Advertising Budget Planning for Your Small Business

The advertising budget for a small business should be consistent with the marketing and promotional targets of the company.  It will have to be realistic as fiscal realities may contain the scope of budget, especially if the business is small and taking baby steps presently. There are many things to be considered before creating an advertising budget which achieves the target of increasing the company's visibility and bringing in more sales.

Important Budget Questions:

  • Who all makeup the target consumer? How to create a consumer portfolio?
  • How effective is the media considered to reach the target consumer?
  • What are ways to motivate the consumer towards purchasing the product or service?
  • How much will be the return/profit from each dollar spent on advertising?

Answers to these questions will give you a picture of the market conditions and how you can optimize your advertising with the funds allocated.

Various Budgeting Methods:

A few of commonly used allocation methods are:

  •  Percentage of sales method
  • Sales objective method
  • Market Share method
  • Unit Sales method

Percentage of Sales Method:

The most commonly used budgeting method is percentage sales method, especially for a small business. Taking a percentage of either past sales or the expected future sales, you will allocate that much percentage of the total budget towards the advertising budget. It is considered safe since you can generally predict the future returns. It is most effective if budget is calculated after checking the competition in the field.

Sales Objective Method:

Considered to be the most sensible method, this correlates the advertising budgetary funds to the overall marketing allocation. This keeps the money spent for advertising targeted on primary business goals. Once marketing objectives are established, advertising objectives can be calculated and funds allotted after checking for availability of funds. Sometimes there may be need for scaling down in case of funds shortage.

Media Selection:

Once you've decided how much to spend on advertising, the next step is to decide where to spend the money to get optimum benefit. The product or service that is being advertised, the target consumer and the cost will be the deciding factors in selecting the media. Additionally, the area to be covered, availability of the media options and the company’s business objectives are other factors to help decide this.

Print media, radio & television, and internet & mass SMS/MMS are a few of the options.

Media Schedule:

Generally 3 methods are followed planning the media schedule.

  • Continuity method: When demand is even and steady, this method is used throughout the planned advertising period.
  • Flighting & Pulse method: When there are spurts in demand, a higher level of advertising is used; otherwise a low-keyed pace is used.
  • Massed method: Mostly for seasonal and specific-period sales.

When the consumer and market demands change, advertising patterns also should change. It is best to track how the customer reacts and how effective the advertising is in increasing sales.

A good and viable advertising budget planning for your small business will bring in more present and potential customers and increase the profits.

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