A question that is often repeated, especially when the general budget of the company is being elaborated, is: how much money do we assign to advertising? In more times than desired, this question is given a whimsical or mechanical response such as “put it the same as last year”. To make advertising a strategic investment, six key questions need to be answered before deciding on the amount.
First of all, define with the greatest possible precision, the following aspects:
- How can your company get as cheaply as possible the totality of its current and potential market?
- How is the process of making and buying the company’s products and services performed in practice?
- What is the level of knowledge of the product in the market?
- What is the company’s marketing strategy: push or pull?
- What is the strategy of investment and profitability of the organization?
The answers given to these questions may even lead to the conclusion that it is not necessary for the company to invest even a single cent in advertising and promotion.
The purpose of advertising and sales promotion is to communicate the competitive advantages of the company’s products or services, in order to influence the buying behavior of consumers or users. Logic tells us that that goal must be achieved with maximum efficiency, that is to achieve the desired results with the least investment of resources.
The more that the company is directed to broader and more dispersed markets, greater investments is needed in advertising and sales promotion to communicate its messages to consumers and users that, perhaps, are distributed throughout the country.
On the contrary, there are situations that don’t require companies to spend a lot on advertising. The following are some examples where advertising is not important: Companies, large or small, targeting a necessarily limited number of current and potential customers to whom it is easier to reach directly, for example, specialized raw material suppliers; Small or micro businesses whose markets are concentrated in the vicinity of their facilities; Companies that are regulated by official regulations. However, there are always valid alternatives to big advertising budgets.
If you can get directly to your consumers and users, it is preferable to use that path to convey the commercial messages of your products or services. However, there is an effective alternative. For example, a very important bank in your country wanted to make an advertising campaign to stimulate the use of their international transactions. The first idea was to carry out a press campaign based on the criterion that all businessmen, and executives read the press. However, the market for these services was clearly limited to exporters and importers. By checking the lists of the associations of these business categories, almost 100 percent of the possible users of these categories were available. As a result, a direct marketing campaign was more efficient. This was done with a much lower investment and achieved the same or even a better result.
In short, it all depends on whether the company has other possible avenues in addition to advertising and promoting mass sales to reach its current or potential consumers or users efficiently, in terms of cost-effectiveness.