Is your advertising maximising your profit?
The first stage in finding out if your advertising is maximising your profit is that when a customer makes contact with your business you need to know where or how they found out about you. This will enable you to get the most from your advertising and promotion dollar by using the most effective promotional means.
There are many methods to gain the ‘where’ or ‘how’ information for example:
In a face to face or telephone conversation simply ask: “How did you find out about (us, our business, that product, that service)?:” and record the answer.
You may “code” the advertisement by directing the customer to ask for a particular member of staff e.g. John. This works well if this contact is fictitious as then you know all enquiries for John must be from your advertisement.
You may ask your customers to bring all or part of an advertisement into you for them to be able to claim the offer. For example, a coupon to fill in and send to you, or simply ask them to bring in the ad or flyer.
What are you going to do to measure your advertising response?
Knowing which of your promotions achieved the greatest number of enquiries is very important but at the end of the day the promotion that ‘sold’ the most product for the dollar invested is your best investment. You need to know the sales dollars gained from promotional dollars spent, and in more detail, you need to know the gross profit generated from the promotional dollar invested.
For example, if you spend $100 on an advertisement and your gross profit margin is 25%, then you will need to generate $400 in sales just to cover the cost of the advertisement. You should do this calculation for every advertisement you place so that you know the minimum dollar value of sales that you need to generate from each advertisement to cover its cost.
How to Tell if your Advertising is Maximising your Profit?
Advertising is probably the most widely used tool in the promotional mix. The purpose of advertising is to inform customers of your products/services and to persuade them to purchase them in preference to the products/services of competitors.
Advertising can be undertaken through a variety of media including newspapers, journals, magazines, brochures and pamphlets, telephone directories, trade directories, radio, television, movie theatres, outdoor advertising, direct mail, point of sale displays and the internet.
Marketing and Advertising
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