Effective Advertising: How to Calculate Ad Budget

Posted 1 mesiac ago podľa Anastasia Prokofieva

Supercharging your business’s growth through effective advertising is like igniting the afterburners on a high-performance jet. When done right, you skyrocket; však, a miscalculation could result in a rapid descent.

That’s why landing on the perfect ad budget is crucial. But how do you define what’s ‘perfect’? It’s about aligning every cent spent with your business goals, and we’re here to be your mission control.

Why Your Ad Budget Matters

In a world where even the tiniest details can make or break a company’s ad game, grasping the decision-making that goes into every campaign is crucial.

Your ad budget is the financial backbone of your marketing efforts. Every dollar should be put to work effectively to give the best ROI, aka return on investment. It isn’t a number you pluck from thin air or borrow from the neighbors. It needs to be strategic, just like your advertising needs to be targeted.

Avšak, the critical question lingering in every business owner’s mind is, how do I know how much to spend for effective advertising?

Before Calculating Your Ad Budget

Figuring out how much to spend on ads is a matter of balance. You don’t want to waste money by overspending, nor do you want to be ineffective by underspending. There is a Goldilocks-like “just right” zone that will bring in results without affecting your margins.

Before we start, there are a few key terms you need to understand:

Markup is the difference between the cost of a product and its selling price (gross profit above cost). It is usually expressed as a percentage.

Napríklad, if you sell a product for $150 when it only costs you $100, your markup is 50%. You’ll want this figure for all your products individually and in your store.

Margin is your gross profit expressed as a percentage of the selling price.

Vo vyššie uvedenom príklade, your profit would be $50. Teda, your total margin would be 33.3% ($50/$150).

Cost of occupancy is the cost of keeping your ecommerce store up and running (such as web hosting, riadenie zásob, and shipping and handling). These costs are usually static and predictable.

You need these metrics before you can start calculating your ad budget. In a separate spreadsheet, make a note of these metrics.

You might have something like this:

	Margin	Markup	Cost of occupancy
Produkt #1	33.33%	50%
Produkt #2	54.54%	120%
Produkt #3	37.5%	60%
Average for Store	43.39%	76%	$30.000

Once you have this data, you can start calculating your ad budget.

Výpočet reklamného rozpočtu pre efektívnu reklamu

Koľko môžete minúť na reklamy, bude závisieť od troch vecí:

Niche: Obchody v určitých oblastiach môžu utratiť menej peňazí za reklamy z dôvodu vyšších marží alebo silnejšieho ústneho kontaktu alebo dosahu na sociálnych sieťach. To platí najmä pre módne alebo veľmi špecializované obchody.
Obchodné štádium: Ak chcete vytvoriť svoju značku, budete musieť investovať viac do reklám v počiatočných fázach svojho podnikania. Spoločnosti v poslednom štádiu môžu vyjsť s výdavkami čo najmenej 3% of their annual revenue on advertising.
Margins: Advertising budgets are usually a function of your margin. The higher the margin, the more money you’ll spend on ads.

The US Small Business Administration advises allocating 7-8% of your gross revenue towards marketing and advertising if your annual sales are under $5 million and your net profit margin ranges between 10% do 12% post-expenses.

Understand that this also includes brand development costs, including spending on websites, blogy, a sociálne médiá. Zvyčajne, you’ll have no more than 3-5% of your annual revenue to spend on advertising.

S týmto v hlave, let’s look at a step-by-step process for calculating your ad budget.

Krok 1: Calculate Your Minimum and Maximum Possible Ad Budget

Ako bolo spomenuté, most businesses allocate 5 do 10 percent of their annual revenue to advertising. Tu, 5 percent would be the floor and 10 percent the upper limit.

Start by calculating these lower and upper limits on your ad spend.

To do this:

Take 5% a 10% of your projected annual sales
Multiply each of these figures by the average markup per transaction.

Napríklad, suppose your business is projected to do $1M in annual sales this year. 5% a 10% of your annual sales would be $50,000 a $100,000.

Suppose your profit margin is 60%, t.j., you make $600,000 in profits with $400,000 in costs.

Preto, your markup would be 150% ($600,000/$400,000 * 100).

You have figures like this:

Annual Sales (A)	5% of Sales (B)	10% of Sales (C)	Markup (D)	*5% of Markup (B D)**	*10% of Markup (C D)**
$1,000,000	$50,000	$100,000	150%	$75,000	$150,000

Teda, your minimum and maximum ad budget is $75,000 a $150,000.

Krok 2: Calculate the Adjusted Ad Budget

The above is your “raw” budget since it doesn’t include your cost of occupancy (t.j., the cost of running the store).

To get your adjusted figure, simply deduct the cost of occupancy from the raw minimum and maximum budget.

Napríklad, predpokladajme, že ide o ročné náklady spojené s prevádzkou predajne:

Softvér elektronického obchodu: $2400
Spracovateľ platieb: 2% ročného predaja ($20,000)
Hosting: $1200

Teda, vaše „náklady na bývanie“ sú $23,600.

Váš upravený reklamný rozpočet je nasledovný:

Minimum: $51,400 ($75,000 – $23,600)
Maximálne: $126,400 ($150,000 – $23,600)

Tento údaj vám hovorí, koľko môžete očakávať, že ročne miniete na reklamy.

Profi tip: Náklady na obsadenosť môžete znížiť pomocou cenovo výhodnej platformy elektronického obchodu, ako je napr Ecwid od Lightspeed. Získate robustný internetový obchod plne hostený a spravovaný spoločnosťou Ecwid, plus dozens of built-in business management and marketing tools to grow your business.

Best Practices for Effective Advertising and Budgeting

Teraz, you have step-by-step instructions on how to calculate your ad budget. For best results, here are some best practices to keep in mind:

Start Small

If you’re just starting with advertising, it’s always better to start small and gradually increase your budget as you see results. It will help you avoid overspending and allow you to make adjustments along the way.

Stanovte si jasné ciele a zámery

Pred vytvorením rozpočtu na reklamu, je dôležité identifikovať svoje obchodné ciele a zámery. Inak, bude ťažké posúdiť účinnosť reklamy.

Či už ide o zvýšenie predaja, zvýšiť návštevnosť webu, alebo zvýšiť povedomie o značke, váš cieľ by mal byť krištáľovo jasný ešte predtým, ako spustíte hárok programu Excel.

Ciele by mali byť konkrétne, Merateľné, Dosiahnuteľné, Relevantné, a časovo ohraničené. Príhodne známy ako S.M.A.R.T, tieto ciele zabezpečujú, že váš zámer je taký ostrý, ako by malo byť vaše uskutočnenie.

Keeping your objectives and goals in mind will help you determine the types of ads you need to run and the platforms you should use. Napríklad, if your goal is to increase brand awareness, social media ads may be better than traditional print or TV ads.

Adjust for Long Game vs. Quick Win

Advertising effectiveness ultimately boils down to how well your tactics align with your goals.

Different objectives call for other strategies. Long-term brand-building efforts require a sustained, consistent ad presence. Rýchly predaj by mohol tlačiť na honosnejšie, krátkodobú reklamnú kampaň.

Zvážte reklamné platformy

To, kde svoje reklamy umiestnite, môže mať významný vplyv na ich účinnosť. Myslite na svoju cieľovú skupinu a na to, kde trávi čas online. Pomôže vám vybrať najvhodnejšiu platformu pre vašu reklamnú kampaň.

Zvážte použitie viacerých platforiem na oslovenie širšieho publika a zvýšenie šancí na úspech. Napríklad, ak sú vašou cieľovou skupinou predovšetkým mladí dospelí, platformy sociálnych médií ako Instagram a Snapchat môžu byť lepšie. V rovnaký čas, Účinnosť televíznej reklamy bude pravdepodobne nízka.

Okrem toho, rôzne reklamné platformy ponúkajú rôzne typy možností zacielenia. Napríklad, Facebook a Google Ads vám umožňujú zacieliť na konkrétne demografické skupiny, záujmy, správania, a umiestnenia. Môže vám to pomôcť zúžiť publikum a zabezpečiť, aby vaše reklamy oslovovali tých správnych ľudí.

Takže, ak sa čudujete, „Je reklama na sociálnych sieťach efektívna??“ Odpoveď je, že určite áno, pokiaľ sú reklamy správne zacielené.

Používanie Ecwid by Lightspeed pre váš internetový obchod, môžete optimalizovať svoje reklamy na Facebooku a Google pomocou Kliknite naň. It’ll help you set up and automate ads and optimize them for a better return on investment.

Track and Analyze Ad Data

Keep track of your ads’ performance and use this data to make informed decisions about your budget. Adjust accordingly if certain ads or platforms don’t yield the desired results.

If you use Ecwid by Lightspeed, measuring advertising effectiveness is easy with the Správy tool. It has a Marketing section that helps track order sources, be it Google ads, Facebook reklamy, or other marketing channels.

Zabaliť

With these strategies in hand, figuring out an ad budget that meets your business goals and guarantees an excellent return on investment turns into a smart move, not a scary one.

Dealing with ad budgets isn’t just about finance but vision. It’s about translating the intangibles of advertising into actionable strategies that leave no room for interpretation — and every room for growth.

You’re not just calculating an ad budget; you’re architecting your path to market success. And with the strategies unearthed here, you’re set to craft an advertising budget that’s not just a figure on a sheet but the lifeblood of your most effective advertising.

Do you want to learn more about advertizing with Google?

About The Author

Anastasia Prokofieva is a content writer at Ecwid. She writes about online marketing and promotion to make entrepreneurs’ daily routine easier and more rewarding. She also has a soft spot for cats, chocolate, and making kombucha at home.