American public despises advertising? This kind of drivel goes in one ear and out the other.

If you're going to make a claim in your advertising, back it up. Use specifics that will add credibility. For instance, instead of just saying you have the largest selection of widgets in town, support your claim by mentioning the actual number of widgets you carry. Specifics are much more convincing than generalities, so consumers will be much more responsive to your message.

If you offer a guarantee be sure to explain what the guarantee actually is instead of just saying "satisfaction guaranteed." If you've won an award always mention the organization from which it was recieved. Anyone can make empty claims like having the best or the most of something. If you're making a similar claim, always prove it!

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Passive media: What they are and how to use them.

Your advertising message falls into one of two categories: passive or intrusive. Intrusive advertising is simply anything involving sound. Sound itself is intrusive because you don't have to be listening in order to hear. You do, however, have to be looking in order to see. Passive media include newspaper, magazines, billboards, and direct mail.

Passive media are best used as "reminders" once you've established significant name awareness with intrusive media. To increase name awareness, it is best to use intrusive media (radio, TV) exclusively. When you've bought all the intrusive media there is to buy, the next step is supporting your campaign with billboards.

Billboards are a great way to point out an invisible or hard-to-find location. The trick is finding available billboard space nearby. Placing a billboard on the other side of town obviously won't help much. The best billboard location is at a busy intersection so people stopped in traffic have time to notice your message.

Newspaper ads are best suited for a sales event or other promotion. The reason being no one remembers a newspaper ad because it's here today and gone tomorrow. It's perfect for showing inventory and prices, but you must be sure to show a picture of the item as well as a captivating headline.

There's a reason direct mail is often referred to as "junk" mail. A 1% response rate is normally considered a success, but it all depends on the quality of your mailing list. It's a good idea to collect customers' addresses whenever possible so you can let them know about special events or "customer appreciation" discounts.

Intrusive (electronic) media work better the longer you use them, but only when done the right way. Think about it. Would you rather reach an entire population with your message or only those who are in the market to buy TODAY? Wouldn't you rather be the first option someone thinks of whenever they're ready to buy?

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Do you have a campaign, or just a bunch of ads?

One ad can never tell the whole story about your business. Great ads make one point very powerfully. If you try to convey too many different ideas in the same ad, it gets confusing. Of course, we're talking about intrusive media in this case. You can cram all the information you want into a newspaper ad or direct mail piece. But for intrusive media it's best to strategize a cohesive series of ads, better known as a campaign.

A successful ad campaign is one that's easy to recognize. The goal is for each ad to be identified immediately by using the same music, voice, characters, style, etc. Whenever you release a new ad in the campaign, you hope that it's instantly recognized based on the awareness you've built up to that point.

Many advertisers get bored with a campaign and change directions just about the time they start achieving top-of-mind awareness. When you have a solid campaign in place, use it as long as possible. Do you think Motel 6 would have been wise to pull the plug on Tom Bodett after only a few months? Can you believe they've been "leaving the light on for ya" since 1986?

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The problem with advertising just before the weekend

Many advertisers want to reach potential customers late in the week because they tend to do more volume on weekends. Their idea is to reach the consumer as close to a purchasing decision as possible. Although this approach has some merit, there is a better way. Why not beat your competition to the punch?

Most media outlets charge higher rates for late-week advertising. But do you reach more people when you advertise later in the week? Of course not! A radio station has about the same number of listeners on Monday as it does on Friday. As for TV, people are loyal to their favorite shows, regardless of what day of the week they're on.

The media outlets charge higher late-week rates simply due to supply and demand. There are so many advertisers wanting to be seen and heard late in the week that it shoots demand through the roof, as well as the rates. A better idea is to buy early week advertising for lower rates and avoid the Thursday-Saturday "shouting match."

This concept also applies to any kind of seasonal advertising. Take jewelry stores for example. There are certain times of year when you cannot avoid the avalanche of jewelry store ads. Christmas, Valentine's, and Mother's Day are the most notable examples. Of course, jewelers again tend to pay higher rates around these times.

In fact, most of them pour their entire ad budget into just a few weeks a year. But how can a small, family-owned jewelry store compete with big national chains during these peak times? The answer is to achieve top-of-mind awareness by advertising consistently all year. You'll pay lower rates and still enjoy a spike during peak seasons.

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Response or results: Which do you prefer?

How do you know your advertising is working? Do you ask customers how they heard about you? If you advertise in newspaper or direct mail, do your eyes light up whenever someone comes in carrying your ad in their hand? Likewise, does your heart dance whenever a customer tells you they saw/heard your TV/radio ad?

Be careful not to confuse response with results! The simple truth is most people do not know how they heard about you. Just be glad they did. With the thousands upon thousands of ads we see and hear every week, how can you honestly expect someone to remember yours in detail? When asked how they heard about you, most people will either say a.) through a friend, or b.) on TV (even if you've never advertised on TV).

That is unless they are holding your newspaper coupon ad in their hand. You cannot compare apples to oranges by measuring a tangible print ad versus an intangible TV or radio ad. The plug has been pulled on many a great ad campaign because the advertiser wasn't getting the "response" they anticipated. If only they'd given it time.

If you really want to know how well your advertising is working, commit to a solid campaign strategy and follow through with it for at least 12 months. Then, when it's done see how much your business has grown. You'll enjoy the results of a fruitful campaign so much more than the response of someone mentioning they saw your ad.

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The problem with qualitative data, audience ratings, and demographics

Ever heard the one about the statistician who drowned while wading across a river with an average depth of four feet? It's amazing that so many people in the advertising world treat survey results (i.e., ratings) as gospel. In fact, the decision of where to spend millions of advertising dollars every year is greatly determined by the results of these often faulty surveys.

Did you know that in Lexington, Kentucky the audience ratings for local radio stations are derived from a survey of merely 0.25% of the population? Yes, out of nearly 400,000 adults age 18 and over, statistics for radio listening are determined by the responses of about 1000 people.

To put that in perspective, let's say you are conducting a survey among 400 people in a room. Only one person out of those 400 participates in the survey. That person's responses will then represent the other 399 people in that room. Do you really think one person is enough to accurately represent a population of 400?

We haven't even touched on the method used to gather this precious data. Participants in the radio measurement survey receive a "diary" in which they are expected to accurately report what radio stations they listen to, at what times they listen, and for how long. Do you think there may be some human error involved in this method?

Unfortunately, TV ratings are also measured by written diaries in most of the country. Some larger markets employ the use of an electronic "people meter" attached to the TV set which accurately tracks what shows are being watched and even who is watching them. Technological advances such as the Portable People Meter will revolutionize the way TV and radio audiences are measured in the coming years.

The audience measurement methods discussed above are examples of quantitative surveys. But what about qualitative surveys which attempt to paint a portrait of a consumer based on their shopping habits, travel destinations, and whether or not they own a dog? Turns out there's much room for improvement in this area as well.

One of the larger qualitative research companies uses a two-part survey to obtain data. First, they conduct a telephone survey to find out your radio listening habits. Then-with your permission-they send a 28-page questionnaire covering every conceivable purchase decision known to man. Oh yeah, they too send you a diary to report your TV viewing habits.

If advertisers would spend a fraction of the time on developing their message as they spend on analyzing ratings and qualitative data, they would be blown away by the results.

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Proverbs 3:5
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Sound Advice Marketing, Inc.