Building a 1997 Advertising Plan

By Scot Giambalvo

If you are like most small business owners, you probably fly by the seat of your pants when it comes to spending money on advertising. You justify advertising investments with "this feels right" or "that makes a lot of sense." When is the last time you broke out your budget while you were sitting with a salesperson, and based any part of your decision on that budget?

If you have always wanted to be organized when it comes to advertising, but just never had the time, here’s your chance. Following are suggestions for getting your "house of advertising" in order for the new year. If you follow these few rules, you should have absolute control over all the money you spend on advertising. You will surely be more confident and less stressed when it comes to making decisions about spending.

STEP 1: Sort your 1996 spending. (This may seem rudimentary, but most small business owners still don’t do it.) Prepare a store-all box (or file cabinet drawer) with 13 hanging file folders. Label with each month of the year, and call the 13th one "summaries." Collect every bill, invoice, statement, and scrap of paper that has to do with any advertising you may have done over the past year. Sort them by month. If you don’t keep absolutely everything, sit down with your partner(s) and your date book and go over each month, recalling what you did regarding advertising, and what you think you spent. You can also contact parties with which you have advertised (you may not keep great records, but they should), and they should be able to supply you with copies upon your request. The hanging files are not just for receipts. Put copies of ads you did, corresponding to each month, in those folders as well. This will make it far easier to plan for the coming year. When you’re done sorting, you should have a pretty accurate picture of what advertising you did in the past year. If possible, it is recommended that you do this for any prior years as well. You’ll thank yourself later.

STEP 2: Analyze. Look carefully at what you did. Big splashy newspaper ads, small church bulletins, radio commercials, TV, direct mail, your own flyers, consider everything. Write down these three factors and create your own effectiveness scale: What was the frequency or duration of the advertisement? What was the realized cost per impression? How pleased were you, and your company, with the advertising itself? These three factors are good starting points for determining whether or not to pursue that form of advertising in the future.

Frequency and duration equal the "life" of your ad. The more times your ad runs, the higher the possibility of getting a response. The longer your ad runs, the higher the possibility of getting a response. Except for one day events, it is generally better to invest in higher frequency, longer term forms of advertising. Even common sense would tell you that an eighth-page ad running eight consecutive times will probably generate a greater response than one full-page ad running just once. How much of your yearly advertising was "one time" and how much was "repetitive" in nature? In the future, try to do at least three in a row of anything.

Realized cost per impression equals the "actual", not perceived, number of exposures you can expect from an advertisement, divided into the amount you invested for that ad. For example, you placed a small ad in a monthly newsletter for $100. The circulation is 1000 copies. The publisher of the newsletter is within their right to tell you that the readership is close to 3000 if three people read each copy of that newsletter. This yields a perceived cost of just three cents per impression. If the truth is that not even all the people that receive the newsletter read it, and the actual number of readers in under 1000, then the realized cost per impression shoots up to over 10 cents per impression. Quite a difference. Pay attention to what is told to you. Remember, they may print X-thousand telephone directories, but they only work when they’re open.

Finally, your satisfaction counts. Contrary to popular belief, your opinion matters when it comes to advertising. As a matter of fact, it is proven that small companies that engage in regular advertising can boost morale and employee pride. Everyone loves to see their name up in lights. If you engage in advertising that isn’t particularly fantastic, but you really like the ad, your employees think it’s great, and they show their friends and family, then you’re getting an added benefit. Don’t discount the things you love to do, but do try to work in the first two factors.

Analyzing lets you assign a value or satisfaction level to your advertising. By doing this regularly, you will have better insight with similar situations in the future.

STEP 3: Chronicle your adventures. (Here’s the part that can be really interesting, especially if you have advertising materials from several years.) You’ve collected past ads and what you’ve paid for them. You’ve analyzed them and assigned some kind of relative value to each. Now, take out a date book and chart your spending for the last year, or years if you can. Chart by week, if possible. Write down where you agreed to invest in advertising, not when you actually paid for it (this is planning, not accounting). You will see trends begin to form. Most retail businesses spend more in advertising at the end of the year, for the holiday season. Health and fitness related industries spend more in the beginning of the new year. Does your company seem to spend in fluctuating degrees, according to season or holiday? Would knowing this information better prepare you for the coming year? You bet.

Here’s the revealing part. Once you’ve determined your spending on advertising for the year, chart it on a graph. Put the months of the year along the bottom, and the maximum you spent in any given month on the top of the left column. (See the inset chart.) Now, do the same for your gross revenue for the year. Your or your accountant should have those numbers readily available. It is best if you extend your graph upwards and create a different scale on the left-hand side for revenue, so that both charts are on the same graph, one above the other. Compare the two. Your spending on advertising should parallel your gross revenue for each corresponding month, to a lesser degree. If the chart for spending on advertising differs radically from the chart of gross revenue, then you may be missing the boat on times where advertising is very important.

STEP 4: Do the math. Plain and simple, the average small business should reinvest 3% to 5% of gross profits in advertising. To some, this may seem small, and others, ridiculously large, but the numbers don’t lie, and if you’re spending far less than this, you’re doing yourself an injustice. If you’re spending far more, you should be able to justify that investment with realized profits (profits attributed directly to that advertising effort).

STEP 5: Plan, plan, plan. Keep a new date book in the "Summaries" folder, along with your yearly advertising/gross revenue chart. Put all your important dates, including your company’s anniversary month, in that date book. Plan around the dates that you know are big revenue months for you. You don’t have to spend your whole 3-5% in each separate month, but don’t forego advertising one month to double up in another. Take the numbers from last year and pencil them in for next year, making adjustments as you feel necessary, according to the success of previous advertising efforts.

You’ll be amazed at your confidence level when making new advertising decisions. The salesperson sitting in front of you will be even more surprised. But don’t ever forget this golden rule, "If they need an answer today, it’s already too late!" You won’t get great placement, and you’re just an afterthought. Stick with advertising avenues that will help you plan well in advance. The best time to do this sort of yearly planning is during the last quarter of the year, so next year start in September, and be done by December.

If you are a new business, use these suggestions to chronicle 1997 and you will be well prepared for 1998.