Learning Good Budget Strategy on Advertising by anamaulida


									There is no exact answer to how much you should spend on advertising.
What you spend will depend on your promotional objectives, your target
customers, the characteristics of your product or service, and the type
of business you are in.       Several methods for deciding on a budget
are used successfully by small businesses. Here are some of those
methods: The percentage of sales method is probably the most frequently
used. A percentage of projected sales revenue to be devoted to
advertising is predetermined. Suppose you learn from your trade
association that firms similar to yours allocate five percent of revenue
to advertising. You'd estimate the amount of your sales for your first
year of operation to determine what your advertising expenditures should
be. Let's say your sales for card printing business are very low
especially on business cards. Then you have to pay more attention to get
more sales. You need to allocate a proper budget for advertising to
generate more sales.

  The fixed dollar per unit method uses an absolute dollar amount in the
advertising budget for each unit of product sold or produced. You'd have
to estimate how much it would take to sell each unit and then set your
advertising budget for the year. A business card printing shop owner who
plans to print 500 cards might estimate a cost of $1 to sell each card.
The advertising budget would be $500.00. The fixed dollar per unit method
like the percentage of sales method represents formula thinking. It
ignores the goal that advertising must achieve- to bring in sales.
Matching competition can be viewed as a defensive way to develop your
advertising budget. Spending as much as your competitors assumes that
your advertising strategy should be similar to theirs. It also assumes
that your competitors know the right amount to spend. And it's pretty
nearly impossible to find out how much your competition is actually
spending in any case. This is not the method you must use.        The
affordable method isn't really a method at all. It simply answers the
question: how much am I willing to spend on advertising? Business owners
who use this procedure as a basis for deciding on an advertising budget
don't truly understand the function of advertising. Of course, there are
practical limits to how much you can afford. The Can I afford approach is
the self-fulfilling prophesy.       Advertising leads to sales. The
amount you spend on it should be keyed in some way to the amount of sales
you want. Suppose an entrepreneur is willing to spend only a small amount
on advertising during the first year of operation. At the end of the
year, meager sales and disappointing profits- the results of the
inadequate advertising program- might lead to even less money being
budgeted during the second year. This method of developing an advertising
budget could result in the ultimate failure of the business.       As a
practical matter, the amount you decide to spend on advertising should be
related to your planned sales targets and the objectives for your
advertising program. This means you should carefully assess your firm's
need for advertising and set specific objectives before you make your
budget. The advertising objectives must be based on your sound
understanding of the target audience and identification of the outcomes
the advertising must produce. At this point you can determine the costs
of reaching your objectives. In this way, the budget results from what
you want to achieve rather than your achievement being limited by what
the budget will permit.      Kaye Z. Marks is an avid writer and follower
of the developments in business cards industry. Order business cards
online with PrintPlace.com.

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