How to set an advertising budget

On: September 12, 2020
In: News
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One of the most difficult questions to answer is how much money to invest in advertising. However, there are ways to determine how much money you should be spending on your ad budget. Keep in mind that as your advertising becomes more effective and more revenue is produced, you may need to revisit your budget to continue to foster growth for your company.

Objective Based
Using an objective based method requires you to set an objective such as increasing your online sales by 10% and figuring out how much revenue it will bring in and the costs necessary to find and market to these consumers. This method is typically utilized by companies that are just starting up or companies who do not have enough revenue to support a large advertising budget.

Dollar Based
This method works by setting a maximum amount that you feel comfortable investing. This method works best for companies that have a solid cash flow or reserves from which to draw. In this situation, decide on a total investment amount and then portion it out accordingly, such as “X” amount for collateral, “X” amount for digital, etc.

Competitor Based
If you want to remain competitive within your industry, quite often your competitors will determine how much you invest on your advertising budget. Find out where and how your competitors are advertising. See if they are using print, radio, digital, etc. and then you need to gauge how much money they are spending.

Testing New Methods
To help determine how much money to spend on an ad campaign, test and explore new avenues to determine effectiveness. Examples include a pay-per-click and results-based marketing for this technique. You can set a small initial budget, track it, and then increase it as needed.

Note that we use the word “invest” instead for spend on advertising.  A strategic advertising plan will make the most your advertising dollars and provide a return on your investment.  We can help your business determine the best way to arrive at a budget and plan to drive success.  Call us today at 520-745-8221.

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