Ohio State University Fact Sheet

Community Development

700 Ackerman Road, Suite 235, Columbus, OH 43202-1578

Advertising: An Investment In Your Business's Future

CDFS-1276-95

Small Business Series

Many products or services have failed in the market, not because of their quality, packaging or pricing, but because potential customers didn't know they were there, and if they did, they didn't know what they were or how to use them. In order to sell your product or service you must promote it. One effective method of promotion is advertising.

What Is Advertising/What Will It Accomplish?

Setting Advertising Goals

Who Is the Customer?

One of the best methods for determining the customer base is to develop a customer profile. Customer profiles ensure effective advertising by targeting a specific customer audience. Customer audiences may be determined by age, gender, income, marital status, occupation or other characteristics relevant to the nature of the business. See fact sheet, CDFS-1253, Finding Customers, for instructions on how to develop customer profiles.

Consider why a group of customers would want to buy the product or service. Then ask, "Why should customers buy from me instead of the competition?" This process helps to determine the competitive advantage of the business's product or service in relation to projected target markets. Competitive advantages become the basis of a customer benefit package. Once the customer benefit package is determined, select the most unique customer benefit to highlight in advertising. An ad should depict the one benefit perceived by the customer to be the most important. Benefits include price, convenience, service, atmosphere, quality, value or reputation. In advertising, as in all marketing efforts, the customer is the central focus. Advertise the benefits that the targeted customer perceives to be important. Advertising based on business owner opinions rather than perceived customer benefits is wasted effort.

Selecting a Medium

Select the best medium, taking into consideration market coverage, type of audience, cost per advertisement and advantages and disadvantages of each medium. Page four shows an example of a score sheet of several common media.

Different customers respond to different types of media. Consider each target customer group and the most effective medium to reach that group. Develop a mix of types of media. Be cautious of putting all advertising dollars into one effort. Develop an advertising budget. Advertising allocations should be carefully considered to achieve specific goals and to reach specific customers.

The Advertising Budget

The second alternative is to spend what can be spared. In other words, spend what is remaining after other obligations are met. In the absence of an advertising budget, spending may occur when a medium representative presents a good deal to the business owner. Try to avoid this piecemeal approach to advertising that implies advertising is a luxury. In reality, advertising is a necessity.

The third way is to spend as much as the competition spends. This works for special short-run efforts but is not realistic for planning an advertising budget. This method may only be mimicking the competition's errors.

The fourth, and most successful, way is to spend what it takes to get the job done. This method requires a complete analysis of the market and advertising alternatives to determine the amount that truly needs to be spent. Business objectives should be established for the year and the cost of accomplishing each objective reflected in a budget plan.

An advertising budget should be planned to cover a 12-month period that helps the business look ahead and gives enough time to measure results. Since the cost of advertising must be paid by revenue produced from sales, the dollar amount designated for advertising should always be expressed as a percent of anticipated sales. The amount or percent used must be determined by each individual business.

First, prepare a budget based on sales goals. Project how much the business will sell in a month, a season or a year. Setting goals may be a form of a guessing game. Basic research in past sales performance, the quantity and quality of the competition, economic forecasts and the changing characteristics of a population all go into the equation.

Use Worksheet 1 to establish a yearly advertising budget based on a percent of gross sales from the previous year. Worksheet 2 breaks down the total advertising budget and sales on a monthly basis. This gives the business the advantage of determining the advertising dollars to be spent each month based on the sales per month and helps determine any other special promotions on a monthly basis. If properly developed, this worksheet can be a valuable tool in the success of a business allowing the business to plan for special events or holidays, develop an advertising and promotion budget and review the previous year. Whether or not the exact forms presented are used, take time to prepare a written advertising budget for the business based on future sales goals rather than the past year's expenses.

Evaluating Advertising Dollars

Another idea is to keep a record of day-to-day circumstances that surround the business such as unusual weather that may make a difference in advertising efforts. Community-wide promotions may also affect sales on specific items. These can change from one year to the next. Note the number of weekends in a month. An increase in sales may be experienced in a month that has five weekends as compared to four the year before. Additional record-keeping techniques include asking new customers how they learned about the business, and asking repeat customers what brought them in today. Keep a tally of the mediums mentioned, including word-of-mouth advertising.

Ask customers to evaluate the product or service. Did they find the article they desired? Would they like a better selection? Are the prices higher or lower or the same as a competitor's? Was it difficult for the customer to locate the business? The answers to these questions help decide short-term changes, as well as advertising for the future. The answers given are clues to the perceived benefits customers receive and help create repeat business-one of the objectives of any advertising effort.

Conclusion