To many businesses marketing is an immeasurable and elastic activity, impossible to cost or budget. What do you include under the heading? The Christmas goodwill calendar? The salesman's car? To some outside the business world, marketing is a confusing miasma of junk mail and PR sleaze - or as I was told recently, 'Marketing is a con.' Very uplifting for your ego. Most firms will only invest if they can quantify the rewards with a fair degree of accuracy and expectation. Buy a truck today and a look at Glass's Guide will give you a fair estimate of the trade-in value in three years' time. Place an ad in a new magazine, and no one can be sure what results will be achieved.
Marketing is not an exact science - part of its appeal and challenge - but some of the variables can be eliminated or at least reduced. It will be argued later that advertising should not be undertaken except where the response can be directly measured. Direct response marketing can and should be tested before launching any significant campaign.
So how much should you spend? Every business is different. The market trader will spend a minute amount, relying on position and repeat custom. The motor trader will have to promote his continuously changing stock to attract casual punters. I have yet to see a satisfactory formula for equating costs with returns, but for what it's worth, there are supposed to be about 15 different methods, the most popular of which are:
1. The same as last year.
2. Last year plus X per cent (and X can be anything).
3. A percentage of past sales, forecast sales, gross profits or unit costs.
4. The ratio to your share of the market (if you know it).
5. What the competition is thought to spend.
6. What you (or the bank manager) think you can afford.
Accepting that generalities will help few people, it may be some guide if I say that it would not be extraordinary for a new enterprise to devote 5 per cent of gross sales to marketing, settling back to half that when more established. Other influences to take into account are:
1. Well-developed, crowded markets need more promotion to accentuate what are often minute differences between brands.
2. Infrequent purchases (capital items) need regular promotion to remind prospects.
3. Marketing a general consumer product is invariably ruinously expensive to a small firm, unless you can ride on someone else's back.
4. Sales and cut-price offers need frequent promotion to alert prospects.
5. High-quality, purpose-made items sold in a small area rarely need high promotion. Personal recommendation fills the gap.
6. Specialist markets that can be readily identified should need less promotion.
7. If the market is expanding with fresh competition you'll need to keep your name visible.
8. If your product lasts a long time you will have to keep hunting for new customers.
Just isolating advertising, the Advertising Association shows advertising spend as a percentage of turnover. Top of the list at 6 per cent is medical and toiletries. Drink and tobacco spend 1.12 per cent, while industry spends 0.47 per cent. The obvious moral from this is that different products are marketed in different ways. Industry relies much more on face-to-face selling and trade shows. Insurance has changed to more direct mail. Consumer products are heavily advertised on TV and in the glossy magazines.
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07152010
1. Sell quality products and send a personal message to your customers
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