How to Plan Short-Term and Long-Term Ad Budgets
Posted Oct 13, 2016 by Lina Vashurina, Ecwid Team

How to Plan Long and Short-Term Ad Budgets for Small Business

We’ve already told you how to calculate your ad budget and learn how much you can spend on ads. Time to get to planning the ad budget you’ve calculated.

In an ideal world, you would be able to take your minimum ad spend and spend it equally across all 12 months.

In the real world, the demand for your products will vary over the year. You’ll make a disproportionate amount of sales during the holiday season while January will be relatively lean.

Your sales will also depend on your target demographics. For instance, if you sell a lot of school supplies, sales will spike during the back to school season.

Because of this, you have to plan your ad spend over the course of 12 months.

Here’s how you can do it.

1. Measure your holiday season sales spike

The holiday season (Oct-Dec) is the most lucrative time of the year. Consumers are in a shopping frenzy and advertising is in overdrive as businesses try to get a bite of the pie.

In fact, according to a Forbes report, some retailers generate as much as 40% of their yearly revenues during the holiday shopping season.

Highest e-commerce spending days

So right off the bat, you know that you need to allocate a greater percentage of your budget for the holidays if you want to drive sales.

Holiday season sales aren’t uniform either. For e-commerce stores, sales peak on Cyber Monday and Black Friday.

Shopping procrastination is increasing every year, which means your shoppers will be placing orders within days or even hours before each holiday and will expect best deals.

This means that you have to plan your holiday ad spending accordingly.

Here’s how:

  • Audit your sales records from the year before. Map out total sales during holiday season (October 31- December 31st) vs. sales during the rest of the year.
  • Drill down further to map out sales records for each day during the holiday season. Make note of your top 10 shopping days.
  • During your audit, make a note of the promotions you ran during these 10 days (if any) and the advertising channel used (if any).

Essentially, you want your advertising budget to match your holiday season sales. If you get 5% of your annual sales on Cyber Monday, you want to spend 2-5% of your ad budget promoting your store on and before this day.

2. Map out time-specific spikes

The holiday season isn’t the only time people spend enormous amounts of money.

There are spikes in littered throughout the year in which consumers shop more than usual. These are usually public holidays (Labor Day, Veteran’s Day) or shopping days such as Mother’s Day.

While much smaller than the holiday season, these days can account for a decent chunk of your annual sales.
And you ideally want to have extra advertising budget for these days.

In 2015, Singles Day (November, 11) outsold Cyber Monday by more than $10 billion.

Follow the same procedure as above to calculate your total sales during such periods.

  • Find out total sales on St.Patrick’s Day, Halloween, Father’s Day, Super Bowl, Easter, Valentine’s Day, Mother’s Day and Back to School season.
  • Calculate your sales on these days as a percentage of your annual sales.
  • Match your advertising budget to this sales percentage.

For example, if you get 15% of your annual sales on the shopping days listed above, make sure that you have at least 10-15% of ad spend to promote your store during these days.

3. Figure out important shopping days for your target demographics

Understanding how your target demographics shops is crucial for planning your yearly ad spend.

For example, if you attract a lot of college students, your sales will likely spike during the back to school period.

Similarly, if you attract a lot of Chinese shoppers, the Chinese New Year (January 28) will be likely your biggest shopping day, not Christmas.

45% purchases in Canada are made on non-Canadian websites. 19% of purchases in France are made on non-French websites. Go global when target your demographics.

This isn’t limited to demographics alone. Your niche will also impact your sales over the year.

If you sell flowers, you’ll see a sales bump around Valentine’s Day. If you sell football jerseys, your sales might go up around Super Bowl. If you sell snow shoes, you won’t make any sales during the summer months.

Factor this into your ad budget planning. Audit your sales records to spot these unseasonal sales bumps. Calculate your sales on these days as a percentage of your annual sales, and change your ad spending accordingly.

4. Account for the slow months

Think of this as consumer downtime.

They are periods where customers are just not interested in buying. No matter how much money you pump into ads during this time, consumers just won’t bite.

For example, late January-February is one of these months. Most consumers are suffering from a post-Christmas hangover and probably a lack of funds.

During this time, it makes sense to dedicate less of your ad budget and just ride out the storm. If you do run any promos around this time, focus on reducing inventory.

All the data you’ve collected above will show you the following:

  • Your biggest shopping days of the year
  • Your slowest days/months
  • Product related sales spikes
  • Demographic related sales spikes

Instead of spreading your ad budget throughout the year, you can use this data to plan your ad spending for your peak sales periods.

For instance, if your records show that you make 40% of your sales during the holiday season, your ad spending should mirror this figure.

If Halloween is a significant sales day for you, make sure to spend more on these days.

Doing this will ensure that you don’t exhaust your budget before important shopping periods. It will also ensure that you have don’t overspend during poor shopping periods.

Related: 11 Practical Tips for Marketing on a Budget

Where to advertise online?

You should now have a good idea of how much and when to spend on ads.

The final step is figuring out where to spend your ad budget.

In 2015 holiday season, social media drove only 1.8 percent of all e-commerce orders.

As an e-commerce store owner, you have a number of options available to you when it comes to online advertising.

Let’s look at some of these options.

1. Search engine advertising

Anywhere between 20% to 50% of traffic to your e-commerce site is going to come from an ad on a search engine.

The formats for such ads are known as Pay-Per-Click (PPC) & Cost-Per-Mille (CPM).
How do they work?

By directly display ads on the search engine results page.

Here’s an example of search which displays PPC ads:

an example of search which displays PPC ads

The images of Levi jeans on the right are PPC ads and they have a powerful effect in driving traffic to their respective product pages.
By delivering exactly what a customer needs at exactly the right time.
In the above example, a customer who types in “buy Levis 541 jeans now” into Google has demonstrated three behaviors:

  • That she intends to buy and not just browse the product.
  • That she knows exactly what she wants to buy (Levi’s 541 jeans). This means that she is a shopper, not a browser.
  • That she wants to buy the product now, not later.

By showing a targeted ad right when the customer is searching for a solution, you have a strong chance of landing a sale.
Besides the targeting, what makes these kinds of ads great is that you are only charged a fee when a visitor clicks on your ad and lands on your site.

Here are two popular search engine advertising platforms you can use:

  • Google Adwords
  • Microsoft adCenter

Use search engine ads for:

  • Promoting specific products to highly motivated buyers (such as the Levi’s 541 jeans example above)
  • Showing urgency-focused ads (such as “Shop now to get 10% off”) to move conversions during heavy shopping periods.
  • Fulfilling bottom of the funnel demand

2. Social media advertising

You aren’t limited only to placing ads on search engines.

You can advertise on social media platforms such as Facebook using PPC and CPM.

The thing you should remember is that in spite of the hype surrounding social media, it only accounts for 1.55% of all e-сommerce traffic.

But social media still provide you the opportunity to create highly targeted and personalized ads, which means more conversions.

Unlike search engines where you have to determine interests based on keywords, on Facebook, you can get very specific.

Just check out how specific you can get with Facebook ad targeting:

Facebook targeting

You can target based on education, location, and even ethnicity.

However, Facebook isn’t the only social media platform. You can also use YouTube as a platform for advertising.

YouTube is unique because it’s a mix of being a search engine and social media site.
And it’s popular.

The rise of video content has led YouTube to become the second largest search engine on the web. People are hooked to video and spend over 6 billion hours on the site each month.

There are various ad formats to choose from on Youtube:

YouTube ad formats

Whichever format you choose, YouTube only charges you for a view when someone completes the entire ad or crosses the 30-second mark. That means every time you pay for an ad, you can be assured you have acquired a high-quality target.

Read also: How to Sell Using YouTube

Use social media advertising for:

  • Fulfilling top of the funnel demand and brand building
  • Introducing customers to new products
  • Estimating demand for a product category
  • Demographic testing, i.e. figuring out which demographic responds best to your products

Ideally, you’ll use a mix of search and social advertising. The former will help improve conversions at the bottom of the funnel. The latter will help build your brand and increase your reach within your target demographic.

Read also: Calculating Perfect Ad Budget To Match Your Business Goals

About the author
Lina is a content creator at Ecwid. She writes to inspire and educate readers on all things commerce. She loves to travel and runs marathons.
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