Planning and Executing a Retail Advertising Campaign

Small Business Retail Advertising Tips is not merely an element of business expense, it is an investment in building your sales. The future growth of your business will be influenced by your ability to plan and execute an effective advertising program. This Chapter offers guidelines to help you plan your advertising budget, select media, use cooperative advertising, and prepare the ad itself.

CUSTOMERS WANTED, NO EXPERIENCE NECESSARY was the sign one hobby and toy retailer displayed across an entire window. Perhaps the owner thought this was funny, but valuable advertising space was being wasted.

Windows are valuable attention-getters. This retailer should have featured products, prices, or "specials" in stead. The retailer not only missed the opportunity to advertise products, but also missed the chance to project the store image to the passing public.

In retail merchandising, advertising begins with the store and its windows. Rental costs depends on location and customer traffic so window displays have special values. One study by a trade publication allocated as much as 40 percent of the store's rent to its window space. The giant stores in New York, Chicago, or Los Angeles fully capitalize their window value, but smaller stores often waste them.

Start With the Retail Advertising Sales Budget

The sales budget is the foundation of all business. It affects profits and costs, including the advertising investment. In preparing the advertising budget, first decide what percentage of your anticipated sales volume you will allocate to advertising. This percentage will vary according to the condition of the business, local competition, and the nature of your products. Trade journals offer comparative percentage statistics on an industry-wide basis. By multiplying your total anticipated sales by the percentage, you will get the total amount of advertising money you can budget for the year.

Then, many owner-managers find it convenient to base their advertising on their planned sales for each month. For example, if March contributes 8 percent of the year's sales, they plan to spend 8 percent of the advertising budget for that month. This way you can base your advertising for each month on the planned sales for that particular month.

One exception to this approach is the Christmas season, which contributes as high as 25 percent of yearly sales for some businesses. It would probably be unwise to spend that much of your total budget for that period. However, you can build some flexibility into your budget if you plan in six-month blocks. This will allow you to spend part of your Christmas advertising money in October and November in preparation for Christmas. Of course, this will vary from business to business.

Finally, you should allocate any money you will need to accomplish a specific task you have planned. Examples of this task approach are: starting a new business with the announcement of the "grand opening," introducing a new product, or conducting a special promotion. This allocation is simply added to the regular budget.

Retail advertising is a completely controllable expense. The function of the budget is to control advertising expenditures. This can be done through a monthly tabulation, as shown in the following chart. With this record, the danger signals flash when the budget is over-extended.

The accounts listed in the chart are not comprehensive, they serve only as examples. For instance, some companies include publicity in the advertising budget, others treat it separately.

Retail Advertising Budget

ACCOUNT Month Year to Date

Budget / Actual / Budget / Actual

Media

Newspapers ______ ______ ______ ______

Radio ______ ______ ______ ______

TV ______ ______ ______ ______

Literature ______ ______ ______ ______

Other ______ ______ ______ ______

Promotions

Exhibits ______ ______ ______ ______

Displays ______ ______ ______ ______

Contests ______ ______ ______ ______

Advertising Expense

Salaries ______ ______ ______ ______

Supplies ______ ______ ______ ______

Stationary ______ ______ ______ ______

Travel ______ ______ ______ ______

Postage ______ ______ ______ ______

Subscriptions ______ ______ ______ ______

Entertainment ______ ______ ______ ______

Dues ______ ______ ______ ______

Totals ______ ______ ______ ______

Profile Yourself and Your Customers

The next step in your advertising plan is to take a good look at both yourself and your customers. You will need the answers to such questions as:

What business am I in?

What quality of merchandise do I sell?

What kind of image do I want to project?

How do I compare with competition?

What customers services do I offer?

Who are my customers?

What are their income levels?

Why do they buy from me?

By profiling yourself and your customers in this way, you will be better able to direct your sales message to those most likely to buy and thus make more effective use of your advertising dollar. For example, if you own a clothing store and are planning a sale on jeans and t-shirts, a message on a local popular radio station might be a better choice than a more distant classical music station. You might also specify a time for broadcast that is after school hours if your anticipated customers are teenagers.

Retail Advertising Media

When you know what you want to advertise and whom you want to reach with your message, you must select the advertising medium to reach them most effectively. Because of the local nature of their operation, most retailers find newspapers, radio, and direct mail the most commonly available choices. However, to reach wider markets, you may consider other media such as magazines, television, billboards, and transportation signs.

Newspapers

Some retailers consider them a primary advertising medium for several reasons. They offer the advantages of local coverage and precise timing. In addition, results may be measured in terms of specifically-featured products or prices. Newspapers also lend themselves to promotional tie-ins such as coupon use of contests. Rates are related to circulation and vary according to the number of newspaper "lines" contracted over a period of time.

There is some difference in thought about the best technique for newspaper advertising. Some owner-managers prefer four quarter-page ads to one full page. Others think it better to have fairly large-sized ads and run them so they really make an impact. Others successfully use the skip method where they run several ads to make an impact and then skip a period of time with no advertising.

Prior to opening your Company you Need to decide upon the general Cost Level you expect to keep. Will you cater to individuals
buying in the high, medium, or low budget? Your choice of location, appearance of your institution, quality of merchandise
handled, and services to be provided will depend on the customers you hope to bring, and so will your costs.

After establishing this overall price level, You're ready to cost Individual items. In general, the purchase price of an item must
cover the cost of this product, all other costs, plus a profit. Thus, you will need to markup the item by a certain amount to
cover costs and make a profit. In a company which sells few things, total prices can easily be allocated to each product and a
markup quickly determined. With a variety of items, allocating costs and determining markup might require an accountant. In retail
operations, goods are often marked up by 50 to 100 percent or more just to make a 5% to 10% gain!

Let's work through a markup illustration. 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 costs entailed in selling Product A are $4.00 per item, and you desire a
$1 per item gain. What's your markup? The sale price is: $5 plus $4 and $1 or $10; the markup therefore is 5. As a percent, it's
100%. So you need to markup Product A by 100% to make a 10% gain!

Many small business managers are interested in understanding what Industry markup standards are for a variety of products.
Wholesalers, distributors, trade associations and company research companies publish a massive variety of these ratios and
business statistics. They are useful as recommendations. Another ratio (in addition to the markup percentage) important to small
firms is the Gross Margin Percentage.

The GMP is comparable to your markup percent but whereas markup Identifies the percentage over the price to you of every product
that you must set the selling price in order to cover the other expenses and earn profits, the GMP shows the association between
sales revenues minus the expense of the item, which is your gross margin, and your sales revenues. What the GMP is telling you is
your markup bears a certain relationship to your sales earnings. The markup percentage and the GMP are essentially the exact same
formula, together with the markup referring to individual product pricing and GMP referring to the item prices times the number of
items sold (quantity ).

Maybe an illustration will clarify the point. Your company sells Product Z. It costs you $.70 each and you decide to sell it for
$1 per cent to cover costs and profit. Your markup is 43%. Let up state you sold 10,000 Merchandise Z's Last month thus producing
$10,000 in earnings. Your cost to buy Product Z was $7000; your gross profit margin was $3,000 (earnings minus cost of products
sold). Additionally, this is your gross mark for your month's volume. Your GMP will be 30 percent. Both these percentages use the
exact same primary amounts, differing just in branch. Both are used to establish a pricing method. And both are published and may
be utilized as guidelines for smaller businesses beginning out. Often supervisors determine what Gross Margin Percentage they will
have to make a profit and simply go to some published Markup Table to find the percent markup that correlates with that margin
condition.

While this discussion of pricing may seem, in some respects, to Be directed just to the pricing of retail product it could be
applied to other types of businesses as well. For solutions the markup must cover administrative and selling costs in addition to
the direct cost of performing a particular service. If you are producing a product, the costs of direct labour, materials and
supplies, parts purchased from different concerns, special equipment and tools, plant overhead, selling and administrative
expenditures must be carefully anticipated. To compute a cost per unit needs an estimate of the number of components you plan to
produce. Before your mill gets too big it would be wise to consult an accountant in a cost accounting system.

Not all items are marked up from the average markup. Luxurious articles Will take more, staples . For instance, increased sales
volume by a lower-than-average markup on a specific thing - a"loss leader" - may bring a higher gross profit unless the purchase
price is reduced too much. Then the consequent increase in sales won't raise the entire gross profit enough to compensate for the
minimal cost.

Sometimes you may wish to market a certain item or service in a lower Markup in order to boost store traffic with the hope of
increasing earnings of Regularly priced product or creating a high number of new service contracts. Competitors' costs will also
regulate your prices. You cannot market a Product if your competition is greatly underselling you. These and other Factors Can
make you change your markup one of items and services. There is no magic Formula that will work on every product or every service
all of the time. But You should keep in mind the general average markup that you need to make a Gain.

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