Calculate Advertising Benefit Cost Ratio
Advertising is a must for your budding or established business to build or build upon brand recognition or entice an immediate action, like attendance to a special sale. Advertising presence in local newspapers, radio and television increases brand awareness while detailing your Unique Selling Position (USP)-what your company has to offer that no other does. Before you jump into the advertising pool, however, it's wise to weigh costs against the benefits, which is hard to do unless you at least put your toes in the water with a bit of advertising and see the sales potential.
Instructions
1. Set an advertising budget. This could be based on last year's budget, profits or unallocated funds.
2. Get advertising quotes from local radio, television and newspaper advertising representatives. See if they'll cut you a break on rates if you bundle or utilize web advertising as well.
3. Determine your company's place in the market. Where do you sit in terms of inventory or sales volume compared to your competitors? Consider current advertising by your competitors and what media they are using.
4. Analyze the benefits of advertising. Consider current sales volume and if your current staff can handle more business. Recognize additional staff may need to be hired to deal with an increased customer base.
5. Pit advertising costs against current sales to see if it's affordable. If so, try a bit of advertising in each genre. If/when you see increased sales, ask customers if/where they saw your ad. If you notice your clientele prefers one source of advertising over another, put more money into that venue and cut back on the others.
6. Compare your advertising expenses to additional sales. The ratio should exceed "One," meaning you are making more money than you are spending. If so, continue advertising to build brand recognition and spread the word about special sales.
