Marketing Tips for the Growing Business
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Emerging Business Series
Copyright 1991, Frederick H. Rice. All rights reserved. No part may be reproduced, transmitted or transcribed without the permission of the author. SBA retains an irrevocable, worldwide, nonexclusive, royalty-free, unlimited license to use this copyrighted material.
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TABLE OF CONTENTS
THE MARKETING CONCEPT
EXPANDING YOUR MARKET
THE MARKETING PLAN
THE MARKETING BUDGET
THE ADVERTISING BUDGET
MAKING ADVERTISING WORK FOR YOU
MEDIA AVAILABLE TO ADVERTISERS
REFINING YOUR ADVERTISING FOR GREATER RESULTS
Marketing continues to be a mystery . . . to those who create it and to those who sponsor it. Often, the ad that generates record-breaking volume for a retail store one month is repeated the following month and bombs. A campaign designed by the best Madison Avenue ad agency may elicit a mediocre response. The same item sells like hotcakes after a 30-word classified ad, with abominable grammar, appears on page 35 of an all-advertising shopper tossed on the front stoops of homes during a rainstorm! The mystery eludes solution but demands attention.
This publication is devoted to the idea that your marketing results can be improved through a better understanding of your customers. This approach usually is referred to as the marketing concept.
Putting the customer first is probably the most popular phrase used by firms ranging from giant conglomerates to the corner barber shop, but the sloganizing is often just lip service. The business continues to operate under the classic approach -- "Come buy this great product we have created or this fantastic service we are offering." The giveaway, of course, is the word we. In other words, most business activities, including advertising, are dedicated to solving the firm's problems. Success, however, is more likely if you dedicate your activities exclusively to solving your customer's problems.
Any marketing program has a better chance of being productive if it is timed, designed and written to solve a problem for potential customers and is carried out in a way that the customer understands and trusts. The pages that follow will present the marketing concept of putting the customer first. Marketing is a very complex subject; it deals with all the steps between determining customer needs and supplying them at a profit. In addition to some introductory material on marketing, this publication includes practical material on the marketing approaches to budgeting, layout design, headline writing, copywriting and media analysis. You have to spend money on marketing; the purpose of this publication is to help you get the most for your money, or the most bang for the buck.
THE MARKETING CONCEPT
Unfortunately, there is still a misunderstanding about the word marketing. Many people, including top executives, use it as a sophisticated term for selling. Marketing representative is commonly used in ads to recruit salespeople. Actually, marketing is a way of managing a business so that each critical business decision is made with full knowledge of the impact it will have on the customer.
Here are some specific ways in which the marketing approach differs from the classic, or sales, approach to managing a business.
In short, under the classic (sales) approach the customer exists for the business, while under the marketing approach the business exists for the customer.
The marketing concept is a management plan that views all marketing components as part of a total system that requires effective planning, organization, leadership and control. It is based on the importance of customers to a firm, and states that
In order to conduct a successful marketing program you must be able to answer the following questions:
1. What type of business are you in (manufacturing, merchandising or service)?
2. What is the nature of your product(s) or service(s)?
3. What market segments do you intend to serve? (Describe the age, sex, income level and life-style characteristics of each market segment.)
4. What strategies will you use to attract and keep customers?
Persuasion (personal selling) ______________________________
5. What is your unique selling proposition (USP)?
6. Who is your competition, and what will you do to control your share of the market?
To use the marketing concept effectively in a growing business, you should
Market research must be used in each of these six steps to help define your business for your customer's interests, not your own. It is the process of learning what customers want or need and determining how to satisfy those wants or needs. It is also used to confirm whether the customer reacted to a marketing program as expected. The benefits of market research include
The dilemma for the small business owner is that, properly done, market research is quite expensive, takes time and requires professional expertise. Acquiring all the necessary data to reduce the risk to your venture may cost so much and take so long that you may go out of business. The answer is to find a quick and inexpensive way of getting enough data to help you make the right decision most of the time. Some obvious pitfalls are
If you have a limited budget, develop the skills to hear what your customers and potential customers are telling you. Some techniques worthy of consideration are
EXPANDING YOUR MARKET
When expanding your business, explore all the strategic alternatives available to you. Select the one that makes the most sense and then prepare a marketing plan on how to implement that strategy.
When expanding your business, explore all the strategic alternatives available to you. Select the one that makes the most sense and then prepare a marketing plan on how to implement that strategy.
Expansion of Present Location
Learn to spot telltale signs of saturation in your present facilities. Grocery stores, for example, keep track of abandoned carts. When a shopper fills a cart and then leaves because the checkout line is too long, the grocer should realize that there is a serious problem. If you are experiencing bottlenecks, think about adding to your facilities. Determine how many additional customers you could service by building up or out and compare the additional sales to the cost of construction and temporary inconvenience.
If it appears unlikely that you can draw more customers to your present location (at a reasonable cost), consider moving closer to your customers. A location on Main Street, in a shopping mall or an industrial park may cost you more in rent, but if you gain exposure to new customers it may be a sound investment.
Reaching the most customers may require opening several outlets at convenient locations throughout your market area. In addition to the added costs of real estate and multiple inventories, carefully analyze the cost and availability of labor and training, and the cost of hiring a manager for each location and installing an efficient monitoring system. Your advertising dollars may become more efficient since your radio, TV and newspaper ads cover your entire market. The multiple locations will make it more convenient for customers to find you.
Downward Vertical Integration
If your profits depend on the prices you pay for raw materials, your most profitable growth strategy may be to buy a farm, mine or processing plant to produce your own materials. This strategy also may make sense if your product quality is based on a consistent supply of goods at an acceptable quality level.
Upward Vertical Integration
Most small manufacturing businesses that start are forced to conform to the existing marketing channels and sell through established manufacturers' representatives, jobbers or dealers who have access to the market. As you grow, however, it makes sense to analyze your distribution system to see when you can improve your situation by hiring your own sales team, contracting with distributors, buying a truck fleet, opening retail stores or factory outlet stores or doing anything else you need to do to get closer to your market. Remember, every time someone gets between you and your customer, it either reduces your revenue or increases your operating costs. Also, it impedes the provider-consumer communication that is essential to a good marketing program.
Exporting Goods or Services
Literally, there is a world of markets available to you if you are willing to learn how to get started. The U.S. Department of Commerce's U.S. and Foreign Commercial Service and the U.S. Small Business Administration can help you explore potential foreign markets for your product or service.
When you are looking for new customers, don't ignore tourists who could be attracted to your area. Work with your local convention and visitors' bureau to determine the impact if you cooperate with local tourist attractions or hotels and restaurants to get more people to visit and spend money in your community.
Franchising as a growth strategy offers advantages if you are short of expansion capital, yet have a concept that can be packaged and taught to people who wish to invest in a business. The legal problems can seem overwhelming, but with a good plan and competent advice, you can develop a franchise system that could prove extremely profitable.
If you have a technical process or service, you may be able to find people in other markets who would be willing to pay you a royalty for the rights to use your process. Perhaps you could sell raw materials, secret ingredients, special tooling or promotional materials to your license holders.
Selling directly to your customers is one of the oldest and most effective methods of marketing. Today, there are few door-to-door salespeople; most direct marketing is seen in party plan selling and through mail, TV and magazines. Direct selling requires good selection and training techniques and a commission plan plus liberal incentives.
If you have a good list of prospective customers, telemarketing may be an effective method of informing them about your business, qualifying them for sales follow-up or selling your product or service to them. Professional firms can be used, or you can set up your own telephone room. Here again, recruiting and training are critical because only a few people can do telemarketing well.
One method of reaching out to new markets is to sell your product under the name of your distributor or retailer. However, you cannot build customer or brand loyalty because the consumer does not know you are the producer. Another potential problem is that, should the owner of the label find a cheaper producer, you may be out of the business.
THE MARKETING PLAN
The marketing plan is a problem-solving document. Skilled problem solvers recognize that a big problem is usually the combination of several smaller problems. The best approach is to solve each of the smaller problems first, thereby dividing the big problem into manageable pieces. Your marketing plan should take the same approach. It should be a guide on which to base decisions and should ensure that everyone in your organization is working together to achieve the same goals. A good marketing plan can prevent your organization from reacting to problems in a piecemeal manner and even help in anticipating problems.
Before your marketing plan can be developed, research must give you the basic guidelines: for whom you are designing your product or service (market segmentation), and exactly what that product or service should mean to those in the marketplace (market positioning). Below are some guidelines to help you develop a marketing plan to support the strategy you have selected for your organization.
Your marketing plan should recognize the various segments of the market for your product or service and indicate how to adjust your product to reach those distinct markets. Instead of marketing a product in one way to everyone, you must recognize that some segments are not only different, but better than others for your product. This approach can be helpful in penetrating markets that would be too broad and undefined without segmentation. No matter what you are making or selling, take the total market and divide it up like a pie chart. The divisions can be based on various criteria such as those listed below.
This is the study of the distribution, density and vital statistics of a population, and includes such characteristics as
This is the study of how the human characteristics of consumers may have a bearing on their response to products, packaging, advertising and public relations efforts. Behavior may be measured as it involves an interplay among these broad sets of variables:
Statements consumers make about themselves through conspicuous consumption can be put to good use by research people who read the signals correctly. By studying behavioral variables, such as a person's use of time, services and products, researchers can identify some common factors that can predict future behavior.
ZIP Code Analysis
In his book, The Clustering of America,* Michael J. Weiss described the research efforts of the Claritas Corporation. In 1971, company president Jonathan Robbin started with the idea of analyzing the 254,000 U.S. census blocks and 36,000 ZIP code areas to find out what types of people live in each. Based on the theory that birds of a feather flock together, he reasoned that, as neighborhoods develop, the people who move in are attracted by a set of common life-style factors in a pattern called social clustering. He analyzed each ZIP code according to hundreds of characteristics under the headings of social rank, mobility, ethnicity, family life cycle and housing style. He found 34 key factors that accounted for 87 percent of the variation among U.S. neighborhoods. His computers then assigned each ZIP code to a cluster type and ranked them from highest to lowest standard of living (see Table 1).
Clustering of U.S. Neighborhoods According to Standard of Living
Source: PRIZM (Census Demography) Claritas Corporation 1987.
a = ZIP quality is a socioeconomic ranking based on income home value education and occupation a kind of pecking order of affluence. Although jobs have no social status per se they're rated in a complex weighting system on the basis of how much education and training they require.
b = Because the upper census limit for home values is $200,000+ the figure for Blue Blood Estates and Urban Gold Coast are estimates.
The important thing to recognize about the 40 groups in Table 1 is that each spends its money in particular ways because the people in that neighborhood have common values. As you move up the zip quality scale, it is obvious that people have more money to spend, but unless you have what that group thinks is important or desirable, they aren't going to buy. And, more important, if their friends and neighbors don't like what you have to sell, your chances of making the sale are pretty slim.
A sample analysis of the data in Table 1 follows. The average American spends 2.6 times his or her annual income on a home (calculated by dividing the median home value for each cluster by the median income). According to Table 1, the Bohemian Mix cluster spends almost twice the average on housing because, while its members earn less money than neighboring clusters, their higher education level gives them the confidence and desire to invest in a larger house. The business owner must learn how home purchase relates to all other purchases for each cluster and how all purchases fall into a pattern. The pattern has to do with how the people in each cluster place values on and gain acceptance and pleasure from purchases, leisure activities and memberships that contribute to the life-style of that particular neighborhood.
In 1978, Claritas launched PRIZM -- Potential Rating Index by ZIP Markets -- which refined the 40 rankings by cross-referencing with magazine subscription lists, new car buyer lists, TV viewing diaries, and warranty card, voting records and sales records for thousands of products and services. With this new level of data sophistication, marketing people obtained an amazingly accurate picture of who lives in the 40 types of neighborhoods.
The largest single cluster, for example, is No. 10 -- Blue Chip Blues. These are the top-of-the-line blue-collar folks who have parlayed a high school education and skilled-labor jobs into suburban comfort and active leisure lives. By comparing this cluster's life-style expenditures with those of other clusters and the national average, we can cumulate data such as those reflected in Table 2.
Life-Style Expenditures of Blue Chip Blues Cluster
Source: SMBR and MRI data bases Claritas Corporation 1987.
*Index numbers indicate percentages of users in each cluster indexed against the national average. An index of 100 equals the U.S. average for that category. An index of 300 means the cluster has three times the national average for that category.
Such information is indispensable to direct mail marketing firms, but almost any growing business can benefit from better information about past and present customers. Start by recording ZIP codes from checks you receive, ask your customers to write ZIP codes on your charge card slips and categorize your cash sales by ZIP code. Such information gathered over time will give you clues to such questions as
The real key to successful marketing is to identify the market segments you wish to reach and then tabulate the results of your marketing efforts until you find out what works best for you -- and then keep repeating your successes.
You must realize that your product or service cannot be all things to all people. Very few items on the market today have universal appeal. Even when dealing in basic commodities like table salt or aspirin, marketing people have gone to all sorts of extremes to create brand awareness and product differentiation. If your product or service is properly positioned, prospective purchasers or users should immediately recognize its unique benefits or advantages and be better able to assess it in comparison to your competition's offering. Positioning is how you give your product or service brand identification.
Positioning involves analyzing each market segment as defined by your research activities and developing a distinct position for each segment. Ask yourself how you want to appear to that segment, or what you must do for that segment to ensure that it buys your product or service. This will dictate different media and advertising appeals for each segment. For example, you may sell the same product in a range of packages or sizes, or make cosmetic changes in the product, producing private labels or selecting separate distribution channels to reach the various segments. Beer, for example, is sold on tap and in seven-ounce bottles, twelve-ounce cans and bottles, six-packs, twelve-packs, cases, and quart bottles and kegs of several sizes. The beer is the same but each package size may appeal to a separate market segment and have to be sold with a totally different appeal and through different retail outlets.
Remember that your marketing position can, and should, change to meet the current conditions of the market for your product. The ability of your company to adjust will be enhanced greatly by an up-to-date knowledge of the marketplace gained through continual monitoring. By having good data about your customers, the segments they fit into and the buying motives of those segments, you can select the position that makes the most sense. While there are many possible marketing positions, most would fit into one of the following categories:
THE MARKETING BUDGET
Resource allocation is a critical part of any marketing plan. To simplify budget preparation, it is recommended that investments in labor, material and services be broken down into the five Ps of marketing:
Each of the five Ps represents an investment in dollars, materials and services. We can represent this as a system of pipes consisting of a tank of money, which represents the total marketing budget, a main pipe through which the dollars flow and five valves that control the flow of money to each of the five Ps (see Figure 1, page 12). The concepts of market planning, segmentation and positioning are shown as filters. Budgeting is the process of setting the valves to meet the needs of each marketing task for each segment and then monitoring the results over time to make sure you remain on target.
As your market segments change, you will have to reset the valves. The important thing is to have in place an effective marketing research system that gives you the confidence to move in the right direction for the right reason.
FIGURE 1 -- A MARKETING MODEL FOR SMALL BUSINESS
The Product (or Service)
When consumers think about using a product or service, they consider its advantages and disadvantages. In other words, they ask, What's in it for me? Therefore, it is not enough to define your product and its features; other questions must be answered. Think first of your perception of your product or service and then find out how your customers see it. Ask yourself questions such as
There are a number of pricing strategies you can use to achieve your growth goal. Each has the potential of producing a profit, and most are tied to the critical relationship of price-to-sales volume and stock turnover. Some strategies you may want to consider are listed below.
This refers to the practice of charging high prices for the purpose of maximizing profit in the short run. It works best when
The real disadvantage of skimming is that it attracts competition. Your competitors will soon figure out what you are up to, and the high profit potential will encourage them to copy you. They may produce cheaper versions of your product or style, referred to as knockoffs in the market. Once you have meaningful competition on price, your skimming days are over and you run the risk of ending up with a warehouse full of products that cannot be sold at any price.
The opposite of skimming is to introduce your product at such a low price that you will quickly gain a large share of the market. The purpose is to discourage competition. However, eventually you will have to raise your prices to start making some profit and, when you do, you will learn much about customer loyalty.
Buying a Market Position
A variation of penetration pricing is to buy your way into the market with free samples or heavy coupons, for example, 50 cents off on a 69-cent purchase. This tactic is usually used by big companies because it takes considerable financial backing and it may be six months or more before it starts to pay off. Small marketers can use it to the degree they know what they are doing and can control the process. Frequent follow-up is important to ensure samples are not going to professional collectors but are reaching potentially strong customers.
This refers to promoting a few items at a sizable reduction to attract customers. The idea is that the increased traffic will result in greater sales of your regular-priced merchandise. The reductions have to be on recognized brands and items purchased frequently enough so customers know the prices and can recognize the savings. You must keep switching leader items -- people are not going to buy catsup four weeks in a row regardless of its price. The danger is that you may develop a following of cherry pickers who will breeze into your store, scoop up the specials and buy nothing else.
Multiple Unit Pricing
You can increase the size of your individual sales by offering a meaningful
discount for larger purchases. A liquor store usually will offer a discount
or throw in a free bottle of wine when you buy a case. The same idea applies
to the baker's dozen, a discount on a set of tires or selling beer and
soft drinks by the pitcher. This is a good technique for building customer
goodwill, but you will not see your customers as often. The trade-off,
of course, is that you save time and money on containers and packaging,
save time by writing up fewer sales and, perhaps, can make your delivery
service more efficient by selling by the truckload. Variations are two-fors,
six-packs, cheaper by the
Suggested Retail Pricing
This is the practice of selling at prices set by your suppliers. It is convenient because many product lines are available prepackaged and prepriced. However, you lose flexibility and must live with a set percentage markup. (To combat this disadvantage, some suppliers offer two-for-three options using the retail price). Because suggested-retail or retail-price-maintenance plans are illegal in some states, the practice usually is a loser. Using a slightly different strategy, Panasonic published a minimum retail price list showing a higher average retail; some stores use such gimmicks as compare at or nationally advertised at to imply that the official price is at a certain point.
The discount store usually offers lower prices as a trade-off for spartan interiors, lack of sales help and the efficiency of central checkouts. These stores typically work on a 35 to 38 percent markup compared to 42.5 to 45 percent for a department store. Since discount stores depend on the efficiency of greater volume to cover operating costs, they must maintain, or at least promote, good prices.
This pricing is calculated by adding the costs of the product or service plus a flat fee or percentage as the margin of profit. During inflation, you must keep track of your costs to make sure that you are charging enough. In many business lines, owners have come to realize that when they replace their stock, the wholesale price has often risen above their retail price. If they do not raise prices rapidly enough, they are faced with diminishing inventories at a constant dollar investment or with having to invest more money to restock their shelves at the constant level.
This refers to the practice of setting the retail price at double the cost figure, or a 100 percent markup. It is most common with jewelry items and in specialty shops, high-ticket fashion shops and department stores. Typically, the merchandise is subject to drastic clearance markdowns on items that are slow sellers or held past the season.
This is the technique used by most retail stores of stocking merchandise in several different price ranges. A hardware store, for example, may carry hammers in good, better, and best categories at $3.49, $6.49 and $9.98, respectively, and a professional model at $17.95. The theory is that people buy products with different uses in mind and with different expectations for quality and length of useful life. If you do not carry a range of prices, you may lose the customers who cannot find the product at the right price. Price lining simplifies buying and inventory control because you buy only for the price levels that you know your customers will accept and eliminate those goods that fall outside the levels you want to carry.
Here is where you copy or follow the prices set by your competition. Based on your service image, you can set your prices equal to, above or below those of your competition. This strategy requires constant vigilance by reading the ads and shopping your competition. It is a more passive technique because you're always following your competitors. Chances are your more aggressive competitor can make better purchases than you. A variation of this is the we-won't-be-undersold routine, where you offer to meet or beat the prices of all your competitors.
Many manufacturers offer price discounts or dated billing as incentives to buy early. This is important to manufacturers because of production planning and the lead time necessary for ordering raw materials. For the retailer, the same principles apply; also, off-season specials may be a way to profit in business on a year-round basis. When you sell at a lower price to get the early sales, you may be borrowing from later full price sales. On the other hand, anyone who has tried to buy snow tires during the year's first snowstorm knows the extent of delivery problems. In this case, early sales at a lower price would have allowed the merchant to serve the customers better and to capture sales that may be lost due to limited service facilities.
Price Is No Object
This refers to certain marketing situations in which the quality of the product or service is far more important than the price. If you need a kidney transplant, for example, you are not going to shop around and haggle over price. And even if you do press the doctor, he probably will quote you a range with a $5,000 spread rather than giving a specific number. The same is often true with high-ticket fashions and jewelry. Using the same psychology, expensive automobiles and boats are not sold on price. They may use a starting at or base price to get people interested, but the prices of the options are usually in very small print. The extreme of this attitude is that if you have to ask the price you probably cannot afford the item anyway.
Where the product is located when the potential customer is exposed to a buying opportunity can often mean the difference between success or failure. The distribution plan for a given product may be determined by several of the factors listed below.
How the customer uses the product after purchase also can determine place characteristics.
For most small businesses, especially those involved in retail, finding the best location at the lowest price becomes an important consideration. You can draw customers to a poor location but the cost of advertising is often prohibitive. You should learn how much money you have to pay for the better location and see how that compares to the cost of drawing the same number of customers to the poorer location. Do not overlook parking, public transportation, quality of the neighborhood, sign restrictions, lighting, traffic flow and other factors that determine your store's convenience and safety.
Perhaps the most versatile of the five marketing Ps is promotion. It covers all phases of communication between the seller and the potential customer. It is versatile because a change in budget, media or target audience can be made quickly. Promotions also can be effectively changed for specific market segment efforts. Major promotional concerns include the following.
Because promotional costs can originate from several sources, it is vital to establish a written budget and closely monitor actual costs. The budgeting procedure is simplified if separate budgets are prepared for advertising and promotional activities. Sales goals in dollars, units or both are usually the basis for promotional budgets.
Selling when the consumer wants to buy is a fundamental factor in the marketing concept. Promotional efforts, whether in-store or through mass media advertising, should be timed to coincide with maximum seasonal or cyclical demand.
Distribution of Promotional Efforts
All advertising and other promotional activities should be in tune with the firm's stated position in the marketplace. This suggests that not only advertising themes but also media selection must be based on building and strengthening that position.
A full discussion of these media is included under Media Available to Advertisers.
In summary, the importance of promotion in the overall marketing strategy suggests you devote time to its written plan and constantly monitor the plan's performance. Be creative but avoid cuteness. Stick to the benefit approach, and your customers will respond.
Your business's success will depend on your ability to persuade others to take actions that will help them while also helping you. This is referred to as a win-win situation. Both parties in the transaction must receive a benefit in value or in satisfaction. There are many buying motives that may bring a customer to your business:
The key to successful selling is to determine which motives brought the customer to you and then develop a sales presentation that will convince the customer that you and your product can meet those needs. This process can be broken down into a series of steps:
The above process may be inefficient in many selling situations. The genius and creativity of advertising is its flexibility in preconditioning the customer and answering some objections. Certainly your reputation, attitude and the atmosphere of the selling situation can do much to alleviate fears or concerns in the mind of the customer. Your best prospect often is a satisfied customer or the friend or relative of a satisfied customer.
For many products or services, direct mail and telephone selling can be used to complete the sale or to qualify prospects for a personal follow-up.
Motivation is an essential ingredient in persuasion. You and your employees
must maintain a positive mental attitude. You must learn to sell yourself,
your company and your product. And your attitude must be one of serving
the customer first, with the realization that your success depends completely
on your ability to serve the customer.
This section will concentrate on how to prepare a written, detailed advertising budget. This differs from a budget that details specific dollar amounts for anticipated receipts and expenditures, usually handled by a certified public accountant (CPA) or other financial advisor. These professionals seldom do more than allocate a specific amount for advertising and treat it the same as rent -- i.e., as an annual expense item.
Returning once again to the marketing approach, a sound advertising budget should be based on consumer habits and preferences. Unfortunately, most retail advertising today appears as an attempt to solve a store's problems. Promotions reading We Are Overstocked, We Must Reduce Inventory and Our Loss Is Your Gain are commonplace and do very little to stimulate the reader to action. The first requirement of successful advertising for the retail store is to work toward solving the consumers' problems. This publication's approach to preparing an advertising budget will, therefore, be based on the following assumptions:
The complete advertising budget must provide specific written answers to each of these questions:
How Much Should I Spend?
Since the cost of advertising must be paid from sales revenue, it should always be expressed as a function of expected sales dollars. The two most popular approaches are
This section will concentrate on the second approach because it allocates advertising costs for all product lines. Although fewer than 50 percent of the items carried by most stores are never advertised, their sale is the direct result of customer traffic created by the advertised items and, therefore, all merchandise sold should contribute to the overall cost of advertising.
Setting Sales Goals
In both approaches, the first step in preparing an advertising budget must be setting sales goals. Just how many television sets do you expect to sell in a month, a season, a year? Or what will the retail sales volume for the entire store be in each time frame?
Setting sales goals can be a guessing game, but basic research into past sales performance, the quantity and quality of competition, the economic forecasts for your area and characteristics of the population in your market area can help make the guess an educated one. The U.S. Department of Commerce publishes statistical information about consumer expenditures, retail sales and expense statistics. An hour or two spent in the government publications section of your local public library can pay big dividends. Another source for statistical data is the business association that serves your industry.
Although the first sales goal you set will be an annual figure, monthly sales goals can never be determined by merely dividing the annual figure by 12 months. One of the certainties of marketing is that consumer habits change constantly. Yet those very changes make the consumer predictable since there is a predictable pattern of consumer desire for almost every known commodity. While this consumption pattern may vary from month to month, the annual pattern repeats itself with remarkable consistency. The chart shown in Appendix B will give you an idea of the variation in annual sales patterns for just a few stores. For example, while the average retail jewelry store can expect 23 percent of its annual sales volume in December, the lumber yard or building materials store can expect only 8 percent of its annual sales during the same month. The figures on the chart represent average figures from stores of all sizes and from all parts of the United States. They have been recorded and averaged for five consecutive years, so your store's actual percentages may vary slightly.
Your next step after setting an annual sales goal is to determine what percentage of that annual volume you should anticipate for each calendar month. You may elect to use the national figures for your industry, but using your actual sales figures will give much more reliable numbers. To determine what percentage of your annual sales were achieved in any given month, merely divide that month's dollar volume by the annual dollar value and multiply that amount by 100. Your monthly share of sales percentages will be even more accurate if you compute it for each of your last three or four years of sales and then average the percentages for each month. When you arrive at your monthly percentage of annual sales, you can provide a picture of the cyclical nature of your business by plotting the percentage figures on the graph provided in Appendix C.
The worksheet in Appendix D will be the first step in preparing a written advertising budget for your firm. Fill in the dollar volume for your store for the last year in the upper right-hand corner. Next, enter the annual sales goal you project for the coming year. Remember to consider elements such as inflation, the condition of both the local and national economies, any major changes in your competition and changes you may have made in your store (e.g., expansion, remodeling or the addition of new product lines or brands). Annual sales estimates often are made on a sales-per-square-foot basis, then converted to gross sales by multiplying the square foot index by the total number of square feet devoted to selling space. Using industry indices, you can calculate your share of the market by comparing your sales with estimates of your competitors' sales.
The third item required at the top of Appendix D is the percentage of gross volume you plan to invest in advertising.
Appendix E shows the average percentage invested by 74 different industries including retail and service establishments. Remember, these published numbers are average figures; your location, competition, reputation and market area may dictate an adjusted percentage of sales for advertising. If your firm is new, you may want to double the average percentage figure during the first year just to establish yourself.
By multiplying the projected volume for the planned year by the percentage allocated for advertising, you will arrive at the dollar amount of the advertising budget for the year. You have answered the question, How much should I spend?
When Should I Spend It?
Although you know how much money you plan to invest in advertising, your budget also must indicate how much of that amount to spend during each of the 12 months. Do this by transferring the figures you plotted in Appendix C to the first column of Appendix E -- these are the same figures. Then multiply the projected volume for the year by the percentage figures for each month and insert the results in column two of Appendix D. You now have refined your annual dollar sales goal into a dollar goal for each calendar month.
The final column in Appendix D can be completed in one of two ways. You can multiply the percentage figures in column one times the projected total advertising budget or multiply the projected monthly sales figures by the annual advertising percentage rate. Either procedure will give identical figures for the projected monthly advertising budget column. The completed Appendix D will give you a written guideline that includes your monthly sales goal and monthly advertising budget. If your business is a one-product type, this simple worksheet could serve as your total budget preparation guide. You should regularly monitor your firm's actual performance against these projected goals, and when there appears to be a deviation from the goals, reevaluate the original goals and perhaps adjust them upward or downward.
Where Should I Spend It?
Many firms, especially in the retail field, cannot settle for only the data in Appendix D since, over the years, they may have added several departments with their own sales patterns. The worksheet in Appendix F is designed to target monthly advertising dollars toward the department or item where they will be most productive. Preparation of this worksheet begins with another review of your firm's past sales records. The left-hand portion of the worksheet provides space to record the relative monthly importance of each of three departments. Make up a sheet to provide for the number of departments in your firm and divide the total volume for each month by each department's volume and multiply by 100. This will give you the percentage importance of each department to the total store volume. The totals for all the departments should equal 100 percent for each month.
Figures for the total ad budget column are merely transferred from the third column in Appendix D. Since being unpredictable is perhaps the most predictable of all human traits, we recommend that you build in some flexibility. In this example, the worksheet calls for saving 10 percent of each monthly advertising budget as a reserve fund. This fund will not be used during the year but will be held back for contingency use. It will be nice to have if a 12-inch snowstorm hits the day after your full-page ad appears!
The net media budget column is completed by subtracting the reserve figures
for each month from the numbers in the advertising budget column. Finally,
complete the columns labeled Departments A, B and C by multiplying the
percentage figures on the left side of the page by the figures in the
net media budget column. For example, if Department A in your store did
40 percent of the store's total volume in January, you would multiply
the net media budget figure for January by 40 percent and enter that figure
under Department A on the right side of the worksheet. When this worksheet
has been completed, you will have a written guide telling you when each
advertising dollar should be spent and on which department (or item) it
should be spent. If you prepare and follow the
What Media Should I Use?
The final step in preparing your advertising budget is to allocate advertising dollars to specific media by using the worksheet in Appendix G, the Media Budget Allocation Form. The worksheet provides a special column for fixed advertising expenditures. Because the monthly costs of advertising in the Yellow Pages, other directories and outdoor advertising signs are fixed costs, they should be subtracted from your net media budget before the remaining dollars are assigned to newspapers, radio stations and other media. The advantage of completing this worksheet is that you will have your total advertising expenditure for an entire year on one sheet of paper.
Preparing these worksheets may seem tedious, but the effort will be well worth your time. If you have a computer, create the budgeting format on your terminal. Automating this procedure will provide a system for tracking the actual sales performance against your targeted goals. Remember, when actual performance deviates from projected performance over a two- or three-month period, it is time to seriously reevaluate the original sales goals. Performance below projected goals, if it continues, will increase the percentage of sales your advertising is costing while continued sales performance above projected goals may justify higher advertising expenditures.
Whether or not you use the forms presented here, take the time to prepare a written advertising budget for your firm that is based on future sales goals rather than on past years. You will notice the difference where it really counts -- in profitability!
MAKING ADVERTISING WORK FOR YOU
Appeal to Consumers' Needs
Human behavior, according to psychologist Abraham Maslow, is always the result of one or more of five basic needs or motivating forces.* Maslow classified these in a sequence he refers to as the hierarchy of human needs.
His theory is that until a lower-ranking need is satisfied there is no desire to pursue a higher-ranking need. Below are the five human motivators, beginning with the basic or lowest-ranked need and continuing to the highest.
The advertising practitioner will do well to become familiar with the Maslow theory of human motivation because it stresses once again that motivation is always an individual act. The most your advertising message can hope to do is to present an appeal strong enough to stimulate action toward satisfying one of the basic human needs.
If there is one rule that will be most helpful in preparing effective advertising, it is this: The message must put the desire of the potential customer before the advertiser's desire. Please read that one more time! The rule may sound like a simple one to follow, but frequently advertising messages take the form of a plea to customers to respond and solve the advertiser's problem.
Visualize the felt tip pen you probably use every day. When it was manufactured the raw materials were converted into these product features: a plastic barrel, a plastic cap, a supply of ink, a felt tip and a metal pocket clip. These are the total product points in the felt tip pen. What's amazing is that none of those things have anything to do with why you will buy the pen! You buy any item only for how it will benefit you. The key, of course, is benefit. Effective advertising must promise the consumer some benefit he or she will receive after buying the goods or services advertised. Product features should be cited only to make the promised benefits believable. Here is an example of how you can advertise the felt tip pen by promising benefits and then using the product features to make promised benefits believable.
Although this technique appears logical, many advertisements ramble on and on with all the product features while the potential customer asks, What will it do for me?
Using the benefit approach can be simplified by preparing a worksheet
on which each product you plan to advertise is dissected into (1) the
benefits the buyer will enjoy by owning this product and (2) which product
features will help convince the potential buyer that the promised benefits
are likely to
Techniques in Presenting the Advertising Message
The buying decision is seldom a purely rational one -- emotions influence your behavior. As you explore various techniques for presenting your advertising message, do not ignore psychological and emotional appeals. For example, red, a strong color suggesting excitement, increases reader interest when used in sales ads. While the principles discussed here relate most specifically to print ads, they can apply to all media.
Determining Layout Shape and Design
Behavioral scientists have determined that of all the rectangular shapes, the vertical rectangle of approximately three units wide by five units deep is the one the public is exposed to most and, therefore, the one people find most comfortable. The advertising world refers to this shape as the golden rectangle of layout. It is believed that an advertising message receives higher readership when presented in this size.
In Appendix H is a drawing of this three-unit by five-unit shape. Notice the dot on the vertical center line, one-third of the way from the top of the ad. This is called the focal point. It is the point to which the eye is attracted first, at which the eye enters the ad. Next, note the wavy line extending from the upper left-hand corner of the ad to the lower right-hand corner. This reverse s is the path that the eye follows, called the gaze motion path. Your objective should be to reinforce the ease with which the eye can follow this path. How you place elements of your ad can invite the reader's eye to follow this path or to leave your ad completely before getting your message. If your artwork, for example, is located near the curves in the gaze-motion pattern, it will invite your reader to leave the ad at that point and turn the page. The gaze motion also reinforces the principle that the best place for a headline is at the top of the ad where the reader starts the visual journey through the ad. The worst place for your logo is the lower left-hand corner; the eye prefers to leave the ad at the lower right-hand corner, so your logo will have greater impact there.
The dotted lines divide the ad into vertical and horizontal halves to stress balance in your layout. Formal or symmetrical balance occurs when the elements on the left side of the vertical center line are in the same position and of the same size or density as corresponding elements on the right side. This formal balance is not as interesting to the eye as informal or asymmetrical balance, obtained by balancing weights on one side of the center line with weights of varying densities at greater or lesser distances from the center line on the other side of the ad. Visualize ad balance as being similar to a see-saw where weight near the outer end of the board can be balanced by heavier weights nearer the fulcrum on the other end of the board. In designing your ad layout, place illustrations, copy blocks, headlines and other elements so they appear balanced without formality.
Communicating Desired Layout to Printer
In submitting any printed advertising message to the media, the only way to ensure that your ad looks the way you intended is to provide adequate instructions. Layout means blueprint to the typesetter or printer. Your layout should be a full-size replica of what you want the finished advertisement or brochure to look like. Here are some guidelines to use in preparing layouts.
1. A layout should accurately indicate where all parts of the completed message are to be located with respect to the borders. This must include the location and approximate, if not actual, dimensions of all artwork.
2. There are five parts to a comprehensive layout:
In addition to these key elements, your layout also should contain instructions, written outside the ad borders and circled. A line from an instruction circle may lead to the specific area within the ad if it helps clarify instructions. Instructions should include the dimensions of the ad stated in inches (width depth). For a newspaper ad, the width should be stated in columns and the depth in inches or lines, depending on the paper's policies. Other instructions can include the insertion date, reference to the enlargement or reduction of artwork, the names of typefaces desired and special typesetting requests. Remember, your layout will serve as the blueprint for your ad. The finished product can be only as effective as the original layout. The copysheet that accompanies your layout also should contain the size of the ad and the insertion date. Use a paper clip rather than stapling the copy sheet to the layout. This will prevent tearing when the two sheets are separated for production.
Figure 2 -- JUSTIFIED AND RAGGED RIGHT MARGINS
Strengthening the Elements of Your Advertisement
Since the headline is the first contact your readers have with your message, it must reach out to them. Promise them a benefit. Tell them how they will be better off if they read the rest of the ad. Use action verbs. Save ten dollars is a stronger heading than Savings of ten dollars because of the verb.
Headlines can be classified into the following five basic types; effective headlines frequently combine two or more of these kinds.
This form tells the reader something he or she did not know before. Using the word news does not make it a news headline. Now -- a copy machine that copies in color is an example of this type headline.
Advice and Promise Headline
Here you are promising something if the reader follows the advice in your ad. Switch to Amoco premium, no-lead gasoline, and your car will stop pinging.
This headline limits the audience to a specific group. For example: To all gray-haired men over forty. Caution! Be absolutely sure you do not eliminate potential customers with this type of headline.
The intent here is to arouse the reader's interest enough to make him or her read the ad. The danger is that this headline often appears cute or clever and fails in its mission. An example: Do you have trouble going to sleep at night?
Command or Demand Headline
Watch out for this one as most people resist pushiness, especially in advertising. Do it now! or Buy this today! This headline generally can be improved by changing to less obtrusive wording such as: Call for your key to success!
One common misconception about headlines is that they must be short and easy to understand. This is not always true. Here is a headline that was used extensively in print ads by Ogilvy and Mather for one of their clients: At 60 miles an hour, the loudest noise in this Rolls-Royce comes from the electric clock.
There are three primary reasons for using illustrations in an advertisement.
Everyone has heard, A picture is worth a thousand words; in advertising, the illustration frequently helps the reader visualize the benefits promised. You can almost feel the warmth of the tropical sun when you see the photos in January travel ads. Cost and practicality may dictate whether your ad uses photographs, artists' drawings or merely canned artwork. Any of these can make the ad more appealing to the reader's eye.
If you follow the three principles of good copy, your ads will be effective:
Clear, crisp and concise . . . the three Cs of copywriting suggest that the words in your advertising message merely do a good job of communicating. Do not use big words when small words can make your meaning clear. Use colorful, descriptive terms. Use the number of words necessary to make your meaning clear and no more -- but also no less! Selecting the right words is critical to the success of the ads. Recent research conducted at Yale University found that the following 12 words are the most personal and persuasive words in our language.
Notice the overused word free is not on the list.
REMEMBER THAT WHEN YOUR MESSAGE IS PRINTED IN ALL CAPITAL LETTERS INSTEAD OF UPPER- AND LOWERCASE LETTERS, IT IS FAR MORE DIFFICULT FOR THE READER TO FOLLOW AND REMAIN INTERESTED. EVEN IN HEADLINES ALL CAPITAL LETTERS SHOULD BE AVOIDED.
Should you or shouldn't you put prices in your ad? Yes! Yes! Yes! Since price is the one factor that allows the consumer to determine whether an item represents an adequate value, an ad without price makes the buying decision difficult if not impossible for the reader. Can you imagine how uninteresting your daily newspaper would be if there were no prices on the food store ads or the department store offerings? Yes, price belongs, and it belongs whether you are advertising a home for $175,000 or a ballpoint pen for 49 cents.
Can you visualize the corporate logos for such firms as Chevrolet, Ford, Playboy, Borden or Levi Strauss? There is an identification advantage in developing a logo design exclusive to your firm. Using a logo also helps give your advertising continuity. Use the logo consistently on all printed pieces, including stationery. Use it in Yellow Page advertising, on the side of your truck or company car, on bags or boxes and anything else your customers or prospects may see.
The typeface you use in advertising plays an important role in how the message comes across. Printers are very knowledgeable about typefaces and happy to help you make choices. A selection of typefaces is illustrated in Appendix I.
MEDIA AVAILABLE TO ADVERTISERS
If you understand the concept that advertising is a multiplication of a selling conversation, then the basic ingredients of advertising media are easier to grasp. First, there must be an audience. A newspaper printed as a single copy could not function as an advertising medium unless the single copy were passed from person to person to create a worthwhile audience. (In that case, the advertiser probably could go from one individual to another and be more effective while reaching at least as many prospects in the same amount of time.) A potential advertiser will require evidence that an audience does exist, and will want to know the size and location of the audience, as well as other characteristics.
The second ingredient on which an advertising medium can be evaluated is its acceptance in the marketplace. Acceptance is related not only to the total number of customers in an audience, but also to the composition of that audience as compared to the target audience of the advertiser. Advertising over a closed circuit television program received only by occupants of nursing homes would not be very profitable for a real estate firm attempting to sell starter homes.
In addition to an audience's acceptance and size, the medium also must have a usable frequency of exposure. Most retailers and other local business establishments rely on their advertisements' reaching potential buyers regularly, some even several times daily. A medium with a once-a-year or even a once-a-month frequency might deserve nothing more than a very small part of a retailer's advertising budget. Remember, one way advertising functions is by repetition; a commercial message increases in audience awareness after more than one exposure.
Various advertising media will be examined from the standpoint of these three basic ingredients: the audience (coverage) each enjoys; the acceptance (impact) of the medium on the audience; and the ability to expand its initial impact by being available more than once or twice in a particular time frame (frequency).
Almost every community has a newspaper. About 1,700 of the paid-circulation papers in America are daily papers and several thousand additional local papers are published weekly. Paid circulation means the audience reached pays to have the paper delivered to the home or pays a per copy price to pick it up at a newsstand or vending machine. Newspapers are the most popular advertising medium for most local businesses.
Today's newspaper no longer enjoys its former role as the almost exclusive source of news; that privilege applies only in those very few areas not served by radio or television. Newspapers remain, however, a strong factor in their sphere of influence. Below are some characteristics of paid-circulation newspapers that make them appealing to advertisers.
There are limitations to the newspaper as an advertising medium.
Advertising in newspapers is always priced by units of space. Rates for classified advertising may be priced per word or per line while display ads (the bordered ads that frequently contain illustrations as well as words) are usually priced per column inch or agate line. A column inch is a space one column wide by one inch deep. The agate line is 1/14th of a column inch. The cost of newspaper advertising is determined by the size of the circulation, the degree of the paper's dominance in the marketplace, and by the increasing costs of newsprint, ink, labor and transportation. The paid-circulation paper is the oldest of the mass media and continues to be the largest, as measured by volume of advertising dollars. It is used by industry giants as well as the corner drugstore. As a retailer or other small business owner, some of your advertising budget will most likely end up in your local paid-circulation newspaper.
Although far from new (the first newspapers in our country were distributed free), today's free-distribution paper is different from paid-circulation newspapers. Although the shopper type papers contain mostly advertising and little feature material, they remain a highly productive advertising medium in hundreds of cities and towns. Many of the earlier shoppers have grown into full-fledged newspapers with news, comics and features, and a frequency of delivery that approaches seven days a week. They offer the advertiser most of the advantages of paid-circulation papers, including the permanence of print, the versatility of color and graphics, and high readership of personal want ads. One advantage over paid-circulation papers is their ability to reach a very high percentage of the market area. Because they are free, they are delivered to every home. If readers like what they read, they soon come to depend on the paper. Studies show penetration and acceptance by more than 90 percent of the residents in the circulation area of free-distribution papers.
To verify the number of papers delivered, publishers of free-distribution papers may employ auditing firms to come into the delivery area and certify the number of copies printed, the number of carriers used and the number of households that regularly report receiving a paper. Many of these papers have audited proof of coverage approaching 100 percent of the homes in their markets.
The phenomenal growth of free-distribution papers in recent years is related to the increased sophistication of marketing and advertising technology. The computer made possible the measurement of sales in market share. Not only do today's merchandise movers target to sell more of their products each year, but also to sell them to ever larger shares of the total population in each area. Since daily and weekly paid newspapers often do not reach a substantial number of consumers, the total coverage concept of the free-distribution papers has proven they have outgrown their reputation as throwaways! Today, Sears, K-Mart, JC Penney and dozens of smaller department, discount, food and apparel chain organizations regularly use the free-distribution papers for total coverage of certain market areas.
Another growing function of the free-distribution papers is their ability to serve as the distribution vehicle for advertisers' own preprinted flyers, sections or merchandise catalogs. Many publishers will custom design for your special promotion a delivery system that will deliver the preprinted section to every home within a specified area, such as the 12 square blocks immediately surrounding your business.
If there is a free-distribution paper in your market area, it deserves an inquiry. Advertisements in it may prove to be the most effective dollar invested in your advertising budget.
We would be remiss not to mention the U.S. Postal Service and its ability to deliver your advertising message. The direct mail advertising message can be highly personal and powerfully effective. You know how saturated your home mailbox is with nothing to buy contests giving you chances to win new houses, cars, world cruises and big checks for every month as long as you live. While there is no obligation for you to buy anything, there is always something available for sale -- subscriptions, books, records, videos, personal products, real estate -- usually at discounted prices. The giveaways are possible only because enough people are tempted by what is available, and what they buy can be traced to direct mail advertising. In almost every business there is an opportunity for increased business through intelligent use of direct mail advertising.
Because the per-piece cost of direct mail is much higher than most forms of print, it must be used carefully, selectively and efficiently. Mailing lists are difficult to prepare, expensive to buy and are partially obsolete the day after they have been completed. Because people die, move away or get mad at you at an alarming pace, keeping an accurate mailing list is not easy. Still, direct mail can be an efficient way to deliver a sales message to a specific target audience. If your audience is composed of doctors, lawyers, dentists or school teachers, for example, only direct mail offers you the chance to direct your ad to that target audience with no waste circulation. Direct mail also makes couponing and sampling practical. It can help isolate advertising response to one segment or another and compare returns in one area with those in another.
The most critical part of any direct mail program is the mailing list. Keep a list of all your customers, either by asking them to fill out a mailing list card or by taking their names off the checks you receive each day. Hold contests to get your customers to fill out an entry form. As your list grows, you may need to buy a computer or hire a mailing firm to keep the list current and to prepare mailing labels.
Print media also include magazines. While most national magazines are
not practical as an advertising medium for local businesses, some local
magazines may be. City magazines are now published in hundreds of cities
and towns. They may look as sophisticated as their national counterparts,
and they are edited to local tastes. They use color, photography and professional
writing and editing to create high-interest stories about people, places
and things. They frequently are distributed free to certain people on
special lists restricted to higher income families. In this way they can
reach relatively exclusive audiences, but the frequency of publication
(usually monthly) restricts their use as a basic medium.
The advantage of magazines is that they have highly defined readerships that allow you to focus on specific market niches. If, for example, you run an ad in a boating magazine, you can be fairly sure the people who subscribe either own a boat or are looking for one. The Standard Rate and Data Service (SRDS) publishes a complete listing of all the magazines that serve particular market interests; it is available in the business section of most libraries.
For many small businesses, a printed brochure may be helpful to establish credibility and tell your story in more detail. Computer typesetting and laser printing have reduced the cost of producing a brochure. Free layout help is available at many copy centers. You can keep your costs down by using standard 8.5x11 inch paper and by using a triple-fold design that will fit into a standard business envelope.
Other Local Print Media
Don't overlook drop-point media such as booklets available for free pickup in high-traffic areas like convenience stores, banks and motels. These may include guides to local television programs, listings currently available from real estate firms, entertainment or sporting events. Evaluate each booklet on its ability to provide enough value to justify using it.
In America, 280 million people own more than 300 million radios! Only radio can take your advertising message to people while they ride bicycles, walk in the park, ride in cars or climb mountains. Radio brings a sense of urgency to its listeners that is second to none. Contrary to the predictions of doom during the advent of television, radio is alive and well today, and radio advertising is a major part of the plan for advertisers of every size and description.
In its pre-television days, radio was the national advertisers' most economical way to communicate with millions at a time. Syndicated programs of music, drama and news were a common part of the American life-style. With the advent of television, radio moved to the automobile and the beach.
Along came the transistor and radio moved to the shirtpocket. Today radio is everywhere. Millions awake to the sound of clock radios, and for many the radio is the last sound they hear before going to sleep. How can a small business use this sound-only medium for effective advertising? Only by understanding it and capitalizing on its strengths.
Today's radio station is judged on its effectiveness not only by the number of its listeners, but also who those listeners are. Many of today's stations have positioned themselves to reach a selective audience instead of a total market. In one marketplace, one station may play only country-western music, another rock music, a third only religious music, while others feature 24-hour news broadcasts or talk shows. As an advertiser, format programming allows you to buy advertising on stations whose listener characteristics most closely coincide with the profile of your firm's customers. Buying time on a given station also can help you reach audience segments that you may want to target to help expand your firm's total market segment.
Radio advertising is sold on the basis of time. That time can vary from an entire program, which includes your commercial announcements, to spot announcements ranging from 10 to 60 seconds. Price ranges are higher during drive time (the hours in the morning and evening when the maximum number of people are in their cars going to or from work, school or other daytime activities) and lower during the time when more people are watching television. Most stations offer package rate plans with a specified number of commercials guaranteed within a particular time slot. Also, consider buying flights of commercials, i.e., an intense saturation of 30-second or 1-minute spots in a relatively short period of two or three weeks. Repeat this flight technique during key promotional times of the year.
The sounds you can employ on radio include not only the monologue of a man's or woman's voice, but dialogue and dramatic conversations, vocal and instrumental music, and sound effects of every imaginable nature, used individually or in combinations. The size of radio's audience, like the circulation of newspapers, is audited by independent organizations and available to advertisers through station sales representatives. Arbitron, one of the auditing firms, conducts its survey by having a sample number of households keep a written diary of the radio listening habits of each occupant during a predetermined period (usually one week). Arbitron then summarizes the various stations' listeners by time of day in 15-minute segments by sex and age of listener. An advertiser can use the Arbitron data to select the station or stations that best cover the desired target audience.
Radio advertising frequency is as high as you can afford. Many stations now broadcast 24 hours a day, seven days a week. The number of commercial minutes any station can air in each segment of programming is limited by the Federal Communications Commission (FCC), but there is still the opportunity to have a message repeated frequently in any given period. It is also possible to have the radio station come to your business for a remote broadcast with customer interviews, prize giveaways and other crowd-drawing techniques.
Watching TV is the most common leisure activity in our country today; many surveys report average daily television viewing time as high as five or six hours. It is no wonder it has grown into a giant advertising medium. Television always has been a popular medium for large retailers, but its effective use by small- and medium-size businesses is becoming more popular because of lowered production costs and the ability of cable TV to reach smaller market areas.
The power of television is its ability to appeal not only to sight and hearing simultaneously, but also to strengthen that appeal by the dimensions of movement and the realism of full color. If you have invented a new product, TV advertising can show and tell many people about it and actually show them the benefit of ownership. Since they saw how it works and the package it comes in, customers will recognize it when they are at the store and be psychologically reminded of how it works and how great it would be to have it. If the hammer had never been invented until you came along, just imagine the number of words in print advertising it would take to equal the effectiveness of a 60-second television spot during which a hammer pounded a nail to fasten one piece of wood to another!
Television advertising is sold by the time the message takes. There may be additional charges for writing, talent, props, on-location filming, music and editing. Audience loyalty is a disadvantage in TV advertising. The audience tunes to a given channel for entertainment they know they will find at a particular time. If a football game, popular movie or some other preferred form of entertainment appears on another channel, the viewer does not hesitate to change channels without leaving the couch. While viewers are loyal to the entertainment value of television, they show very little loyalty to the station itself, especially as cable can bring 40 to 50 viewing alternatives into the home. Viewers, however, do tend to have favorite news, weather and sports telecasting personalities, which can influence the size of your audience and its consistency during certain time periods.
Other developments that could affect television advertising are the availability of many different stations through cable companies, all-shopper channels, all-sports channels, all-news stations, the use of home television screens as monitors for in-home computer and game systems, and the popularity of video movie cassettes. All of these may reduce the size of the audience a television station can guarantee its advertisers.
Many rating services measure the size of television audiences. National programs are measured daily and a station's audience size can be estimated fairly well. Your local television representative can explain television's penetration within the station's area of dominant influence (ADI) and how that area may conform to your firm's trade area.
Despite restrictive legislation, billboards and other outdoor display signs still perform a strong advertising task in many areas. Instant communication is the key to successfully using billboards. Directed at drivers with only split seconds to divert their eyes and to passengers who can at best get a fleeting glance, wordy or complex messages are worthless. Photos or striking art combined with a firm name and a one- or two-word headline or slogan are common.
Audience totals are determined by how many sign locations you buy and the total traffic passing each sign. Outdoor advertising is usually sold on a basis of gross rating point (GRP) evaluation. The GRP of any medium is the number of persons exposed to a message compared to the total number of persons that make up the market. One shortcoming is that the same person may drive by the same billboard three or four times a day and be counted as four separate people. Your local outdoor sales representative can explain how many locations are necessary for you to achieve 50, 75 or 100 gross rating points, and what that exposure will cost you over varying time periods.
Other Media for Advertising
We could spend considerable time just trying to complete a list of all the other ways a business can advertise and probably still leave some out. Pencils and pens with your firm's name imprinted, skywriting, business cards and even sandwich boards all can perform an effective advertising role for some advertisers. You must evaluate each one on its ability to get your sales message to the maximum number of prospects in a believable manner and at a reasonable price. No textbook or consultant can do the job for you. After you have read and listened, go to your local media representatives and ask for their help. They have everything to gain and nothing to lose by putting your firm's best interest ahead of their desire to make a sale.
REFINING YOUR ADVERTISING FOR GREATER RESULTS
One of the greats in the advertising business, David Oglivy, preached this philosophy to would-be advertisers: Never run an ad unless you have a Unique Selling Proposition (USP).* It's still a sound philosophy. If you can substitute your competitor's logo in your ad and it still makes sense, you are not going to get your money's worth out of the ad. Having a USP, as it has come to be known, is difficult with today's brand name merchandise and competitive pressures, but it is important.
* David Ogilvy, Ogilvy on Advertising (New York: Random House, 1985)
Every item you advertise and every word and illustration you use becomes a part of your firm's image. Your ability to develop a USP depends on your knowing what you want your image to be and then doing those things and only those things that reinforce that image.
A men's clothing store can become the store with fashions for the man who thinks young. A nursery can create the image of the home of the talked-to plants that will respond to you. A car dealer can develop a following and a reputation for his automatic three-year trade-in plan. Once you have arrived at a USP that you think will appeal to your customers, translate the idea into a selling slogan of three to ten words that can be used as the theme of your advertising campaign. Use it consistently until our customers learn to associate your business with the selling slogan.
But be careful. A few years ago Excedrin decided to position itself
as the headache remedy for many different kinds of headaches, like headache
No. 43 or No. 27. Their TV commercial showed the agony of each headache
by the number. What happened? People went to their drugstores and said
If you want to position your business in the marketplace, select your target market. How old are they? What do they have in common? What are their goals and ambitions? When you have learned all you can about them, go back and learn more! Then start talking to them, and only to them, in your advertising. Talk to them about themselves and their desires. Then tell them how the goods or services you sell are perfectly suited to helping them achieve those desires.
Timing Each Ad for Impact
While your budget will tell you how much you have to spend each month, you must refine your plan to know how many ads will run each week and on which days. In planning your ad insert schedule, be aware that the best results are obtained by strengthening already strong sales days, not by trying to make bad days better. If large employers in your area have paydays on the first and fifteenth of the month, time your advertising to coincide. If you use more than one medium, attempt to coordinate your efforts by scheduling a radio blitz to coincide with a big print campaign or special store event.
Adding color to a black-and-white advertisement not only increases readership, but can substantially increase the sales response. Retailers, however, frequently use too much color in their ads. Remember, color works because of its contrast with noncolor areas; use it in one or two strong clustered areas rather than scattering it throughout your ad. Keep in mind that colors also communicate psychologically. Here are a few popular colors and their common associations.
Research on the productivity of color in newspaper advertising invariably shows increased readership as well as increased sales from ads that use color. Adding color raises the cost of the ad, but the increased results are substantially greater than the increased costs.
Critiquing Your Ads
We can learn great lessons from the past. If your firm has been running ads, dig out a few from a year or so ago and see how many of these common no-no's you can find.
As you continue to expand your business in the months and years ahead, use the tips presented here. Prepare a budget and review it frequently. Select your items for advertising to help solve consumer problems and then present your advertising message as a form of planned communication. Ask your media representatives for help in understanding their product.
Maslow, Abraham. Motivation and Personality. New York: Harper & Brothers, 1954.
Ogilvy, David. Confessions of an Advertising Man. New York: Random H. Wolff, 1963.
Ogilvy on Advertising. New York: Random House, 1985. Weiss, Michael J. The Clustering of America. New York: Harper & Row, 1989.
APPENDIX A: CUSTOMER SURVEY
If you are a business owner, these questions are for you. Have you conducted your own private interview of customers? Have you personally talked to at least 50 to 60 customers to find out what they like or dislike about your business, products and service?
A personalized business survey is a simple thing to prepare and implement. If you do it regularly, you can find when and where things are breaking down in your service.
Use a piece of 8.5x11 inch paper with the following types of "yes" and "no" questions:
1. Is the service we provide meeting your highest expectations? If
2. Are we providing the brands and lines you want and expect? If
3. Is our business clean and pleasant to be in at all times? How
4. Do you feel the business is truly a part of the community? _____ yes _____ no
5. Is it a friendly place? _____ yes _____ no
6. Are the prices competitive? _____ yes _____ no
7. Do you feel you are getting good values? _____ yes _____ no
You may want to include more specific questions, but the key is to keep the survey short and to the point. Keep it personal by preparing and signing it yourself. Leave room for written comments.
Questionnaires should not be stacked at the cash register for casual distribution. Personally present them to customers along with a self-addressed, stamped envelope.
What can you learn from this? Plenty. What can customers learn? Well, it shows you care and that is always a sales plus.
APPENDIX B: ANNUAL SALES BY STORE TYPE
Percentage of the Year's Total Sales Each Month
(Five Year Average)
Source:U.S. Department of Commerce
APPENDIX C: SHARE OF ANNUAL SALES BY MONTH
APPENDIX D: PROJECTED SALES AND PLANNED AD VOLUME
Projected Sales Volume By Months and Planned Monthly Ad Volume
Previous year's gross annual volume $__________
Projected volume for planned year $__________
Percentage of gross volume for advertising __________%
Projected total annual budget for advertising $__________
APPENDIX E: AVERAGE ADVERTISING INVESTMENTS OF RETAIL STORES
Advertising and Promotion as a Percentage of Sales
Source: Advertising Age, August 17, 1981
APPENDIX F: DETERMINATION OF ADVERTISING MEDIA BUDGET
APPENDIX G: MEDIA BUDGET ALLOCATION FORM
Step 1: Transfer advertising budget figures from Appendix D to Plan Portion
Step 2: List all fixed monthly advertising expenses (example-- Yellow Pages)
Step 3: Determine percentage of total budget to be allocated to each category
Step 4: Apply each media's percentage share against net budget dollars and record dollar amounts.
APPENDIX H: ADVERTISING LAYOUT GUIDE
APPENDIX I: TYPE STYLES
APPENDIX J: INFORMATION RESOURCES
U.S. Small Business Administration (SBA)
The SBA offers an extensive selection of information on most business management topics, from how to start a business to exporting your products.
SBA has offices throughout the country. Consult the U.S. Government section in your telephone directory for the office nearest you. SBA offers a number of programs and services, including training and educational programs, counseling services, financial programs and contract assistance. Ask about
For more information about SBA business development programs and
Other U.S. Government Resources
Many publications on business management and other related topics are available from the Government Printing Office (GPO). GPO bookstores are located in 24 major cities and are listed in the Yellow Pages under the bookstore heading. Find a “Catalog of Government Publications at http://catalog.gpo.gov/F
Many federal agencies offer Websites and publications of interest to small businesses. There is a nominal fee for some, but most are free. Below is a selected list of government agencies that provide publications and other services targeted to small businesses. To get their publications, contact the regional offices listed in the telephone directory or write to the addresses below:
Federal Citizen Information Center (FCIC)
Consumer Product Safety Commission (CPSC)
U.S. Department of Agriculture (USDA)
The USDA offers publications on selling to the USDA. Publications and programs on entrepreneurship are also available through county extension offices nationwide.
U.S. Department of Commerce (DOC)
U.S. Department of Health and Human Services (HHS)
U.S. Department of Labor (DOL)
U.S. Department of Treasury
U.S. Environmental Protection Agency (EPA)
U.S. Food and Drug Administration (FDA)
For More Information
A librarian can help you locate the specific information you need in reference books. Most libraries have a variety of directories, indexes and encyclopedias that cover many business topics. They also have other resources, such as
In addition to books and magazines, many libraries offer free workshops, free access to computers and the Internet, lend skill-building tapes and have catalogues and brochures describing continuing education opportunities.
Published - March 2010
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