How much should you spend on your advertising budget?


Some companies are not that familiar with the concept of advertising budgets.  While they know that they can assign a certain amount of money towards advertising, smaller companies and owners often can’t really point out why they reached a specific dollar amount. At Twelve12, we want to help you understand some key factors that should help you decide how much money you should assign to your advertising budget and tangibly get something significant out of your investment – just as if you were part of a top advertising agency in Orange County.

Have you ever raised the question about how much money you should put into your advertising campaigns? Maybe you are spending way too much, or not as much as you should? One of the most common mistakes is that small business owners usually think of advertising as an unavoidable expense.

I want you to become familiar with the terms “Return Of Investment” and “Return On Investment”. Both terms work similarly, however, they have some differences that we’ll address in a future blog; for now, just read up on the topic so you can understand how to calculate and evaluate the money that you will allocate towards a project – in this particular case, advertising.

There are 5 main key factors that you should consider while you work on your advertising budget.

  1. The stage where your product is located in its life cycle
  2. The competitors
  3. Your consumer base and market share
  4. The interchangeability of your product
  5. The frequency of the advertising

The life cycle of a product is very important. If you have a brand-new service or product, you might be eager to spend a lot of money to advertise it. If it is an older product, you might think it wouldn’t need that much money invested in advertising, since people are already familiar with it. Not quite! A great place to start looking into it is the BCG matrix, which is a vintage tool but still very useful to understand how your products are evolving and if you should spend more money or be more cautious about doing so.

The interchangeability of a product is something that should be at the top of your list. Some products/services are very similar and it is very difficult to add enough value to differentiate them from other brands. When this happens, it usually requires a lot of money to stand out from the competitors on your image alone.

The competitors, consumer base, market share and the frequency of an ad are key factors that require a lot of number crunching and research. There’s no point in spending a lot of money when your product or service is regional or local; the same applies if you are at the bottom of the market share or if your consumer base is small. In those cases, it is better to have a discrete ad budget and a more aggressive branding budget.

If you want to know more about a smart advertising budget call Twelve12 today and find out how our advertising agency in Orange County can help you achieve your goals.

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