Calculating Your Ad Budget

One of the best pieces I've ever read about calculating an ad budget was passed on to me in early 2003. Rather than using the old 5-6% of sales measure for creating my ad budget, I've used the following formula and it's been terrific!

First, before starting (and I know this is business 101 for most of you but please bear with me.

MARGIN is Gross profit divided by Gross Sales Volume

MARKUP is Gross Profit divided by Cost of Goods

Be sure to plug in MARKUP, not MARGIN when figuring your ad budget. Let's say that you have a business averaging 100% markup (keystone) or in other words a 50% Gross Profit Margin.

Take that and multiply the average markup by your cost of exposure...for most businesses the cost of exposure is = to a percentage of your projected sales. I use 10%.

So, if my projected sales are $300,000 per quarter the ad budget calculation looks like this:

30,000 x 100% = $30,000

Now, take that $30,000 number and subtract out your cost of exposure..your website, storefront, rent, etc. for the quarter. Let's say that's $7,500.00

$30,000 - $7,500 = $22,500 and there's your ad budget for the quarter.

if, however, my average markup is only 86% it would shake out as follows:

30,000 x 86% = $25,800

$25,800 - $7,500 = $18,300 remaining for ad budget.

It's a simple formula and while not every simple formula such as this is going to fit every business you can modify it so that it can provide a "make sense" number for you in these otherwise very confusing times...and if nothing else, you have a firm number in mind when shopping for the various marketing/advertising options out there that you can choose from. I do hope that this helps...it's what I use and it hasn't failed me yet!

Best Always,
Dave J.

The New Robber Barons

Those who study American history are undoubtedly familiar with the late 19th century titans of industry who were dubbed the "Robber Barons." They were named such for their cutthroat business tactics and their iron will. They were seen as the Great White Sharks of industry...devouring all who opposed them and accumulating great wealth.

This morning I have just returned from Asheville, NC where my family and I visited (for the umpteenth time) the Biltmore Estate. This house, for those who may not know, is still America's largest private residence...3 times the size of the White House. This massive estate was built by George Washington Vanderbilt, youngest grandson of "The Commodore" Cornelius Vanderbilt, founder of the family fortune and who, along with John Jacob Astor is widely accepted as one of the "original" Robber Barons. Now, this trip to Biltmore, as I've already stated, is one that our family has made many times before, but today it just seems a bit more relevant. You see, when I returned home I sat down at my desk, opened my e-mail and actually watched an info-mercial (yep, guilty as charged) on the Internet about the "New Robber Barons." This particular pitchman said that the new robber barons were the folks who signed up for a specific type of commodity trading account, and therefore it was implied that those who did not, by default, were excluded from ever hoping to achieve the greatness in industry that is each American's to seek. I thought this to be a bit dismissive and otherwise slighting! You see, the robber barons of old (Carnegie, Vanderbilt, Rockefeller, Morgan, Gould, etc.) and the inventors that followed (Ford, Edison, Dodge, Bell, etc.)gained their success through foresight and innovation. Was such an info-mercial as I watched last night around for them or when current titans such as Bill Gates or Steve Jobs had their groundbreaking ideas and helped to usher in the mass-acceptance of the computer age? Would they have been excluded from success for not taking advantage of such an offer? I believe not! This type of advertising, preying on people's fear while conjuring up the ghosts of past success is, to me, like saying to a new driver..."make sure to only pay attention to what's going on inside the car or only in the rear-view mirror." We all know that driving this way will put you in a ditch...but fast! I'm rambling about this today, but it just seems to me that if we're really trying to empower and energize people to become the next innovator and/or Captain of industry, a better approach for those wishing to become such is to study the past, but look steadily forward, rely on your own steam, and figure out what issues and/or needs need to be addressed to make the country a better place. Create, innovate, serve...for the one thing that (for all their faults) the Robber Barons of old did...they created! Sure, they were tough-minded, iron-willed, and in some instances just not nice people, but in their collective wake they left mines, railroads, refineries, pipelines, banks, brokerages, etc. Items and institutions that would serve our country, produce jobs, and propel us forward for many generations to come. That's what will bring America back...creation of opportunity...not setting up some personal commodity trading account! Want to be a New Robber Baron, think like an old Robber Baron...now you'll have to excuse me... I have to get out there and create something!
Best Always,
Dave J.

What the Heck?!?

Is this really supposed to get me to buy tires...the Michelin man is being made over as a tire chucking super-hero?!? Holy cow! I'm really at a loss for words and that rarely ever happens.

Best Always,
Dave J.

The One Thing!!!

In advertising there is only ONE THING that matters and will get someone to buy your product or service. Now, before I go into what it is (and it's really simple) you need to realize that apart from this one thing, all other items that we blog about on this site are simply tools or delivery methods. Twitter, LinkedIn, Facebook, The Internet, Magazines, Television, Radio, etc. all delivery methods and/or tools that bow down in homage to this one thing. The one and only thing that matters in any form of advertising or marketing is ... getting the target audience to envision themselves using your product and/or service and feeling that in some way it will enhance their life. That's it...sounds really simple...and it is, in theory. That's what all these neat tools are for...to provide a means by which someone can hear about, realize, and in some way verify that what you are selling will assist in making their lives better. If you hold onto this "one thing" your advertising will be much more effective. (The term we use for this very important issue is Synaptic Marketing)

Don't Replace the Live Drummer with a Drum "Machine"

As I was sitting here on vacation it dawned on me that as we move headlong into the age of "digital marketing," that "creativity" is taking a back seat to technology and metrics. Whether a banner ad is blinking, partially or fully animated, swirling, etc. it's still a banner ad and it seems as thought the technology to make it dance and sing (along with the immediate tracking and desire of/for the all-important click-through) has taken the place of delivering a significantly "creative" message. When speaking to Todd (our CEO) about this yesterday AM he said, "sure, it's like all those bands out there who found that they could get by with a drum machine instead of a live drummer." The machine did a great and "predictable" job. But, with the live drummer you had a creative mind that could improvise and potentially make the song better and/or more interesting." This is what I would caution small businesses against these days...whether it's an in-house person you rely on for marketing, or an outside group, don't give up the compelling and otherwise relatable message in exchange for a simple/predictable "click through" vehicle. Now, don't get me wrong...we're ALL FOR DIGITAL MEDIA...we just believe that any banner or online ad you put together (or is put together for you) must still have a "Creative" component that the viewer will relate to and will therefore get them to view your product in relation to his or her own life. The Drum Kit is good, The Drummer is Better!

The Beginning ...

I sat at my son's computer on Dec. 26th, 2008 and came up with the idea for iAdvertizing.com I thought to myself, "what a great day it must've been over at Apple when they came up with the thought behind iTunes. Someone could actually come in to their website and instead of purchasing an entire CD for $12-$15 dollars, (when they only wanted 2 or 3 songs) they could simply choose those 2 or 3 songs and pay only .99 cents for each - saving themselves the difference." Now, since THE WPM GROUP (our full service agency offering) is virtual, with all designers and staff working across the nation from their homes I figured that we could do the same thing for the advertising world. With the economy circling the drain and businesses being squeezed from every direction (supply and consumer price side) we realized that there is really NO SHORTAGE of marketing NEED, but there was a server shortage of businesses willing to pay for the long-term agency retainer style contracts. So, with the help of our management team and designers we were able to develop a fixed pricing list and otherwise commoditize each of our marketing agencies' service offerings. This would allow business owners, marketing officers, etc. to come in, choose only what they want and/or need and not have to worry about whether or not their advertising/marketing dollars were being used effectively. On top of that we decided that we'd offer evey business a free service that they could use, even if they didn't purchase from iAdvertising. That service was a free, real-time, automated quote feature. You see, for far too long traditional advertising agencies have cloaked the cost of services in a shroud of mystery. We felt as though the time for complete transparency had arrived. So, with the launch of iAdvertizing we made it so that anyone can come to our menu of services page, begin clickng on the items they want and then, off to the left side, they would see a real-time total appear. This would allow them to move forward with a baseline number from which to compare with other marketing options they may investigate. We felt as though this was the best way to do business and from what we've seen to date, so do our customers.