The ROI's Retail Finance How-To Articles

Take the Voodoo Out of Advertising!

by Patricia M. Johnson, CMC and Richard F. Outcalt, CMC

"I know half my advertising budget is wasted. I just don’t know which half.”
— John Wanamaker, Department Store Magnate

Retailers of every size and stripe share Wanamaker’s frustration. Because some retailers don’t understand advertising, they try a variety of advertising approaches throughout their business lives.

One is simply to refuse to play the game. Those people quickly become former retailers!
Another approach is to look upon advertising as a necessary evil, and simply throw money in the direction of a few advertising media, hoping to attract some customers. These people usually have to take solace in the size of their advertising budgets, since there is little comfort in the results.
A third approach is jumping in with both feet, controlling the process from start to finish. These people should hang pictures of themselves in their stores to remind their employees and customers what they look like. Absent from the store, they’re forever immersed in the details of the next ad.

These are broad generalizations, but chances are you fit one of them. In fact, you’ve probably fit all three at some point in your career. And, most likely, you’re as confused and frustrated now as you were when you first met the advertising beast.

Advertising need not be confusing and frustrating. If you use the same dispassionate, objective approach to advertising that you do with financial management, you can achieve very satisfying and rewarding results from your advertising efforts.

What Advertising Is—And How to Make It Effective

Advertising is a method of communicating. Everything your store does to “talk” to potential customers is a form of advertising.

In fact, your store is one of your most important forms of advertising—you need to find the location that will most accurately communicate your business to your customer. When you advertise, you’re conveying an impression—a persona that should match your store’s personality and style.

Advertising is effective only when you direct it to the right audience.

Usually, you’re trying to communicate with your regular customers. But occasionally, you may want to target potential new shoppers.

Your medium must speak directly to your audience. If you’re a small business, your choices may be simplified—you may not be able to afford expensive forms of advertising. Be selective. Ask your customers which media they respond to most frequently: newspaper, circular, TV, radio, billboard, online, etc.

What Advertising Can Do

When we ask retailers what they want their advertising to do for them, they typically respond, “increase sales.” While this is an understandable goal, most of your advertising cannot result in direct sales.

Make sure your message is simple and direct, and always link your advertising to a specific event or occasion. The advertised message should be secondary, complementing the primary in-store promotion.

Advertising can draw people into your store, where your other efforts can result in sales. No matter what medium you use, you must follow up with another effort to close the sale.

Be realistic: Measure your advertising’s success by how it attracts potential customers to your store, not by sales.

Get Help with Your Advertising

You can neither ignore your advertising efforts altogether, nor take direct responsibility for every detail of your program. Evaluate your own abilities honestly and decide which parts of the program to perform yourself and which parts to delegate to others.

We know retailers who are very talented copywriters, layout artists, or photographers. Others have excellent radio voices, or present an attractive television image. These people can perform certain parts of the advertising process themselves. It’s something they enjoy, and it gives them a welcome break from their daily routines without consuming all their time. If you are one of these people, use your talents to your best advantage.

However, we’ve never meet a retailer who can write copy, sketch layouts, take pictures, select media, read radio commercials, and perform television commercials while managing the store. If you want an effective advertising campaign for your business, you will have to delegate most of the execution to other competent people.

Planning

As a business owner, your primary advertising responsibility is much the same as your managing responsibility—planning for the future. In advertising, this takes the form of planning your advertising media and events for the year and establishing corresponding budgets to support them.

Point One: Objectives for the Year

As mentioned earlier, it is critical to identify objectives your advertising can affect directly. This gives you a yardstick by which to measure the effectiveness of your advertising efforts.

With that in mind, state your major objectives in terms of store traffic, or consumer awareness of your business.

Your number one objective might be to increase traffic for the year by 25 percent over the previous year.
Your second objective might be to double the number of people in your market who know your business exists and what type of merchandise it offers.

These objectives will obviously be linked to your sales goals. Stating your objectives in terms of what your advertising can directly affect will help to isolate advertising from the other components of your sales effort.

If you’re achieving your traffic and consumer awareness goals, but falling short of sales goals, you’ll know the shortcomings are not in your advertising program.

Point Two: Advertising Budget as a Percentage Of Sales

There are any number of ways to establish an advertising budget. One popular way is to wake up in the morning and see how much money you feel like spending on advertising that day. Don’t laugh—you’d be surprised at how many store owners operate that way!

If you’re going to carry on an effective advertising campaign, you have to approach advertising as an investment. That means you have to make a commitment to putting a pre-determined amount into advertising. The best way to do that is to tie your advertising investment to sales.

You can base the advertising budget on last year’s sales, or on the average of sales over the last several years. However, we recommend you base it on a percentage of your projected sales for the year you are planning. This will ensure you have sufficient advertising support to reach the sales goals.

How much should that percentage of projected sales be? That depends—in low-noise, low-competition advertising environments, you may get by with as little as two percent. If you face stiff competition, you may have to go as high as five percent.

Subtract 10 percent of your budget off the top as contingency. Set this aside for special opportunities that arise during the year which you didn’t know about or forgot when you were planning your budget. Divide the rest into the four quarters of the year, following your sales projections for those quarters.

A point of clarification—after you’ve allocated budgets to all your planned advertising events for the year, you need to break down each allocation into the media you will use to promote that event.

In-House Staff vs. Advertising Agency vs. Freelance Graphic Designer

Unless you are the Superman or the Wonderwoman of Retailing, you're going to need help creating and delivering your advertising messages. Assess your talents objectively to decide what parts, if any, of the advertising process you can perform personally. Remember: Don't try to do everything yourself.

Once you've decided which parts you are going to delegate, you have to decide whether you want to hire someone in-house to handle those details, or entrust them to an outside agency or an independent graphic designer.

The advantage of hiring someone in-house is that you have greater control over the process from beginning to end. However, unless you hire more than one person, you're not likely to get all the skills you'll need to construct a full advertising campaign. You may get a copywriter who can put together adequate layouts, or an artist who can write adequate copy, but you're not likely to get someone who can do an excellent job at both.

Today, there are many qualified independent graphic designers who can help you orchestrate an advertising budget. This is possible because of a proliferation of freelancers and computers. Graphic designers can also save you agency discounts offered by many media sources. Make sure that you ask.

An advertising agency can overcome the skill gap because agencies usually employ, or can contact, specialists in every area that you need to conduct your campaign. However, agency costs can quickly get out of hand. It sometimes seems that the agency's meter is constantly running—and that contracting with an agency is like giving them a blank check.

Your Job: Managing the Budget

If you decide to use an ad agency, you can avoid the dangers of the “blank-check syndrome” by using a few simple guidelines. We believe most retailers will be ahead in the long run if they retain an agency or graphic designer that can help direct all advertising efforts.

First, establish a solid budget within which the agency or graphic designer must operate. Make it clear to them that you expect the lion's share of the budget to go for delivery, rather than for production. Calculate a percentage of the total budget to use for production. That percentage will vary broadly, depending on the media mix you want to use. However, if you negotiate in good faith with an agency or a designer you can trust, you should arrive at a figure you both can live with.

Second, make it clear you expect to pay for finished work, rather than for effort or time. If you ask someone to produce a print ad, let them know it's the final product you're interested in, not the amount of time they put into it.

Third, in conjunction with the second guideline, get as many solid quotes on costs as you can up front. Explain very clearly to the agency or designer exactly what you want, and have them make a bid on the cost. Recognize, however, that if you want your costs up front, you will have to communicate very clearly what you want them to produce. After you have worked with the same people for a while, you'll find less and less need for costly revisions.

The key to successful advertising production — whether you hire staff, an agency, or a designer — is to find people you can trust and let them do their jobs.

Don't hang over their shoulders every minute asking the copywriter why he put that comma there, or the artist why she placed your phone number on the left side of the page. Creative people work best when you leave them alone. Concern yourself with the overall program; let the specialists take care of the details.

Tweak the Plan

Once you begin to plan your advertising, you’ll be able to take control of it without being overwhelmed.

A sound budget plan will also free you from all the persistent advertising salespeople. Listen to their offers, but instead of sweating, coolly tell them you already have your advertising dollars budgeted. (Don’t tell them when you do your budget or you’re in for trouble!)

With a balance of science and art, you can take the voodoo out of advertising!

Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"