To ensure development advertising campaign and its successful implementation, it is important to determine the possible allocations of the advertiser for these purposes. It is important for any advertiser to get the most bang for your buck.
In the process of implementing an advertising campaign, the main costs are spent on advertising in the media (purchase of space or time). At the same time, significant costs are associated with the development and production of advertising products. The ratio of production and advertising costs depends on the specifics of the advertised product, as well as the chosen means of advertising distribution.
Planning in advertising management has several stages: defining the goals (objectives) of advertising; definition of a market segment; selection of the main advertising topic; choice of means (channel) of placement; development of an advertising budget.
Stage 1. Defining goals. This work provides a brief description of the process of defining the objectives of the advertising that the manufacturing firm is about to develop. This process can be divided into two stages. At the first stage, the management of the firm, responsible for advertising activities, determines what advertising should do for the organization. For example, analyzing marketing indicators, the company's management comes to the conclusion that its product and its positive qualities are not properly assessed in the market. Thus, the need for increased advertising of this product is recognized.
The second stage of the advertising targeting process is to consider what kind of advertising should be given, i.e. what changes need to be made in the advertising campaign of the company so that the consumer can more correctly evaluate its product in favor of the company. In other words, what by advertising means and actions can be performed marketing task firms - to achieve an increase in sales of goods. The main goal of the advertisement or the entire advertising campaign is determined. In this case, this goal can be characterized in terms of image advertising as the goal of attracting the attention of consumers to the product, making them believe its content (a message about the excellent qualities of the product), thereby changing their initial opinion about this product, which did not quite satisfy the company.
Stage 2. Determination of the market segment. When planning an advertising campaign, the contingent of potential buyers of the product, which the company is counting on or which needs to be won, must be clearly defined. The analysis of the buying audience can be carried out in two ways.
First, a market segment is identified, i.e. the most common categories of buyers of the company's goods. Analyzed quantitative indicators the needs of this group of people in goods, including the goods of this company.
The second direction is a more detailed analysis of the purchasing power and needs of the selected segment of consumers. This analysis is already individual characteristics consumers within the segment. An important aspect of it is considering the market segment from the standpoint of distinguishing different groups: potential (potential) buyers, new, permanent, etc. Finding out what needs of these groups can be satisfied when they buy a firm's product is the key to developing effective advertising for this product.
Stage 3. Choosing the main advertising topic. The effectiveness of advertising depends on how clearly and clearly it conveys to the consumer information about the high consumer properties of the advertised product. The subject of advertising, therefore, must be presented in two aspects: it must be attractive to the consumer and well understood by him. The first aspect is achieved through an effective title, slogan, etc. The second aspect is determined by the size of the advertisement: the advertisement as a whole should be short, but of such volume (or length) to contain the main information about the product.
Stage 4. Choosing a means (channel) for distributing advertising. This stage is very important in planning an advertising campaign, since various media essentially require different types advertising materials. And before proceeding to the stage of organizing (developing) advertising, managers dealing with advertising in an enterprise or in an advertising agency need to determine in which media the manufacturer's advertisements will be placed.
The approach to the choice of media should be based on the analysis by the advertising manager (team of managers) of those possible channels through which it is easiest and faster for him to reach the attention of the target audience of consumers. In this case, the manager works from the opposite - from the consumer: a permanent, potential, new buyer of the company's goods. He compares consumer characteristics target audience with opportunities to influence those with the help of the elected (elected) media. The choice of advertising means also depends on the goals of the company's advertising management and the content of advertising messages to the consumer.
the largest coverage of the consumer audience;
delivering the message to the executives of various organizations;
The chances of making the right choice are significantly increased if the advertiser once again carefully examines the data of the marketing indicators of the company. So, information about the segment of buyers, in terms of demographics, social status, lifestyle, cultural characteristics, allow you to choose the media that best meet the characteristics of the target market. These will be the means that, more than others, are used by people belonging to the category of potential and real buyers of the firm's goods. Usually these same funds have minimal distribution among persons who are not potential buyers. For example, magazines are seen as a medium for advertising to reach an important segment of the consumer audience.
The correct approach is to advertise in the media that the majority of potential buyers read or listen to. So, for firms operating in local, regional markets, the most appropriate would be to use local funds. Nationwide advertisers select the nationwide media that best cover the geographic areas where their products are sold. Local press, radio and television can also be used as additional means of distributing advertising.
The purpose and topic of advertising messages also greatly influences the choice of advertising channel. A message about the appearance of a new product usually requires the creation of an effect of extreme importance and usefulness of this product, and even the relevance of its purchase. This effect is achieved by advertising on television and in newspapers.
Television and radio, working on a time basis, gather at different times of the day different audiences in terms of composition and size. This factor should be taken into account by the advertiser. When choosing the time of transmission, for example, of his advertising message, he essentially chooses his target audience and in the amount that is most beneficial to him.
There is another type of selection criterion effective remedy advertising distribution is a purely quantitative criterion expressed in the cost of advertising per one or a thousand consumers. Such a quantitative analysis does not present any particular difficulty for a specialist and is carried out on the basis of data on the cost of the advertising medium and the coverage of the readership. This criterion quantitative analysis can be supplemented with one more - calculation of the required number of repeatability of advertising to cover the required number of consumers.
Stage 5. Planning the advertising budget. This is one of the most difficult problems. The cost of advertising in the media can be significant. For example, in the early 1990s, a one-time run of a typical TV commercial cost US advertisers between $ 25,000 and $ 100,000. The cost of placing advertising materials is gradually increasing all over the world. Over the past 10 years, it has increased significantly - two to three times.
At the same time, it should be said that in common system costs of the firm for the production and sale of goods advertising costs do not seem so significant. What's more, the high ad spend isn't actually that big when you consider how much revenue can be generated. effective advertising and how many potential buyers it covers. Thus, advertising on a television channel costs less than 1 cent per person or family.
On average, industrial enterprises spend no more than 1% of their sales on advertising. Although large corporations, well aware of the benefits of effective advertising, spend more money on large and small advertising campaigns. The advertising budget of many of them reaches 5 - 10% of sales, and in the perfumery industry it reaches 20 - 30%.
There are several methods for planning your advertising budget. They involve two approaches:
the budget is planned based on the analysis of the effectiveness of the advertising activities of the company;
the budget is planned without taking into account the analysis of the profitability of promotions.
The first approach is very complicated and can only be done by advertising specialists who have a very high vocational training and a staff of employees who are able to conduct not only a thorough study of the performance of past advertising campaigns, but also make adequate predictions for the future. Specific figures for advertising costs are planned based on the profitability it can bring. This method requires the use of specially developed methods for determining profitability at different stages of an advertising campaign and allows you to additionally identify at which stage the advertising of a product is most effective, and at which stages the costs for it can be reduced. So, one of the famous researchers of the advertising business K.S. Palda conducted a special analysis of the possibilities of developing an effective (necessary) advertising budget for a corporation engaged in the manufacture and sale of proprietary medicines. The study found that one dollar spent on advertising only generates $ 0.50 additional sales if the campaign lasts a short time; however, profitability from one dollar of ad spend on a long-term campaign reaches $ 1.63. Thus, thanks to the results of the research by Palda and his employees, the management of the company not only determined the allocation for advertising, but also chose a strategy of a powerful advertising campaign without hesitation. In most cases, however, the advertising budget of organizations is calculated using methods that are not directly related to its profitability. The most famous of them are the following: interest method; method of possibilities; parity method; method of goals and objectives.
Interest method. This is the most traditional and easiest way to plan your advertising budget. Allocated a certain percentage of last year's sales. In this case, the allocation for advertising activities increases if the sales of goods were high, and, conversely, decreases with a decrease in sales. V Lately many firms use this method, but not in relation to past sales, but projected for the next year.
Method of possibilities. Its essence lies in the fact that the company limits its advertising budget to the amount that it can spend on advertising. In practice, such planning of the advertising budget is carried out according to a kind of residual principle: first, allocations are made for all production, management and other types of activities, and the remaining funds can be used for advertising business firms. This approach does not at all guarantee the correct selection of the required amount of appropriations for advertising. As a rule, this amount will be significantly lower than the required one, and in some cases (if the company is very rich) and exceed that. Budget planning using this method is based on the assumption of its minimum sufficiency.
Parity method. This is a method of planning an advertising budget, which is carried out taking into account the activities of competitors. Many leaders of organizations understand that in order to maintain a niche market, they must spend on advertising at least as much as their competitors spend. The task of the marketing manager in this case is to find information about the costs of competitors for their branded products. Such information is generally available, since the prices for the main means of distribution of advertising materials are known.
Method of goals and objectives. Firms using this method to develop an ad budget start by defining specific goals for a future ad campaign. For example, the company "Texasgulf" before the start of its advertising campaign had a market share of about 5% and respectable buyers (six organizations) of its product - phosphoric acid. The goal of advertising was set - in a short period of advertising to increase the number of consumers who know about the company and its product by 10%. The campaign was designed to advertise phosphoric acid as a very "clean and green" product.
In accordance with this, a certain amount of money was allocated for carrying out promotional activities. It turned out that the budget developers were not mistaken. Advertising fully recouped the costs and brought significant profits, since the set goal was not only achieved, but its results were higher - 20% increase in the number of potential and actual buyers.
Organization and coordination functions. In advertising management, these two functions operate simultaneously, since the creation of an advertisement or an advertising campaign is a complex process, in which several subjects and objects of management are involved at once: an advertiser, an advertising agency, advertising distribution media, and also, in some cases, a significant contingent of dealers and intermediaries of the marketing system. firm - manufacturer of goods. Accordingly, at all stages of such a process, along with organizational actions and operations will also take place elements of coordination or adjustment of the interaction of all its participants.
Two aspects can be distinguished in the organizational (including coordination) function in advertising management. The first, or narrow, aspect is managing the creation of advertising materials. The second, broader aspect is the management of the organization and the conduct of an advertising campaign, which, in addition to the developed advertisements, includes issues of means of their placement, coordination of various types of advertising in the general system, their number, volume, as well as coordination of actions to achieve main goal the entire advertising process.
At the stage of advertising planning, the management of the company determined its main goals and the main theme. The goals must be achieved, and the subject of the message must reach the consumer if an effective ad is created. Thus, at the stage of organization, two categories of employees are involved in advertising activities: managers and creative workers, who will have to develop the text and design of the advertisement. The main role, of course, belongs to the latter, although professional managers are needed to coordinate and manage their activities, and often as consultants on organizational and even creative issues.
The size of the ad is determined by the characteristics of the advertising appeal, the need to repeat it, the amount of advertising allocations, prices for placement, etc. You should not reserve space for advertising without making sure that the ad will fit exactly into the available space. If you buy too little space for advertising, then the ad may not "fit" into it. On the other hand, the acquisition of more space than required will lead to ineffective spending of the advertising budget. In addition, practice confirms the riskiness of a one-time publication in a magazine or newspaper of one large-format advertisement, since a series of advertisements (even of a smaller format) will be more effective and possibly cheaper.
Evaluation of the merits of the publications selected for use in the planned advertising campaign is mainly carried out by experts. To this can be added a formal comparison method, which turns out to be useful at the stage of preliminary planning of an advertising campaign - determining the cost of publishing one calculated line advertising text in 1 million copies of the circulation (the so-called tariff milline). But this indicator may not always serve as a truly reliable and accurate guideline, since the page sizes in different publications are different and, in addition, their readership may differ.
A new brand enters a market where this product category already exists. In doing so, you can rely on existing experience (of the entire industry or individual competitors). However, this is only partial information. We cannot assume that competitors are calculating their budgets correctly, although, of course, we can assume that the leading firms do it better than others.
Method of goals and objectives. This method is also a priority in the case of a new brand entering the market. But knowing what difficulties are involved in estimating the conversion rates, on the accuracy of which the size of the budget largely depends, we recommend additionally using at least one competitor-oriented method and comparing the obtained values. For example, this may be the Peckham method discussed below, coupled with the principle of priority to market Advertising and product promotion. J.R. Rossiter, L. Percy. "Peter", St. Petersburg. 2000, p. 53.
Peckham's method of “Priority to market”. This method of determining the size of the advertising budget for a new brand was proposed by J.O. Peckham, one of the most famous advertising consultants. It must be said that Peckham developed this method only for products sold in pharmacies and supermarkets. (However, it is perfectly acceptable to use it as an adjunct to the goals and objectives method.)
For Peckham's method, there is only one limitation: in the product category under study, there must be a clear correlation between “share of the vote” (the cost of advertising a given brand as a percentage of all advertising costs for all brands in this category) and “market share” (volume of sales in kind). expression, presented as a percentage of the total sales by category). The presence of such interdependence can be said only if there is data on the advertising costs of individual brands and their market shares. Of course, one must bear in mind that the correlation may turn out to be “unnatural”, since the budgets of the rest of the brands in the category may already be based on share of the vote and thus create a false interdependence. Yet in the annual period that we are considering, in many industries, be it consumer or industrial products, there is a strong relationship between voice and market share.
So, if it is possible to establish the above correlation, Peckham recommends setting the new brand's voting share to be 1.5X the market share that the brand should receive by the end of its second year of existence. If we know the advertising and sales volumes for the industry as a whole, we can easily translate the resulting share of the vote into the size of the advertising budget. Converting the planned market share into sales in real terms is also not difficult.
But how do you determine what market share a brand should have in two years? This is where the principle of sequencing the brand's entry into the market comes in handy.
To determine your market share, prioritize your exit. In virtually all product categories, be it consumer goods or industrial goods, a brand's market share depends on the order in which it enters the market. In this case, we are talking about market share in pieces, and not in monetary units. For some reason, the first brand, the "pioneer" of the market, gains the largest market share, the second the next largest, and so on.
Sales GeneratorReading time: 17 minutes
Determining the marketing budget is a very important step in the media planning process. Cost planning allows you to determine as accurately as possible how to correctly allocate resources, and in the future not go beyond the established boundaries when spending funds. At the same time, it is the budget that becomes the main constraint when planning advertising and choosing suitable media carriers. About the correct calculation and optimal budget formation - in our article. Advertising campaign budget - this is exactly what the theme sounds like.
Calculating the budget for an advertising campaign - easy or difficult?
The budget of an advertising campaign and its impact on media planning - these two main issues we will consider in the article. So, every marketing campaign has its own specific budget. It is always difficult, and often even impossible, to determine exactly how much money a company will need for marketing activities. Note that advertising is just one of the many parameters affecting a firm's sales. Therefore, it is very difficult to understand how exactly advertising affects the sales of a particular product. In addition to advertising, both when entering the market and when selling, a lot depends on the cost, distribution, packaging, product properties, customer preferences, the presence of competitors, the professionalism of the distributor, etc.
For example, the elasticity of the sales response to price decreases is about 20 times higher than the elasticity of sales as a result of increased advertising costs. That is, a change in tariffs has a much stronger effect on sales than a change in the volume of advertising.
The results of one study showed that for the average brand as a result of a 1% price reduction, sales will increase by 1.76%.
At the same time, the main difference between advertising and sales promotion is that lowering prices (the most popular way to stimulate sales) costs the manufacturer much more than increasing advertising volumes, and therefore it would be a mistake to assess the effectiveness of these two marketing areas solely by their level. influence on sales.
In practice, no one increases advertising costs by 1% and does not reduce prices for such a small indicator. To get even a small effect, advertising costs need to be increased by at least 50%.
The conclusion is obvious: despite the fact that additional advertising has little effect on the increase in sales, they, as a rule, still increased. This effect is exactly the opposite of the result of lower prices, when sales increased quite significantly, but profits were almost always significantly reduced.
It is noteworthy that it is often more efficient not to carry out additional promotional activities and not to reduce, but, on the contrary, to raise prices. With minimal indicators of price elasticity of demand, the loss in the level of sales caused by an increase in cost by 5-10% is so insignificant, and additional profit so tangible that the increase in prices often brings the company an increase in net profit.
However, the formation of an advertising campaign budget, at least roughly, is a necessity. Why? This is necessary in order to understand the amount allocated by the company for advertising purposes in question, as well as to avoid obviously rash expenses.
As you develop your advertising budget, remember that the biggest changes in the volume of sales of products and services are not caused by a change in the amounts sent by the company to marketing goals... Sales volumes, as a rule, largely depend on the distribution of these funds by the organization: for which target audience it works, which advertising media it uses, what advertising message it makes to potential buyers, etc.
Each company wants to form an initially full-fledged budget, which does not need to be significantly changed. This requires Objective assessment advertising campaign budget. In it, from the very beginning, all costs within the advertising campaign should be foreseen as accurately as possible: for marketing research, the development of advertising materials, payment for advertising space, preliminary and post-testing, etc.
In the advertising budget, most often all expenses for advertising purposes are included for a specific time period (usually a year). The budget of the advertising campaign is drawn up in a table format, where several sections are provided - the types of expenses for a specific period.
When forming a budget, you need to determine the method for calculating it, having previously analyzed the methods for calculating the budget of an advertising campaign and choosing the best way for yourself to distribute to markets, resolve procedural issues and reduce costs.
Features of planning an advertising campaign budget
Most companies have the concept of "total budget" and "budget for the coming year for each department." In the first case, the budget for marketing activities, as a rule, is formed in relation to the departments whose work is related to the placement of advertising. The entire budget of an advertising campaign can either pass through any division of the organization, or be distributed among divisions that develop independent marketing programs.
Let's say - the first option: the communications department accounts for the entire advertising budget as a whole.
The second option: the marketing department has a budget formed just for marketing purposes; on the personnel service- funds allocated for advertising employment; for the department of external communications - means of general advertising of the company.
The first option is increasingly common in many organizations. It is mostly used when possible, as it makes it easier to track and manage costs. But the head of the enterprise decides what is best to take in each specific case, of course. This decision is finally approved by the board of directors. It all depends mainly on the scale of marketing activities and the total amount of expenses.
If we are talking about a non-profit enterprise, then the lion's share of the budget is directed to achieving advertising goals or solving the general problems of the company.
The key is, of course, the decision to develop a budget. What is the basis for its formation?
Some companies find it easier, in principle, not to develop a budget, but to channel money for marketing purposes as needed. If a marketing campaign is needed, it should be done. Let's say we want to advertise in the media. Let's do it and see what effect it gives.
Small businessmen, as well as sole proprietors of the business, often choose this path. They do not need to report to anyone about the work done, and therefore this issue does not bother them. But even in situations like this, it is much better for business if the budget is structured. When accounting, it has different values and is necessary to maintain financial control. Its formation allows you to compare the costs of advertising purposes with other costs when calculating the income and surplus goods.
What marketing costs does the advertising campaign budget go for?
Before you start shaping your marketing budget, remember how you need to structure it. V real business There are 5 key items in advertising costs:
This article describes the costs of promotions aimed at the end customer, as well as promotions for distributors, POS materials, and shop equipment.
Expenses for promotional activities are calculated for each article separately, after which they are combined into the total budget of the advertising campaign and optimized depending on the importance of the direction. If you know what goals the company is striving for for each commodity item, you can choose the optimal communication channels, or the so-called media mix.
So, you have identified the communication channels that are useful to you. Next, you need to establish where the marketing campaign will be geographically carried out: throughout the country (large-scale), in certain regions or at certain points of sale.
The next step is to establish the strength of the marketing impact. What parameters are taken into account? Duration and duration of support, frequency of impressions and target reach of the marketing message. Taking into account the values of these parameters, the budget for each advertising campaign is calculated.
By combining the budgets of all marketing campaigns, we get a preliminary budget value that needs to be adjusted according to the following principle:
- the budget amount should not be higher than the maximum investment amount calculated initially;
- the budget should provide for the priority areas of activity for the company and invest in their development (it should not happen that the money within the framework of the advertising campaign does not go into the priority channel);
- it is necessary that the ROI for each marketing campaign is obvious ( large enterprises often make investments that do not pay off for several years. But if we mean a small business, then the payback period of a marketing campaign should not exceed one year, and ideally six months).
Advertising campaign budgeting methods
1. Fixed budget method
In accordance with it, the company determines a specific amount that will be directed to advertising purposes, and these costs are not revised from year to year, no matter how business affairs and the external environment change.
2. The residual cost method
The firm uses the money left over after covering all other expenses for advertising purposes. It is most often used by small organizations. But it so happens that advertising for the advertiser is in last place, since he does not have the funds for it. As a result, no marketing activities, no big sales ... Therefore, it is very important to calculate the budget of an advertising campaign.
3. Formation of the budget as a percentage of sales
Its other name is the fixed interest method. The method is based on the fact that, when developing a budget for an advertising campaign, the advertiser takes into account the estimated or real turnover of his company. This can be revenue, profit, current year or last year, quarterly or monthly data. Interest can be constant or floating, changing every year, decreasing when specific indicators are reached, or, on the contrary, increasing when, say, profits decrease.
Advertisers use the method in a certain version quite often, since it is quite simple. It is optimal when the market situation is stable and there is no need to change the degree of brand awareness, launch a new product on the market, etc.
Less commonly, it is used in an unstable environment, with a drop in sales, when the cost of marketing activities may be greater than the profit. And not every company can afford such an approach.
The method is based on the fact that the company monitors the marketing activities of its closest competitors. Based on data on ad volume and campaign budgets, the firm determines whether its budget should be the same or higher.
Let's give an example: service firm mobile communications closely monitors competitors. After calculating their marketing costs for publications (about 10 thousand rubles per campaign per month), the company sets its own budget in the amount of 12 thousand rubles. monthly.
5. Formation of the budget for the goals and objectives of the advertising campaign
We believe this is the most interesting way. The point is to pre-formulate the goals of the marketing campaign and calculate the costs necessary for implementation. But according to the circumstances already indicated in the previous paragraph, the calculations are very approximate. Despite this, the approach is one of the most effective.
It should be borne in mind that in different life cycles product and advertising costs are different. There is a "Peckham formula", according to which the costs of organizing a marketing campaign in the first two years of the existence of a product on the market are 1.5 times higher than the profit.
6. Formation of the budget based on the maximum income
The method is based on comparing marketing costs with the income generated by advertising campaigns. Here the ratio is calculated at which the level of income is maximum. As in the previous method, due to the influence of other parameters, the calculation result is inaccurate. This method is used to develop a budget for an advertising campaign.
The results of tests and experiments are used here. First of all, they conduct a small test advertising campaign in a small market, similar to the market that the company is interested in. Based on the results, the most effective approach is calculated, which is then transferred to the budgeting for the main marketing campaign.
As you experiment, keep in mind the importance of actions such as:
- random selection of markets (cities, districts);
- reconciliation of data obtained before and after the experiment, and not with last year's indicators, etc.;
- comparison of the apparent budget change (not less than 50%);
- comparison of experimental data, which was carried out over a fairly long period;
- comparison of significant audiences.
The method is very limited, and this is obvious: there are differences even between very, at first glance, similar markets. The disadvantage is that competitors may be watching the trial marketing campaign. They have the potential to bypass you as an advertiser in the mainstream market. However, if the market situation is stable, this approach is often used. It is also used when there is little market data available.
8. Budgeting based on modeling
It uses computerized data processing. In addition to it, mathematical methods are also used to build the dependence of sales and profits on the amount of the marketing budget.
To apply the method, reliable data and large financial investments are required. Therefore, it is recommended to use it for large enterprises. But even if all the data is accurate, no one guarantees an absolutely correct result. That is, the budget of the advertising campaign may not be entirely correct. This is because financial results depends on many market parameters.
Forming the budget of the advertising campaign, the company estimates what share it occupies in the product market, what is the total size of this market, and then calculates the required amount of funds to cover the same percentage marketing market... That is, if a company occupies 20% of the product market, then its advertising on marketing should also occupy 20%.
The method is based on the assumption of a linear relationship between investments in advertising and the share of the product market owned by the company.
To combine in one metric own advertising costs, competitors' marketing costs, as well as total sales, use the amount of marketing costs per unit of market share. Since the total volume of the marketing market changes with the size of the marketing budgets of competing firms and the number of competitors, the budget calculated in this way needs to be adjusted all the time.
According to the Dorfman-Stayman rule, the ratio of the marketing budget to total sales is equal to the ratio of the elasticity of demand for advertising to the elasticity of demand for price. That is, the method is based on 3 indicators: the total sales of the firm, the elasticity of price demand and the elasticity of advertising demand. Given these metrics, you can calculate your ad budget:
R = P × Er / Etse.
When using this method, the advertising and pricing strategy of the enterprise is synchronized. The difficulty here is that it is necessary to correctly determine both elasticity indicators, which is often not easy.
Generally speaking, the elasticity of demand for a particular indicator is the rate of change in total sales when the indicator changes by one percent (while all indicators remain unchanged).
If the elasticity indicator is less than 1, it means that due to a 1% change in the indicator, the total sales change is less than 1% (inelastic demand). With elasticity greater than 1, a 1% change in the indicator leads to a change in the overall level of sales by more than 1% (elastic demand).
The following formula is used to calculate the elasticity of price demand:
К = (∆q / q) / (∆P / P),
where q- the total sales of the product before the price change;
∆q- change in total sales for a product after a price change;
R- product price before its change;
∆Р- change in the price of a product.
Typically, enterprises are able to independently calculate the price elasticity. But as for the elasticity of advertising demand, this indicator is difficult to calculate, and therefore you can borrow it from marketing research... Lambin has established an elasticity of demand for advertising at 0.1 in surveys of many European brands. In an early 1980s survey by Leoneetal, ad demand elasticities range from 0.003 to 0.482. Most of them are less than 0.2. Seturman and Tellis, along with more recent researchers, also show that ad elasticities of demand are within the 0.1–0.2 range.
The method has a limitation: it can only be used for products with elastic price demand.
Exists different methods calculating the budget of an advertising campaign. Some of them are used by companies taking into account their goals and preferences. Often, different methods are used not only separately, but also in a mixed form.
How to properly distribute your campaign's ad budget
In addition to setting an overall budget, many advertisers need to distribute it across markets and brands.
How to create a budget for an advertising campaign for Yandex.Direct (and for other electronic platforms)
Today, this type of advertising is offered by all major search engines on the Russian Internet. When developing a budget for a search advertising campaign, you should (these parameters will just affect the amount of funds that you need):
1. Make a list of keywords that will be used in your marketing campaign.
2. Select the search sites where you are going to advertise.
3. Check the frequency of the keys (words and phrases) you selected.
To reflect the totals in the table:
4. Calculate how much it costs to place ads or banners in accordance with the price list of search sites.
You can find out how much it costs to place search advertising at the following addresses:
- Yandex: http://advertising.yandex.ru/price.xml?#yandextarg (minimum order price RUB 21,000);
- On Google: https://ads.google.com;
- "Aport": http://www.begun.ru/.
An important point: on some sites, prices are set for impressions, on others - for clicks.
If we are talking about clicks, the calculations will not be so simple and you can ask for the help of ad sales managers on a particular site.
If you are not satisfied with the result, you can try to adjust your marketing campaign:
- change queries using a more specialized phrase;
- change the display region of the banner (ad);
- change the sites where you plan to stay.
HOWEVER, the scheme, however, will be the same as indicated earlier.
Evaluate, calculate. Practice shows that you can find the best options for placing search advertising, even with a limited budget.
You can compose the text of an advertisement yourself or entrust this question to specialists who optimize and promote sites. Usually, there is nowhere to order a separate service for writing text for an advertisement, but you can still search.
It can take about 50 USD to develop a banner. e. Everything is determined by the format and type of the banner. It also happens that for one marketing campaign you need to create several banners.
Please note that you will not be able to limit yourself to placing a banner or ad on the site and do nothing else, but only get an excellent result from your investment. The campaign needs to be tracked, especially on sites where clicks are the basis for calculation. The costs are as follows:
Option 1. Either you or an employee of your company monitors how the advertising campaign is progressing (changes bids, adjusts ads), on average 1-1.5 hours every day. In this case, estimate the time that you spend on these works, in monetary terms and, taking into account wages employee (or your own), calculate the costs of them.
Option 2. The campaign is controlled by the manager of the search engine itself. Usually, in this situation, the amount of payment for the services of the site increases, which must be paid once.
You yourself choose the option that suits you. You just need to consider each of them when forming your marketing campaign budget.
How to calculate your TV ad campaign budget
Step # 1. Establish what goals you would like to achieve. For example, increase sales by 15%.
Step number 2. Calculate how much money you can invest in marketing. Let's say advertisers have found that, taking into account the current cost of goods, it is rational for you to invest no more than 2% of turnover in advertising. In reality, it will look like this. If during the first quarter the company received 10 million rubles from the sale of goods, then the advertising budget for the next quarter will be calculated using the formula 10 million rubles x 0.02 = 200 thousand rubles. You can direct this amount for marketing activities in whole or distribute it between different channels communications (television, radio, Internet, etc.).
Step number 3. Ask the TV staff to calculate the budget for your ad campaign. Let's say the Mediagraphia service officially sells media resources of local TV broadcasters in more than 300 Russian cities. Ask the TV crew what the conditions are for posting on TV. You can easily tell them what goals you are pursuing (see step # 1) and the "upper" bar of the budget (see step # 2). Service specialists will compare the first and second indicators and advise what to do next.
Anyone who orders an advertisement on TV should remember that its price is determined not only by the planned channel for placement, but also by the city of display. The minimum cost of displaying advertising on the same channel (for example, TNT) in a city with a population of more than a million will be one, in a city with half a million to a million people - another, in small town- the third. And this is not surprising, since the potential coverage of advertising on TV directly depends on the population of the city, and the cost should be determined by the coverage.
Graphically, the dependence of the effectiveness of television advertising on the budget of the marketing campaign can be shown as follows:
How to use this data when forming a budget for an advertising campaign? It is clear from the graph that TV advertising has a visible effect only if the advertising budget is not less than a certain limit. We indicated this minimum effective budget as software (“threshold of return”). In each city, the return threshold is different, and if an advertiser invests in an advertising campaign in a particular city an amount less than the software, then it may well fall into the "red zone", that is, simply not to recoup the funds invested in marketing.
Media planning professionals who have advertised on TV repeatedly and over a long period of time different cities, can easily guide you in local rates. Therefore, when you contact the television staff and ask them a question about the optimal budget, they will tell you if the amount of funds you have allocated for the advertising campaign is adequate.
Events here can develop in two ways.
Option number 1. The "upper" budget limit you specified (step two) does not make it possible to arrive at the set results (step one). That is, your financial capabilities are beyond the “threshold of return”. Here it is better to either change goals, or choose a less expensive way of promotion like television.
Option number 2. The “upper” budget limit you designate relates to goals or even allows you to scale them. Here you approve the exact amount of the budget and ask you to calculate a specific media plan indicating the duration of the advertising campaign, the time the video is released during the day, as well as the desired indicators (reach, rating, audience share, etc.).
In order for each time your planned budget for an advertising campaign on TV to more and more correspond to the desired results, it is necessary to regularly evaluate the effectiveness of the placement. There is a common formula for such an assessment - ROI (from the English "return on investment" - return on investment).
Let's say you are selling bags that cost an average of 4,500 rubles. per piece The cost price of each is 2700 rubles. You invested 130 thousand rubles in TV advertising on one of the well-known channels of city A. As a result, the level of sales in comparison with the baseline indicators increased by 470 sales.
Let's make calculations gross profit with 470 bags sold. It is equal to the gross proceeds (4500 rubles x 470 pieces) minus the cost of the bags sold (2700 rubles x 470 pieces). So: 2 115 000 rubles. - 1,269,000 rubles. = 846,000 rubles.
Let's calculate ROI... This indicator is (if the calculations are made according to the above formula) (846,000 rubles - 130,000 rubles) / 130,000 rubles. = 5.51. That is, each ruble you invested in an advertising campaign on the selected TV channel brought 5.51 rubles. net profit.
The size of the advertising campaign budget and its planning for large and small firms
An American entrepreneur of the early twentieth century, John Vanamaker, once said that he knows that he is wasting half of his money on advertising purposes, but he does not know which half. This famous expression is still relevant today. Almost every company has difficulties in calculating the required advertising budget, and almost no one can determine exactly how much would be optimal, how to achieve one hundred percent return on advertising and how relevant the topic chosen by the advertiser is.
Large and small enterprises plan their advertising campaign budget in different ways. According to some experts, small budgets should be planned. Large ones, even in case of inaccuracy, achieve the desired results. The little ones have no margin for error, and therefore they must aim exactly at the target.
Indeed, in large organizations, the effectiveness of the marketing campaign does not greatly depend on minor fluctuations in the advertising budget. This is due to the fact that with significant investments in advertising, large firms achieve their goals, despite errors in the calculations of some stocks. That is, large advertisers can minimize the risks associated with budget allocation for advertising campaigns to a minimum. How? If they conduct long-term and wide advertising campaigns in the range of media involved. This picture is fully reflected by the phrase that 50% of the advertising budget goes nowhere, but no one knows which half it is, and it's good that there is enough money for everything.
For small and medium-sized businesses, budget allocation for advertising is a more serious issue. If the advertising budget is small, the company cannot afford large-scale promotions, since the possibility of suboptimal distribution of money inevitably arises. Indeed, the management of small businesses, forming an advertising budget, often relies on the principle of "minimum sufficiency", and when distributing money, focuses on "barter relations" and discounts depending on the amount of purchased advertising time (space).
If a company uses this approach, then, most likely, the funds invested in the advertising campaign will not bring it the desired result. Due to the lack of access to more promising marketing media (no funds to provide the second, "profitable" half), it will incur significant costs.
At the same time, mention should be made of a certain threshold for marketing costs (break-even advertising costs) associated with limited demand and the cost of advertising media, below which advertising costs cannot be. The closer the advertising budget is to this point, the more the company risks investing.
As a rule, this situation occurs in small businesses. Therefore, it is very important to optimize advertising costs and correctly distribute the marketing budget. The success of the company in the market depends on this.
Since television is the most expensive of all media, about 50% of the budget should be allocated to this channel. In second place in terms of the price of the press, about 1/3 of the budget is sent there. The remaining money is invested in radio advertising. There is another option - to get the maximum GRP with a fixed budget. Option number 3 - determine the required GPR of a marketing campaign with a variable budget.
In all these cases, all media are ranked according to GRP СРР (the best media have the lowest СРР). Further, from the entire list of media outlets, those that provide the necessary total coverage are selected. An amount is invested in each channel of communication Money equal to the effective frequency multiplied by the cost of one media outlet. The media plan is developed within budget.
You can also distribute the budget in other ways - it all depends on what the advertising campaign is for, on the advertised products, services, target audience, the situation in the advertising market, etc.
How to run an effective advertising campaign with a minimal budget
In economically successful countries, in which the market situation is stable, the cost of advertising purposes does not change often and not dramatically. All changes, as a rule, vary within certain values.
As for the size of the budget of an advertising campaign, as noted by the famous researcher in the field of marketing D. Starch, “although it is impossible to say exactly how advertising costs affect sales, the relationship between indicators lies on the surface. And large enterprises invest a lot of money in advertising, not just because they are large, but because, according to American experts, the largest advertisers compared to others get 50% more readers of their advertising for every advertising dollar invested. They spend 70% more on advertising per unit of sales and sell 170% more of those units. On average, for every dollar of advertising cost, they usually get about $ 3 of the product sold. "
Why and how economies of scale are managed is not clear. But there is reason to believe that they are related to one characteristic of customer behavior: large brands are ahead due to the fact that purchases, including repeat, exceed the average value. This phenomenon is called overpenetration.
According to Kenneth Mason, “A serious campaign budget does not translate into high sales figures. On the contrary, high sales figures cause an increase in the advertising budget. ”
According to the results of a study of packaged product brands conducted by J. WalterThompson, advertising costs to the total sales for such brands are usually equal to 4–8%.
These are just some of the indicators from different times, rather averaged. It should be remembered that by placing ads, you can always save a little.
For example, an advertiser can agree with the media or an advertising agency to buy a place with a good discount, which, due to certain circumstances, remained unoccupied before signing the issue for print or going on air. Such options turn up quite often. Of course, it is quite difficult to predict and plan advertising for them, but, most likely, this move is more than justified.
Savings can be achieved even when the media release new projects. Let's say a newspaper issues a new tab and most advertisers are wary of it. But if advertisement in this tab is justified, then it should be placed. In the first issues, they will definitely make a significant discount. The same applies to new programs on TV and radio.
Large advertising space or advertising air can also be purchased at a bargain price. Buying space for the entire campaign at once is more profitable than purchasing parts of it at certain time intervals.
You can avoid wasting money only if you choose truly effective media. Placing advertisements in several newspapers is more profitable than in one. But advertising on one media platform can give a better result than a campaign in several. The same applies to TV and radio commercials.
Often, a combination of large and small advertisements gives good results.
In local media, you can save your campaign budget by using ads in categories. It is often much cheaper and results in better results than modular ones. This is especially evident in test advertising materials, when a company checks how customers are responding to a new product offer.
We recommend not to skimp on the development of good media materials. The cost of a good ad is slightly higher than a bad one. But the effectiveness of the bad is much lower. It will need to be given more often, and the costs will rise disproportionately.
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