How to Evaluate Your Advertising Results

Because your budget is limited you must see that your advertising does the job you want it to. Measuring your advertising results on a continuing basis can help you see that your ads keep your business's name before the public and contribute to increasing sales.

Planning is important. Before you can evaluate results, you must decide what purpose your ads should accomplish. This Guide gives pointers on planning ads and discusses several ways you can compare advertising and sales.

Advertising is necessary today. Whether you have a small business or a large one, you must tell groups of people who you are, what you sell, and where you are located. You must tell them when they wish to hear or read about such things. So you must place ads in newspapers, on radio, TV, and outdoor posters, or send out direct mail pieces.

As a business owner-manager, you know the money that you spend on advertising must return enough sales and profits in added business to justify the cost of the advertising. In most firms, neither time nor money is sufficient to engage in complicated ad measurement methods. Even so, you can use certain rule-of-thumb devices to get a good idea about the results of your advertising.

What Advertising Results Do You Expect?

Essentially, measuring results means comparing sales with advertising. In order to do it you have to start early in the process - before you even make up the advertisement. The question to the answer is: What do you expect the advertising to do for your firm?

Immediate response advertising results

Is designed to cause the potential customer to buy a particular product from you within a short time - today, tomorrow, the or next week. An example of such decision-triggering ads is one that promotes regular price merchandise with immediate appeal. Other examples are ads which use price appeals in combination with clearance sales, special purchases, seasonal items, (for example, white sales, Easter sales, etc.), and "family of items" purchases.

Such advertising should be checked for results daily or at the end of 1 week from appearance. Because all advertising has some carry-over effect, it is a good idea to check also at the end of 2 weeks from advertising runs, 3 weeks from runs, and so on to insure that no opportunity for using profit-making messages is lost.

Attitude Advertising results

Is the type you use to keep your store's name and merchandise before the public. Some people think of this type as "image-building" advertising. With it, you remind people week after week about your regular merchandise or services or tell them about new or special services or policies. Such advertising should create in the minds of your customers the attitude you want them to have about your store, its merchandise, its services, and its policies.

To some degree, all advertising should be attitude advertising. It is your reputation builder.

Attitude (or image-building) advertising is harder to measure than immediate response advertising because you cannot always attribute a specific sale to it. Its sales are usually created long after the ad has appeared. However, you should keep in mind that there is a lead time relationship in such advertising. For example, an ad or a series of ads that announces you have the exclusive franchise for a particular brand starts to pay off when you begin to get customers who want that brand only and ask no questions about competing brands.

In short, attitude advertising messages linger in the minds of those who have some contact with the ad. These messages sooner or later are acted upon by people when they decide that they will make a certain purchase.

Because the purpose of attitude advertising is spread out over an extended period of time, the measurement of results can be more leisurely. Some attitude advertising - such as a series of ads can be measured at the end of 1 month from the appearance of the ads or at the end of a campaign.

Planning for Advertising Results

Whether you are trying to measure immediate response or attitude advertising, your success will depend on how well the ads have been planned. The trick is to work out points against which you can check after customers have seen or heard the advertisement.

Certain things are basic to planning advertisements whose results can be measured. First of all, advertise products or services that have merit in themselves.

Unless a product or service is good, few customers will make repeat purchases no matter how much advertising you do.

Many people will not make an initial purchase of a shoddy item because of doubt or unfavorable word-of-mouth publicity. The ad that successfully sells inferior merchandise usually loses customers in the long run.

Marketers, as a rule, should treat their messages seriously. Humor is risky as well as difficult to write. Be on the safe side and tell people the facts about your merchandise and services.

Another basic element in planning advertisements is to know exactly what you wish a particular ad to accomplish. In an immediate response ad, you want customers to come in and buy a certain item, or items in the next several days. In attitude advertising, you decide what attitude you are trying to
create and plan each individual ad to that end.

Plan the ad around one idea

Each ad should have a single message. If the message needs reinforcing with other ideas, keep them in the background. If you have several important things to say, use a different ad for each one and run the ads on succeeding days or weeks.

The pointers which follow are designed to help you plan ads so they will make your store stand out consistently when people read or hear about it:

Identify your business fully and clearly

Make sure your radio and television ads identify your sponsorship as fully and frequently as possible without interfering with the message. Logotypes and signatures in visual ads should be clean-lined, uncluttered, and prominently displayed. Give your address and telephone number. It's possible to use a musical or sound effect signature identified with your store to
create a "logo" on radio, too.

Before opening your Company you must decide upon the general Cost Level you expect to maintain. Will you appeal to people buying
in the high, medium, or low price range? Your choice of location, appearance of your establishment, quality of goods handled, and
solutions to be offered will depend on the customers you hope to bring, and so will your prices.

After establishing this general price level, you are ready to cost Individual products. In general, the purchase price of an item
must cover the cost of this product, the other costs, and a profit. Therefore, you'll have to markup the item by a specific sum to
cover costs and earn a profit. In a company that sells few things, total prices can readily be allocated to each item and a markup
quickly ascertained. With many different items, allocating costs and determining markup might need an accountant. In retail
operations, products are often marked up by 50 to 100 per cent or more just to earn a 5 percent to 10% profit!

Let's work through a markup example. Suppose your company sells 1 product, Merchandise A. The provider sells Product A for you for
$5.00 each. You and your accountant determine the prices involved in selling Product A are $4.00 each item, and you desire a $1
per item gain. What is your markup? Well, the selling price is: $5 and $4 and $1 or $10; the markup consequently is 5. As a
percentage, it is 100%. So you have to markup Product A by 100 percent to produce a 10% profit!

Many small business managers are interested in knowing what Industry markup standards are for various products. Wholesalers,
distributors, trade associations and business research companies publish a huge assortment of such ratios and business statistics.
They're useful as guidelines. Another ratio (in addition to the markup percent ) significant to small firms is your Gross Margin
Percentage.

The GMP is similar to your markup percent but whereas markup Identifies the percent above the price to you of each product that
you must set the selling price so as to cover all other costs and earn profits, the GMP indicates the association between sales
revenues minus the expense of the item, which can be your gross profit margin, and your earnings earnings. Exactly what the GMP is
telling you is that your markup bears a certain relationship to your sales earnings. The markup percent along with the GMP are
basically the same formula, with the markup referring to individual item pricing and GMP referring to the item costs times the
number of items sold (volume).

Maybe an example will clarify the point. Your firm sells Product Z. It costs you $.70 each and you choose to sell it for $1 per
cent to cover costs and gain. Your markup is 43%. Let up state you sold 10,000 Merchandise Z's Last month thus producing $10,000
in revenues. Your price to buy Product Z was $7000; your gross margin was $3,000 (revenues minus cost of products sold). This is
also your gross markup for your month's volume. Your GMP would be 30%. Both of these percentages utilize the exact same basic
numbers, differing just in division. Both are used to establish a pricing method. And both are published and can be utilized as
guidelines for small businesses beginning out. Often managers determine what Gross Margin Percentage they'll have to earn a profit
and just visit a printed Markup Table to find the percent markup which correlates with that margin requirement.

While this discussion of pricing might seem, in certain respects, to Be directed just to the pricing of retail product it can be
applied to other types of companies as well. For solutions the markup has to pay for selling and administrative costs in addition
to the direct cost of performing a particular service. If you are manufacturing a product, the costs of direct labor, materials
and supplies, components purchased from different concerns, special equipment and tools, plant overhead, selling and
administrative expenditures have to be carefully anticipated. To compute a price per unit needs an estimate of the number of units
you plan to produce. Before your factory becomes too large it would be wise to consult an accountant about a cost accounting
system.

Not all things are marked up from the average markup. Luxurious articles Will require more, staples less. For example, increased
sales volume by a lower-than-average markup on a specific item - a"loss leader" - can bring a greater gross profit unless the
purchase price is lowered too much. Then the resulting increase in sales won't increase the entire gross profit enough to
compensate for the low cost.

Sometimes you Might Wish to market a certain item or service in a lower Markup in order to boost store visitors with the hope of
increasing earnings of Regularly priced merchandise or generating a large number of new service contracts. Competitors' prices
will also govern your costs. You Can't sell a Product if your competition is greatly underselling you. These and other Factors May
cause you to change your markup among items and services. There is no magic Formula which will work on every product or every
service all of the time. However, You ought to remember the general average markup which you want to generate a Gain.

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