To ensure the development advertising campaign and its successful implementation, it is important to determine the advertiser's possible allocations for these purposes. It is important for any advertiser to get the most bang for their buck.
In the process of implementing an advertising campaign, the main costs fall on advertising in media. mass media(buying space or time). However, significant costs are associated with the development and production advertising products. The ratio of the cost of production and placement of advertising depends on the specifics of the advertised product, as well as the chosen means of advertising distribution.
Planning in advertising management has several stages: defining the goals (tasks) of advertising; definition of the market segment; choice of the main theme of advertising; choice of means (channel) of placement; developing an advertising budget.
Stage 1. Definition of goals. This paper provides a brief description of the process of determining the objectives of the advertising that the manufacturing company is going to develop. This process can be divided into two stages. At the first stage, the management of the company, responsible for promotional activities defines what advertising should do for the organization. For example, by analyzing marketing performance, the company's management comes to the conclusion that its product and its positive traits not properly valued in the market. Thus, the need to strengthen the advertising of this product is recognized.
The second stage of the advertising goal determination process is the consideration of what kind of advertising should be given, i.e. what changes need to be made to the company's advertising campaign so that the consumer can more correctly, in favor of the company, evaluate its product. In other words, what advertising ways and by actions it is possible to fulfill the marketing task of the company - to achieve an increase in sales of goods. The main goal of advertising or the entire advertising campaign is determined. In this case, this goal can be characterized in terms of image advertising as the goal of attracting consumers' attention to the product, making them believe its content (message about the excellent qualities of the product), thereby changing their initial opinion about this product, which did not quite satisfy the company.
Stage 2. Definition of a market segment. When planning an advertising campaign, the contingent of potential buyers of the product that the company is counting on or that needs to be won must be clearly defined. The analysis of the consumer audience can be carried out in two directions.
First, a market segment is identified, i.e. the most common categories of buyers of the company's goods. Quantitative indicators of the needs of this group of people for goods, including the goods of this company, are analyzed.
The second direction is a more detailed analysis of the purchasing power and needs of a selected segment of consumers. This is an analysis of the individual characteristics of consumers within the segment. Its important side is the consideration of the market segment from the standpoint of identifying different groups: possible (potential) buyers, new, regular, etc. Finding out what needs of these groups can be satisfied when they buy the company's product is the key to developing effective advertising for this product.
Stage 3. Selecting the main theme of the advertisement. The effectiveness of advertising depends on how clearly and clearly it conveys to the consumer information about the high consumer properties of the advertised product. The topic of advertising, therefore, must be presented in two aspects: it must be attractive to the consumer and well understood by him. The first aspect is achieved through an effective title, slogan, etc. The second aspect is determined by the size of the advertisement: the advertisement as a whole should be short, but of such volume (or length) as to contain the main information about the product.
Stage 4. Choice of means (channel) of distribution of advertising. This stage is very important in planning an advertising campaign, since different media essentially require different types of advertising materials. And before proceeding to the stage of organization (development) of advertising, managers involved in advertising at an enterprise or in an advertising agency need to determine in which media the manufacturer's advertisements will be placed.
The approach to the choice of media should be based on an analysis by an advertising manager (management team) of those possible channels through which it is most easier and faster to reach the attention of the target audience of consumers. The manager works in this case from the opposite side - from the consumer: a permanent, potential, new buyer of the company's goods. It compares the consumer characteristics of the target audience with the possibilities of influencing those with the help of the chosen media. The choice of advertising medium also depends on the goals of the company's advertising management and the content of advertising messages to the consumer.
the largest coverage of the consumer audience;
delivering a message to senior officials of various organizations;
chances to do right choice significantly increase if the advertiser once again carefully examines the firm's marketing performance data. Thus, information about the segment of buyers, in terms of demographics, social status, lifestyle, cultural characteristics, allows you to choose the media that best meets the characteristics target market. These will be the means that, to a greater extent than others, are used by people belonging to the category of potential and real buyers of the company's goods. Usually these same funds have minimal distribution among persons who are not potential buyers. For example, magazines are viewed as an advertising medium that reaches an important segment of the consumer audience.
The correct approach is to advertise in the media that most potential buyers read or listen to. So, for firms operating in local, regional markets, the most appropriate would be the use of local funds. Advertising firms operating in the national market choose the national media accordingly, which best cover the geographic areas where their products are sold. Local press, radio, television can also be used as additional means of advertising distribution.
The purpose and theme of advertising messages also greatly influence the choice of advertising channel. Communication about the appearance of a new product usually requires the creation of the effect of the extreme importance and usefulness of this product and even the relevance of its purchase. This effect is achieved by advertising on television and in newspapers.
Television and radio, working on a temporary principle, gather at different times of the day a different audience in terms of composition and size. This factor must be taken into account by the advertiser. By choosing the time of transmission, for example, of his advertising message, he essentially chooses his target audience and in the amount that is most beneficial to him.
There is another type of criterion for choosing an effective advertising medium - it is purely quantitative criterion, expressed in the cost of advertising per one or a thousand consumers. Such a quantitative analysis is not particularly difficult for a specialist and is performed on the basis of data on the cost of advertising media and readership coverage. This criterion quantitative analysis can be supplemented by one more - the calculation of the required number of repetitions of advertising to reach the required number of consumers.
Stage 5. Planning an advertising budget. This is one of the most difficult problems. The cost of advertising in the media can be very significant. For example, in the early 90s, a one-time display of a typical commercial on television cost American advertisers between $25,000 and $100,000. The cost of placing advertising materials is gradually increasing all over the world. Over the past 10 years, it has increased significantly - two to three times.
At the same time, it should be said that in the general system of the company's expenses for the production and sale of goods, advertising costs do not look so significant. Moreover, the high costs of advertising are actually not so high, given how much profit can be generated by effective advertising and how many potential buyers it reaches. Thus, advertising on a television channel costs less than 1 cent per person or family.
Average industrial enterprises spend no more than 1% of sales on advertising. Although large corporations, well aware of the benefits of effective advertising, spend more significant amounts on large and small advertising campaigns. The advertising budget of many of them reaches 5 - 10% of sales, and in the perfume industry it reaches 20 - 30%.
There are several methods for planning an advertising budget. They are associated with two approaches:
the budget is planned on the basis of an analysis of the effectiveness of the company's advertising activities;
the budget is planned without taking into account the analysis of the profitability of advertising campaigns.
The first approach is very complex and can only be done by advertising specialists who have very high professional training and a staff of employees who are able to conduct not only a thorough study of the performance of past advertising campaigns, but also make adequate forecasts for the future. Specific figures for advertising costs are planned based on the profitability that it can bring. This method requires the use of specially developed methods for determining profitability at different stages of an advertising campaign and allows you to additionally identify at what stage the advertising of a product is most effective, and at what stages its costs can be reduced. So, one of the well-known researchers of the advertising business K.S. Palda conducted a special analysis of the possibilities of developing an effective (necessary) advertising budget for a corporation engaged in the manufacture and sale of patent medicines. The study found that one dollar spent on advertising generates only $0.50 of additional sales if the advertising campaign lasts a short time; however, the profitability of one dollar of advertising costs in a long-term campaign reaches $1.63. Thus, thanks to the results of the study by Palda and his collaborators, the management of the company not only determined the allocations for advertising, but also unhesitatingly chose the strategy of a powerful advertising campaign. In most cases, however, an organization's advertising budget is calculated using methods that are not directly related to its profitability. The most famous of them are the following: the percentage method; opportunity method; parity method; method of goals and objectives.
percentage method. This is the most traditional and most easy way advertising budget planning. A certain percentage of sales over the past year is allocated. In this case, allocations for advertising activities increase if sales of goods were high, and, conversely, decrease with a decrease in sales. Recently, many firms have been using this method, but not in relation to past sales, but to those expected for the next year.
Opportunity method. Its essence lies in the fact that the company limits its advertising budget to the amount that it can spend on advertising. In practice, such planning of the advertising budget is carried out according to a kind of residual principle: first, appropriations are allocated for all production, management and other activities, and the remaining funds can be used in advertising business firms. With this approach, the correct choice of the required amount of allocations for advertising is not at all guaranteed. As a rule, this amount will be much lower than required, and in some cases (if the company is very rich) even exceed it. Budget planning by this method is based on the assumption of its minimum sufficiency.
parity method. This is a method of planning an advertising budget, which is carried out taking into account the activities of competitors. Many leaders of organizations understand that in order to retain their market niche, they must spend at least as much on advertising as their competitors spend. The task of the marketing manager in this case is to find information about the costs of competitors for their branded products. Such information is generally available, since the prices for the main means of distribution of promotional materials are known.
Method of goals and objectives. Firms that use this method in developing an advertising budget begin by defining the specific goals of a future advertising campaign. For example, the company "Texasgulf" before the start of its advertising campaign had a market share of about 5% and solid buyers (six organizations) of its product - phosphoric acid. The goal of advertising was set - in a short period of advertising to increase the number of consumers who know about the company and its product by 10%. The advertising campaign was designed to promote phosphoric acid as a very "clean and green" product.
In accordance with this, a certain amount of money was allocated for promotional activities. It turned out that the developers of the budget were not mistaken. Advertising fully paid back the costs and brought significant profits, since the goal was not only achieved, but its results were higher - a 20% increase in the number of potential and actual buyers.
Functions of organization and coordination. In advertising management, these two functions operate simultaneously, since the creation of an advertisement or an advertising campaign is difficult process, which involves several subjects and objects of management at once: an advertiser, an advertising agency, means of advertising distribution, as well as, in some cases, a significant contingent of dealers and intermediaries of the marketing system of a manufacturer of goods. Accordingly, at all stages of such a process, along with organizational actions and operations, there will also be elements of coordination or adjustment of the interaction of all its participants.
It is possible to single out two aspects in the organizational (including coordinating) function in advertising management. The first, or narrow, aspect is the management of the creation of promotional materials. The second, broader aspect is the management of the organization and conduct of an advertising campaign, which, in addition to the developed advertisements, includes the issues of means of their placement, coordination of various types of advertising in a common system, their quantity, volume, as well as coordination of actions to achieve the main goal of the entire advertising process.
At the stage of advertising planning, the company's management determined its main goals and main theme. The goals must be achieved, and the subject of the message must reach the consumer if effective advertising is to be created. Thus, at the stage of organization, two categories of employees are involved in advertising activities: managers and creative workers who will develop the text and design of advertising. The main role, of course, belongs to the latter, although professional managers are needed to coordinate and manage their activities, and often as consultants on organizational and even creative issues.
The size of the advertisement is determined by the characteristics of the advertisement, the need to repeat it, the amount of advertising allocations, the rates for placement, etc. You should not reserve advertising space without making sure that the advertisement will fit exactly into the available space. If you buy too small an area for advertising, then the ad may not "fit" into it. On the other hand, the acquisition of more space than required will lead to inefficient spending of the advertising budget. In addition, practice confirms the riskiness of a one-time publication in a magazine or newspaper of one large format ad, since a series of ads (even smaller ones) will be more effective and possibly cheaper.
The evaluation of the merits of publications selected for use in the framework of the planned advertising campaign is mainly carried out by an expert. To this we can add a formal method of comparison, which turns out to be useful at the stage of preliminary planning of an advertising campaign - determining the cost of publishing one calculated line of an advertising text in 1 million copies of a circulation (the so-called milling rate). But this indicator cannot always serve as a truly reliable and accurate benchmark, since the size of the pages in different publications is different and, in addition, their readership may differ.
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The successful existence of any enterprise today is impossible without advertising. It is not only responsible for the recognition of the company, but also promotes and attracts new suppliers and customers. Often, investments in advertising represent a significant part of the company's budget, along with other expenses. In order for these costs to be justified, it is necessary to carefully monitor the results of ongoing campaigns, as well as monitor the strategy for forming an advertising budget.
Why is it necessary to form an advertising budget for a company?
The types and purposes of advertising may vary depending on the characteristics of the organization and the product it offers. The formation of an advertising budget helps to determine the audience of ongoing campaigns and ways to attract the attention of potential consumers. Since advertising costs can be attributed to current costs, the effectiveness of activities can be tracked quite easily. However, the specifics of the market, depending, for example, on seasonality, may delay the receipt feedback from the funds invested in promotion. Therefore, these costs can be classified as long-term investments. Like other major investments, advertising spending must have a significant financial value in order for the effect of ongoing campaigns to be comparable to the cost of investments.
Formation of the advertising budget is based on the principle of reasonable spending of financial resources. Large costs may not always lead to the desired results if the effectiveness of investments is not calculated. Therefore, the issue of forming an advertising budget must be approached from the point of view of the experience of past advertising campaigns and the specifics of the organization, taking into account the creative potential of specialists responsible for advertising.
What factors influence the formation of an advertising budget
The most significant factors to consider:
Market Coverage
The planned target audience can determine the size of the advertising budget. Market coverage can be carried out both nationally and regionally. As a rule, when launching a new product on the market, large players can afford to operate within a specific country or even continent. The advertising budget of such companies takes into account possible risks. However, smaller or inexperienced organizations prefer to cover the market gradually by conducting advertising campaigns in certain regions. The formation of the advertising budget in this case is free from the risks associated with the possible inefficiency of promotions on a national scale.
The choice of the market segment to which advertising is oriented is largely determined by demographic characteristics. The smaller the audience, the more effective the campaign becomes through specific advertising media. If coverage of a heterogeneous market is needed, more advertising methods of attraction must be used, which can significantly reduce cost effectiveness. Reaching such an audience requires the use of television, the national press, etc., and such means are very expensive, while the effectiveness of advertising may not be high enough.
The role of advertising
It is no secret that the sales volume directly depends on the effectiveness of the ongoing advertising campaign. If a manufacturer chooses to deliver its product to stores before the release of advertising, this contributes to greater recognition of the product among buyers. This method is widely used by companies producing consumer goods. In this case, the formation of the advertising budget depends on the results of such a "launch": the higher the level of sales, the lower the cost of advertising, and vice versa. At the same time, the budget also takes into account the costs of demand monitoring.
In the industrial goods market, a large role is given to personal sales, and advertising is of an auxiliary nature. Therefore, when selling these products, there is a reduction in the advertising budget, the formation of which depends on demand.
The formation of the advertising budget is also influenced by additional marketing tools that are used to create distribution channels. Often, printed materials (booklets, coupons), distribution of samples, discounts to retailers, etc. are used to stimulate demand.
Product life cycle
The launch of a new product requires a more intensive advertising campaign. At the same time, the return on such advertising is often very low. This is due life cycle a product in the first year of which the demand is not yet large enough to justify the investment in the advertising budget. The formation of product recognition depends on the cost of "entry" to the market, which includes the establishment and promotion of distribution channels, a period of trial sales, etc.
As soon as the demand for a novelty has reached the predicted level and the amount of profit has reached or exceeded the cost of investments, the manufacturing company can choose one of three options for further development:
- stimulating further growth;
- maintenance of the achieved position;
- obtaining the maximum profit within the existing situation.
To stimulate further growth, it is necessary to significantly expand the advertising budget, the formation of which can lead to a drop in revenues for a short period of time. At the same time, the probability of a more successful entry into the market and the capture of its significant share increases. The sustaining level strategy is widely used by companies that have a strong position in a fully mature market. At the same time, the advertising budget remains practically unchanged, since no additional campaigns are required to stimulate demand. If the company wants to "squeeze" the maximum profit from the achieved position, it reduces advertising costs in addition to the planned revenue growth.
Product properties
Unique products with properties highly valued by consumers can significantly reduce the advertising budget spent on their promotion, the formation of which can even be canceled due to brand recognition and the absence of the need for aggressive advertising. As a rule, in order to strengthen the position of a given product in the market, minimal advertising messages are sufficient. However, if a manufacturer wants to maintain a leading position in the market in the long term, it is necessary to maintain the status of the product by conducting advertising campaigns to keep consumer "loyalty" to the brand.
Ratio of profit and sales
The ratio of profit and sales can have the most direct impact on the formation of an advertising budget. The cost of a unit of goods is the sum of these two indicators. If the profit is significant with a relatively small sales volume, the formation of an advertising budget does not have a rigid financial framework. At the same time, the significant size of sales justifies the small amount of profit per unit of production.
Marketing research has shown that well-known products that have significant advertising support can have a higher price than competitors that do not invest significant amounts in promotion. In this regard, the consumer may get the impression that he is overpaying for the brand, since a significant part of the advertising budget is included in the unit price of the product. However, unjustified overpricing of products is hampered by consumer demand. The buyer may violate his "loyalty" to the brand if he finds that the product offered by a competitor has similar properties at a lower price.
Competitors' expenses
The amount of advertising spend may be determined by the size of the planned market share of your products. The percentage of consumers attracted by the ongoing campaign is approximately equal to the part of the market that your product occupies. The formation of the advertising budget should take into account the volume of sales, which determines the amount of funds allocated for advertising. The desire to increase the advertising budget in order to attract more attention of consumers and gain more market share does not always guarantee the desired result, since the ratio of shares may be well-established, and the ongoing campaign may not be effective enough. Therefore, monitoring the advertising costs of competitors does not always reflect their real position in the market. However, this indicator should be taken into account when analyzing consumer preferences.
Funding level
The formation of the advertising budget must necessarily take into account the possible risks arising from the ineffectiveness of the ongoing campaign or the wrong way of promotion. The probability of failure proportionally increases when it comes to entering the national market. A relatively small number of companies can afford to invest significant amounts in the formation of an advertising budget. Firms with relatively low advertising budgets can start by gradually capturing the market, increasing advertising spending as sales grow. Overstating the advertising budget by reducing subsidies for other areas of organizational activity can ultimately lead to the bankruptcy of the enterprise, since such a risk is not always justified in the long term.
Basic principles of advertising budget formation
- Top-down principle. With this method, targeted funds for advertising are allocated simultaneously with investments in other areas of organizational activity. The final distribution of the advertising budget is carried out by the responsible department. An undoubted advantage of this principle is the possibility to consider subsidies for advertising as part of a single marketing strategy and adjust the selected promotion methods in accordance with the current market needs. However, with such a wide coverage, the merits of some advertising media can be overlooked, due to the lack of awareness of the staff responsible for the distribution of budgetary funds.
- The bottom up principle. In this case, the formation of the advertising budget is based on specific tasks at the immediate moment. That is, the allocation of funds for advertising occurs on the basis of estimates for the planned campaigns. The undoubted advantage of this method is close attention to the actual tasks of promotion, while the probability of exceeding the advertising budget is quite high.
It is impossible to single out one of these principles as the only true one. The realities of the Russian market dictate their own rules. The advertising budget must be flexible and responsive to changing political or economic situations. In order to choose best way formation of the advertising budget, it is necessary to rely on the specific experience and practice of conducting similar campaigns in the past.
The most common methods of forming an advertising budget
The concept of "advertising budget" refers to new categories of the modern market. However, even before the advent of the current methods of promotion, the allocation of funds for advertising a product or service by companies of those years was widely practiced. Therefore, the methods of forming an advertising budget can be divided into modern and traditional. The new methods are mostly based on mathematical calculations that require the processing of a large amount of information in a short time, and therefore, without the involvement of computers and the corresponding software is indispensable here. However, the Russian market is rather unstable and is subject to the influence of political and economic macro-changes. Therefore, it seems unreasonable to completely reject the time-tested methods of forming an advertising budget.
Traditional methods include:
Method 1. Method of calculation "from cash"
Many companies are engaged in the formation of an advertising budget, based on the available amount of funds. This method does not take into account the influence of promotion methods on sales volume. In this regard, the advertising budget has an indefinite size, within which it is almost impossible to build a competent marketing strategy.
Method 2. Calculation method "as a percentage of the amount of sales"
Formation of the advertising budget in this case depends on the predicted level of sales or the final price of the product. Promotion expenses are allocated a certain percentage of sales, the amount of which depends on the cost of advertising costs for the same period last year and the projected sales volume.
This method allows the use of simple mathematical calculations that do not require specialized software or expensive computing equipment. The final size of the advertising budget may vary depending on additional factors. The disadvantage of this method is its retrograde: the calculation takes into account data for the past period, which may not reflect the current state of affairs and market changes. If there is a need to promote a completely new product, this method does not allow you to correctly calculate what size of the advertising budget will need to be mastered. In addition, such parameters as the territory of sale and the existing opportunities of the advertiser are not taken into account.
Method 3. Historical method
The formation of the advertising budget in this case occurs on the basis of similar data for the past period, taking into account the circumstances that have arisen. As a rule, the main parameter for changing the size of subsidies is the level of inflation. With this method, the probability of making an error in the calculations is quite high if it was omitted during the formation of the advertising budget for the same period and transferred to new system promotion spending planning.
Method 4. Competitive parity method
This method is based on the analysis of advertising costs of competitors, who are assumed to have sufficient experience to form an adequate cost planning system. Such hopes for "wisdom" and maintaining a competitive balance can provoke miscalculations in terms of promotion costs. The formation of the advertising budget largely depends on subjective assessments employees responsible for it, and no one is immune from mistakes. Therefore, do not rely on the common sense of competitors and their methods of calculating advertising costs.
Method 5. Calculation method "based on goals and objectives"
To form an advertising budget using this method, you must first determine the objectives of the campaign to promote the product, as well as identify the amount of financial resources needed to fulfill them. To do this, the advertising budget must meet the following parameters:
- specification of goals;
- definition of tasks on the way of achievement of the purposes;
- analysis of planned expenses;
- identifying the size and properties of the audience selected for advertising;
- formation of advertising campaign parameters;
- identifying the purpose of a particular promotion;
- monitoring ways to attract the attention of the audience to the advertised product;
- analysis of the amount of financial resources required to achieve the planned result.
This method, despite its laboriousness, turns out to be quite effective, since the process of forming an advertising budget is as transparent as possible from the moment the campaign goals and means of achieving them are determined to forecasting the amount of required financial resources. The undoubted advantage of such advertising budget planning is the ability to avoid both unjustified spending on promotion and insufficient funding.
Method 6. Equity method
The use of this method of forming an advertising budget is relevant in cases where competing companies with a certain percentage position in the market for similar products allocate funds for promotion depending on this “place in the ranking”. For example, if a company owns 15% of the market, it sets the same amount of subsidies for promotion. At the same time, it is recommended to slightly increase this percentage so that the effectiveness of the campaign justifies the investment.
However, such a strategy is fraught with risks associated with the likelihood of a simultaneous increase in the advertising budget by all participants in this market sector. This could lead to growth total cost promotion costs, from which the end consumer will suffer, forced to overpay for advertising the product he needs.
Method 7. Empirical method
The formation of the advertising budget can be carried out on the basis of the analysis of data from a practical experiment. To do this, it is necessary to monitor the feedback after a series of tests showing the effectiveness various methods advertising using advertising budgets of different sizes. However, the result of such an experiment is not always sufficiently informative due to the very high probability of distortion of the final results under the influence of indirect parameters.
This method is good in that when it is used to form an advertising budget, the data of specific estimates compiled for certain promotion methods are taken into account. This helps to avoid overspending or underfunding.
In this case, the formation of the advertising budget occurs according to the residual principle, that is, the funds remaining after the main payments are allocated for promotion. With this method, advertising costs are equated in importance to all other expenses for organizational needs. Therefore, their value may have a different expression depending on the amount of profit for a specific period of time.
Formation of the advertising campaign budget for new and established brands
Formation of the advertising budget of an established brand
When an organization decides to run an advertising campaign for an established brand, setting an advertising budget is a relatively simple task, since the experience helps to choose the best and proven methods of promotion. For monitoring, traditional methods of analyzing marketing effectiveness are used, which include:
- Test ad. Such an experiment of promotion in the real market helps to reveal the effectiveness of the influence of the chosen advertising strategy of an established brand on sales volume. For objectivity, similar markets are used, while having different amounts of funds allocated for promotion. The amount of finance in each case is determined by the size of the test budget. The conducted experiment shows what sales indicators are achieved in each of these markets. The optimal ratio of invested funds and the highest profit indicators becomes the basis for the formation of the advertising budget of the project.
- Statistical forecasting. Analyzing the statistics of past advertising campaigns and sales volumes, as well as forming models of future promotional activities based on these data, is a less expensive way compared to the experimental method described in the previous paragraph. If we add flexible coefficients to these parameters (inflation, economic or legislative changes compared to the same period in the past), this option of forming an advertising budget can provide data that reflects the amount of required expenses as much as possible.
- Schroer method. The basis of this method is the assumption that for an established brand, the only way to increase profits is to expand market share. To develop the required market segment, it is necessary to concentrate on attracting the attention of small markets with a fairly narrow specialization. The formation of the advertising budget in this case should take into account the mobilization of specific means of promotion, which are quite effective in this particular market segment.
Formation of the advertising budget of the new brand
When a company plans to launch a new product on the market, it is necessary to analyze the performance of competitors. Them successful experience the launch of a new brand can become a guideline in the formation of an advertising budget. However, you should not absolutely rely on the methods of competitors, since no one is immune from mistakes. There are many proven technologies that can be used to increase the effectiveness of a new brand entry into the market, many of which have already been described in this article. The method of goals and objectives shows the most accurate results, however, when forming the advertising budget of a new product, it is necessary to use another technique that helps to make the calculation of the funds required for promotion more accurate, namely, the Peckham method.
Peckham Method works only when there is a clear relationship between the share of your brand's advertising spend in total spend in a given product category (called "vote share") and the share of new product sales in total sales (called "market share"). ). Such indicators can only be discovered by constantly monitoring the advertising budgets of competitors and the market shares of their products received as a result of promotion. At the same time, it should be borne in mind that the “vote share” previously acquired by other companies affects this interdependence, so the final results may be distorted.
Having discovered such a correlation, Peckham suggested that when forming an advertising budget, it is necessary to take the following mathematical calculation formula as a basis:
This formula helps to accurately calculate the amount of planned advertising costs for a new brand. However, it is not always possible to predict the size of the “market share” for a new brand in 2 years. This is where the principle of order of entry of the brand into the market comes to the rescue.
It's no secret that the new brand, which appeared first on the market, gains the greatest popularity, and hence the largest market share. The second product in turn captures a smaller market than the first, and so on. Knowing where your brand occupies in this queue, you will calculate with sufficient accuracy in percentage terms the market share that it has captured. Such a forecast can be built for several years ahead, which means that it will not be difficult to find out the "market share" by the end of the second year of the new brand's existence.
Formation of the advertising budget for a new product category
Launching a new category of product on the market is one of the most difficult situations in terms of predicting advertising costs. Due to the fact that this product has no analogues, the formation of an advertising budget can be difficult due to the lack of information about the effectiveness of applying certain promotion methods in this case. In addition, it is practically impossible to calculate the predicted timeframe from the moment a product enters the market until it gains a confident share of this market and consumer popularity. Therefore, when launching a new category, it is necessary to rely on your own experience and parameters of subjective assessment.
The most relevant will be the use of the method of goals and objectives in conjunction with the method of independent averaged forecast (IAP).
The construction of theoretical forecasts using the method of goals and objectives will be the best option in the formation of an advertising budget for a new product category. Insufficient information can lead to abstract guessing, but if this process is led by experienced professionals with the necessary qualifications, this will reduce the likelihood of errors. Consistent formation of tasks, methods and final estimates that interact with each other will increase the reliability of the result.
When the forecast of promotion costs is made, it is necessary to conduct an experimental assessment of the final parameters using the method of test sales and test advertising. This will help you adjust your advertising budget based on the bottom line. However, it is not always possible to conduct such tests. This is where the Independent Averaged Forecast (NUP) method comes to the rescue. Its essence is as follows.
Experts with knowledge of necessary knowledge and marketing experience. The optimal number of experts is 5. As the practice of using this method to form an advertising budget has shown, an increase in the number of "experts" does not improve the quality of the assessment. It is best to involve experts from different departments of the organization so that the final result is more independent. Each of the experts makes his own forecast of the formation of the advertising budget, on the basis of which an average estimate is built. Further joint discussion of the results by experts does not make sense, as this may distort the reliability of the final parameters.
Formation of an advertising budget for specific articles
To evaluate the effectiveness of ongoing advertising campaigns, it is necessary to take a detailed approach to the issue of planning investments in promoting your product. Each item of expenditure requires special attention and the utmost accuracy of calculations, which will help to avoid underfunding the advertising budget of the organization. At the same time, advertising itself consists not only of a direct design project and placement in sources. A variety of secondary materials act as additional cost items, without which it is impossible to build an effective advertising strategy. The formation of an advertising budget should take into account all aspects of the product promotion plan. This will help to create a competent scheme for investing in advertising, which will eliminate the need for additional costs or an urgent review of everything. budget plan due to sudden change in circumstances. The communication program in this case will be most effective, since the feedback forecast will be based on real investment data.
Among the articles of marketing costs, the main ones can be distinguished:
- Article "Direct advertising" (investments in advertising in the main sources of attracting consumer attention: television, radio, print media, outdoor advertising).
- Article "Production" (direct costs associated with the production of promotional materials - posters, commercials, design layouts, etc.). For the most competent development of the advertising budget, the cost of this item of expenditure should be no more than 10% of total amount allocated for the promotion of funds.
- Article "Internet" (payment for the creation and promotion of a site or page in in social networks, hosting and maintenance costs, and contextual advertising). Besides, in this article expenses included wage SMM managers responsible for filling content.
- Article "Trade marketing" (payment for indirect methods of attracting the attention of consumers: promotions, promotions for distributors, POS materials, shop equipment).
- Article " Auxiliary materials» (payment of small Supplies for marketing activities: brochures, flyers, catalogs for buyers, catalogs for sales personnel, branded pens, envelopes).
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For more than fifteen years, communicating with clients, I often encounter the problem of forming an advertising budget. Often, even experienced managers approach this critical issue unsystematic, not taking into account many trends and changes in the media market. AT Russian editions in advertising, I have never found competent, interesting and practically applicable works on this topic - as a rule, everything ends with general arguments without specific recommendations. Modern Western publications are much more useful in this regard, but are not always applicable to Russian reality. In this article, I analyzed Western approaches to advertising budgeting and the possibility of their application in our country. Before proceeding to the analysis of the principles of building an advertising budget, let's define the main factors influencing this process:
Product life cycle
The introduction of a new product to the market requires significant advertising costs, often exceeding the profit from its sale for a long period. Obviously: in order for the buyer to learn about the product, distinguish it from the competition and make a trial purchase, it is necessary serious investments. The risk of failure is the highest here. After passing through this stage, a decision is made to choose a further marketing strategy - either we move forward, increasing sales and advertising budget, or we defend the captured market segment, which requires lower costs. Some companies use the third option - a minimum of advertising costs after the first stage. Their decision is based on the fact that for some period of time there is a "memory effect": a person continues to buy without advertising. Although sooner or later the demand for goods will still decrease. The higher the activity of competitors and the less bright individual advantages a product has, the faster this will happen, even in a growing market.
Market
Before determining the advertising budget, you must clearly understand your market - its volume, quality and territory. It is clear that it makes no sense to go to the national media if the main sales of goods are concentrated in the capital and three or four cities. In this case, it is wiser to concentrate on local advertising. It is worth entering the federal media (primarily TV) only when the number of regions of interest to us exceeds 15. Of course, this indicator can vary greatly depending on specific areas and selected communication channels, but always remember: in any nationwide campaign some of the money will be wasted. No, and there cannot be a product or service presented in every village, every settlement and every city in Russia where federal channels broadcast. Therefore, in any case, all advertising costs must be evaluated in terms of payback and representation of the product in outlets. When evaluating the market, it is also necessary to take into account its quality, i.e. a set of demographic, social, age, property characteristics. As a rule - the wider the market, the more expensive advertising. All advertising costs must be evaluated in terms of payback and representation of the product in retail outlets.
Competition
Another important factor in market analysis is competition. A clear understanding of the actions of competitors, their "pluses" and "minuses", knowledge of their costs and the effectiveness of campaigns are the necessary components of successful media activity. Before starting an advertising campaign for your product, it is very useful to have information on the shares of costs (SOS - Share of Spends) and ratings (SOV - Share of Voice) of your competitors. Sometimes it is better to immediately refuse to launch a new brand on the market and promote it than to waste money. At the same time, the more unique the product, the more consumer advantages it has and the more interesting creative solutions in packaging and advertising, the more chances for success even in the face of fierce competition.
Profitability
The indicator of the level of profitability of the goods is one of the most important conditions affecting the size of the advertising budget. With minimal profitability, it is possible to spend serious money on promotion only with large sales volumes of goods. Conversely, brands with high and very high added value can be advertised with relatively small sales, while the allocation of funds for promotion logically fits into the brand development strategy, and the risks of failure are much less than in the first case.
Finance
It is no secret that large transnational companies, by redistributing financial resources between product lines, can afford to advertise their goods for a long time and actively, working "to zero" or "to a loss". The main thing is the prospect, winning your market share, getting loyal customers. Most Russian companies limited resources and high risks when introducing a new brand to the market prevent doing this. In the absence of the necessary financial resources, the most appropriate strategy seems to me to be a gradual increase in advertising costs, linked to an increase in sales. The most dangerous thing is to get involved in the "budget race", because in this case strong competitors will begin to put pressure on increasing advertising costs and induce unreasonable expenses.
The problem of over and under costs
The question that is of primary interest to all advertisers is the relationship between advertising and sales. The approach popular in Russia in the nineties “the more I spend on advertising, the more I sell” is dangerous and does not take into account most of the trends of the modern market, namely: the unpredictability of the actions of competitors and the reaction of consumers to new product, the problem of market glut in all segments. Any professional can easily give a lot of examples of inflated promotion costs. The main mistake of many advertisers is their belief that advertising sells a product. Not at all - the goods are sold by the sales department and sellers in stores, or the buyer himself chooses a specific product from a variety of similar ones. Advertising does not sell the product, it gives the buyer information, creates in his mind the image of a particular brand, its advantages, forms associations and influences the choice. This is the whole point! But how to understand how much more to spend when the brand image has already been created by means of advertising, associations have been formed and the choice of buyers has been made? The American (V.Arens, K.Arens) approach to the issue of the relationship between advertising expenses and the level of sales seems very interesting to me, the essence of which is that at a certain point in time, additional investments in advertising cease to affect the level of sales, moreover, when large advertising spending sales begin to fall. Why is this happening? There may be several reasons:
- The product is outdated, you are wasting money on an obsolete or not accepted by the consumer product category. There is only one recipe - before spending extra money, look at what is happening outside the window and whether your product has a future. Even if you invest tens of millions of dollars, you will not be able to increase sales.
- The consumer "ate" advertising, its abundance, monotony and frequency cause persistent rejection, which goes to the product itself.
- Poor media campaign planning or wrong creative decisions. You hit advertising in the wrong direction or speak to the consumer in a language they do not understand.
- Competitors have joined the war for your customer, but you have not been able to assess the new situation and continue to follow the knurled advertising scheme. In all these cases, investments in advertising sharply lose their effectiveness. True, even if none of these factors is relevant to you, all the same, with an increase in advertising costs, their effectiveness gradually decreases.
Conditionally: at the stage of entering the market, each million rubles correctly spent on advertising gives an increase in sales by one percent. At the stage of maturity for the same million, we can only maintain the existing sales volume. But if we cut costs, sales may fall. In such a situation, it is necessary to evaluate the market prospect of the product. If it exists, then you can either be content with the status quo, periodically changing creative solutions (so as not to get bored!), or rebrand the brand, “refresh” it, thereby attracting new customers.
The main approach when building a media budget is to always check the cost of advertising with a return on investment, taking into account the following:
- The impact of advertising on sales may only become apparent after some time;
- With an increase in advertising costs at a certain stage, the level of sales will increase, but profit will decrease;
- There is always a minimum advertising spend to achieve each goal: if you spend less than the minimum, then you should not expect a good result.
There is always a limit, exceeding which will not affect the level of sales. Another problem that has to be faced is the discrepancy between the task and the allocated budget. When a client writes in a brief for media planning “coverage - all of Russia, means of communication - television, budget - $ 200,000”, he can only be advised to measure financial capabilities and goals. More than 20,000 different commercials are shown on Russian television a year, and the smaller the budget, the more likely it is to "sink" in this vast ocean. Experience shows that in order for a person to pay attention to an advertising message, he must see it at least six to eight times. Based on this figure, knowing the media indicators (share, audience, coverage, target audience matching index) and the cost of advertising, you can approximately calculate the minimum that you cannot spend less. And even remembered - does not mean bought. Therefore, when planning an advertising budget, you must always take into account a great many components and think about the goal.
Principles of building an advertising budget
American marketers (Beauvais, Arena) identify nine basic principles for building an advertising budget:
- Percentage of sales. The size of the budget is determined by correlation with the percentage of last year's sales, or the level of expected sales for the next year, or both. This percentage is usually based on the level of sales in the industry as a whole, on the experience of the company, or is set arbitrarily.
- Percentage of profit. Similar to the previous method, except that the percentage takes the profit (for the past year or estimated for the next year).
- The level of sales in units of goods. Otherwise referred to as "the method of calculating the rate of sales in a particular situation" - this is another option for calculating sales as a percentage. The amount of expenses is set for each box, box, barrel that goes on sale. It is used primarily to evaluate the activities of members of cooperative trade or trade associations horizontally.
- competitive parity. Money is distributed in an amount corresponding to the costs of the main competitors. Otherwise, this method is called "self-defense method".
- Equity participation in the market. The amount of expenses is distributed so that the percentage of share participation in industry-wide advertising is preserved according to the percentage share in the market or with some excess of the latter. Often used when introducing new products to the market.
- Task matching method. Otherwise known as the target or method of increasing the budget, it includes three stages: setting goals, defining strategies, and determining the costs of implementing these strategies.
- empirical method. By conducting a series of studies in different markets with different budgets, companies determine the most effective level of costs.
- Use of quantitative mathematical models. Uses computer programs developed by major advertisers and advertising agencies based on the input of mathematical calculations, development history and assumptions.
- Accounting method for existing funds. A method of solving a problem in-house, usually used by small firms with limited capital who are trying to introduce new products or services to the market.
It is impossible to find the only correct approach. The advertising budget in the conditions of Russian reality should carry the fundamental opportunities to change, be as flexible as possible, respond to ongoing changes in politics, the economy, legislation, and the competitive environment. In my opinion, only a combination of several methods and the inner instinct of a businessman will help develop a budget that is close to optimal, bringing real results.
There is no way to determine a media budget that suits you 100%. Consider all of these principles through the prism of the realities of our market.
"Percentage of Sales"
The most ingenuous, popular and up to a point effective method. Calculated either on the basis of the previous year's results (defined as the share of advertising costs in the company's total sales) or as a planned percentage of sales in next year. Or both approaches are combined. The main disadvantage of this method is that it is impossible to take into account the dynamics of the market, changes in competitive environment and fall (increase) in the level of sales. Unfortunately, in Russia there is no open reliable data on the relationship between the level of sales and the percentage of promotion costs. However, using the available data on media spending by companies and comparing it with the data of the customs committee or published reports of advertisers (which happens very rarely!), you can roughly understand the value of this indicator. Of course, this method is very useful in a relatively stable market - it is clear, transparent and easy to calculate. However, it also has very serious drawbacks.
Firstly, The "percentage of sales" method rather states the current (and often working!) situation in the company, but does not answer the question: "How much money should I spend when launching a new product?".
Secondly, in the event of a drop in sales, following this method, you need to proportionally reduce advertising costs. But after all, a decrease in sales can be caused by many reasons - these are the actions of a competitor, and changes in the price situation, and changes in demand. In this case, blindly following this method can lead to even greater losses.
"Percentage of profit"
You cannot know how much product you will sell next year, but you know very well what your share of profit per unit of product is. The spread of profitability levels even within a specific product category is very large. But this is a known value. By defining the advertising budget as a certain percentage of the profit and correctly evaluating your market, you can plan your advertising costs quite correctly and effectively. The disadvantage of this method, as well as the previous one, is that when using it, it is necessary to combine it with other approaches and take into account constant changes in the market situation.
"Level of sales in units of goods"
In fact, this method is quite similar to the previous two, the only difference is that the starting point is not the volume of sales or profits, but the number of units sold (pairs of shoes, kilograms of sausage, bottles, cans, boxes ...) As a rule, are used as initial indicators advertising expenses for a certain period, which are divided by the number of goods sold. For example, 2,000,000 toothpaste packages were sold. $100,000 spent on advertising, i.e. $1 for every 20 packs. Theoretically, in order to increase sales, you need to increase the advertising budget accordingly. In reality, this approach is practically inapplicable, because the market environment is constantly changing, and one of the main criteria for an effective advertising budget is the possibility of its change under the influence of external and internal factors.
"Competitive Parity"
For Russian business, in my opinion, this method is one of the most applicable.
Firstly, you can get fairly reliable data on the advertising costs of the main competitors. Secondly, using surveys and research to determine where we are in relation to competitors, how well we are known and bought. Thirdly, knowing other people's advertising costs and comparing them with sales information, one can draw conclusions about the effectiveness or inefficiency of one's media spending. The data of research companies on media budgets is very conditional, since they do not take into account discounts, allowances and taxes. But knowing the order of pricing for advertising media, you can accurately calculate the real costs for each of the competitors. A number of Western authors call this method the "method of self-defense", which for Russian practice not quite right. When you introduce a new product to the market, you analyze not only its potential and competitive environment, but also the successes and mistakes of opposing companies. If you plan to capture a significant market share, then at the entry stage your costs should be significantly higher than the average costs of other players, since in reality you are not yet a competitor to them - no one knows your product. This method is often called "advertising attack" - a powerful, verified media impact on all consumer groups within a certain period of time. You abruptly enter the battle, and very quickly everyone to whom the advertising message is addressed will find out about your brand. However, as in war, such an attack must be very well prepared, namely:
- Your brand must be in demand and appeal to consumers;
- Your product is on the shelves;
- Inventory or production can significantly increase supply;
- Your sales team and your dealers know when and how the advertising campaign will be carried out.
Quite interesting to me is the method of cost-effectiveness analysis based on a unit of market share. The lower the advertising costs per unit of market share, the more effective advertising works.
"Market share"
This method is used primarily by companies that aim to achieve a certain market share by spending an appropriate percentage of the budget on advertising. The author of the method - J. Peckam - states that "when a new brand is introduced, the advertising budget should be one and a half times the market share expected in two years. This means that if the company expects to achieve 10% market share in two years, then it should spend roughly 15% of industry advertising in the first two years." Thus, the method assumes that in order to maintain or increase the market share of a product, the advertising budget must always exceed the industry average.
In practice, especially in our country, this method should not be considered otherwise than as an exclusively theoretical construction, because the potential dangers from its use outweigh the effectiveness. Why?
- Firstly, it is impossible to take into account the growth of media inflation, which sometimes reaches up to 30% per year. At the same time, no one guarantees that the volume of this market will increase proportionally.
- Secondly, we cannot know the plans of competitors. It is possible that their budgets will be significantly higher than ours, even with the expected lead.
- Thirdly. The ratio of market shares between companies is a constantly changing value, which does not always directly depend on the volume of advertising investments. There are always many other, subjective and objective factors, administrative, economic and political processes that affect the market share of the product.
Conclusion: you can know about the existence of the method, but it is not recommended to use it in our reality.
"Agreeing with the task"
One of the most interesting and practical methods for determining the advertising budget. It establishes the main goals and ways to use advertising to achieve them. Otherwise, this method is called "target". It is fundamentally important that advertising in this case is considered as part of a marketing strategy that has an impact on product sales.
The method consists of three stages.
Stage 1. Determination of the goal
Based on production volumes, potential, market volume, current level of sales, analysis of the competitive environment, certain marketing goals with quantitative measurements are set. At the same time, it is important to realistically assess your capabilities and the emerging market situation.
Stage 2. Strategy definition
In other words, the development of a program of goals. It is the program to achieve goals, and not the concept of an advertising campaign. The fact is that the concept of an advertising campaign also involves the definition of a budget. In this case, we determine HOW and WHAT needs to be done in order to achieve the intended results. Using Data marketing research, analyzing their own, as well as other people's successes and mistakes, understanding the mechanism of the impact of advertising on our consumer, options are planned advertising impact, taking into account the reach of the target audience, seasonality, types of media, the required number of contacts of the audience with our message.
Stage 3. Cost estimation
Once the goals and strategy have been determined, a cost estimate for our program is drawn up. It may turn out that the amount will be significantly higher than our initial plans and economically inexpedient. In this case, you need to either adjust the goals (lowest risk), or come to terms with the fact that at this stage the profit from the project will be minimal. In practice, both approaches are applicable, the only criterion in their use is time. If the goal is to achieve maximum advertising performance (ranking, frequency, reach) very quickly, then the inevitable costs are very high. But the effectiveness of advertising can be felt very soon.
In another case, when a strategy of long-term entry into the market and the gradual gaining of share is adopted, the chosen program is stretched in time so that advertising costs fit into economic indicators companies. It is always necessary to carefully analyze the results of each stage of the campaign, for which, even at the stage of its development, it is necessary to prepare criteria for evaluating the effectiveness. The advantage of this method is that it is maximally adapted to market changes, has both a logical and mathematical justification. The disadvantage is that it is very difficult to determine in advance the amount of funds to achieve the goal, however, when combining this method with others, you can get a good result.
"Empirical method"
On the one hand, it is a very expensive method, because when using it, you need to experiment with your own money, conducting trial campaigns, using different kinds advertising in different volumes or build advertising communication based on their own vision and understanding. On the other hand, with the right analysis of data obtained through trial and error, it can give a very good result.
When should it be applied? When you cannot assess the preferences of the target audience or when you introduce a completely new product or service to the market. Often this method is used when advertising expensive real estate and B2B projects. Target audience - people with high and very high level prosperity. They do not participate in surveys, do not answer questionnaires - in general, they really do not like someone to interfere in their lives. But they read newspapers, listen to the radio in the car, go to restaurants, clubs. In this case, a generalized image is compiled potential buyer, the possible range of his interests is determined and work begins on placing advertisements that he may see.
Then, analyzing the results obtained (calls and purchases), the most effective types of advertising and their costs are determined.
Conclusion: the method is inappropriate when promoting mass products or services, but can be very successfully applied in cases where it is impossible to predict the effectiveness of advertising investments.
"Quantitative mathematical models"
I have seen several examples of building an advertising budget using data on the expected response of the consumer to communication and his behavior. Moreover, there are a number of formulas that allow, from the point of view of their authors, to draw up an optimal advertising budget.
The simplest of them - the Powers formula - looks like this:
P = S(L)(M) - (UF + OF + V[S][L] + T[E])
Where R- expected profit; S- increase in sales (expressed as a share of the base level of sales); L- base level of sales in monetary units;
M- coefficient of profitability of goods (profit per unit of production, expressed as a share of the selling price of a unit of production); UV- costs associated with the payment of contractors' services; OF- current fixed costs; V- variable costs; T- probability of termination; E- Termination costs.
I think comments are unnecessary.
Conclusion: the method will work only in the sterile conditions of a frozen market. It is based on assumptions that may turn out to be false or on data that cannot be obtained. In Russian reality, it is practically inapplicable.
"Accounting for Existing Funds"
Unfortunately, a very common method in Russia. The budget is determined based on the financial capacity of the company for a specific period after taking into account all other expenses. The concepts of "goals" and "prospects" go to the farthest plane: if the money remains in the company, they are spent on advertising, if not, then there is no advertising. As a rule, the level of advertising from such advertisers is appropriate. One thing is encouraging - there are fewer and fewer such companies.
Advertising budgeting
In most large companies, the advertising budget is drawn up a year in advance, which allows, firstly, to correlate advertising costs with the planned financial activities, secondly, to get the best conditions for advertising on TV, radio, in the press.
With a strong influence of the seasonality factor, the budget is approved for a specific season (at the same time, the conditions for advertising, as a rule, are still received for a year). The main thing in all approaches is not only getting the best conditions, but also the possibility of making changes to the budget distribution, its adjustments and additions depending on changing market conditions, competitors' actions, and changes in strategy. Advertising budget management is usually the responsibility of the head of marketing/advertising or the advertising agency.
Conclusion. Harmonious budget.
Mistakes and distortions in the distribution of funds, even with a properly planned budget, happen very, very often. As a rule, the reason for this is either a lack of understanding of the principles of the impact of advertising or the transfer of knowledge and ideas about budgeting from other areas of business to advertising.
Alas, sometimes I observe a situation where the budget is made “under the first person”: those channels and publications are taken that, first of all, are watched by the head, and not the target audience.
Thus, speaking of a harmonious budget, I mean the optimal budget in terms of amount, developed based on the conditions / competitive environment and the chosen marketing strategy:
- a budget built on the basis of clearly formulated tasks facing the advertising campaign;
- a budget that takes into account effective coverage of the target audience;
- a budget in which the distribution of costs is carried out taking into account their profitability and efficiency;
- budget, each element of which is a necessary part of the company's overall marketing mechanism;
- a budget that can be adjusted to meet changing business conditions.
A new brand enters a market where the product category already exists. In this case, you can rely on existing experience (of the entire industry or individual competitors). However, this is only partial information. We cannot assume that competitors calculate their budgets correctly, although it can certainly be assumed that leading firms do it better than others.
Method of goals and objectives. This method is also a priority in the case of a new brand entering the market. But knowing the difficulties associated with estimating conversion rates, the accuracy of which largely determines the size of the budget, we recommend that you additionally use at least one competitor-oriented method and compare the obtained values. For example, this may be the Peckham method discussed below, coupled with the principle of order of entry into the market. Advertising and promotion of goods. J. R. Rossiter, L. Percy. "Peter", St. Petersburg. 2000, p. 53.
Peckham's "Principal order to market" method. This method of determining the size of the advertising budget for a new brand was proposed by J. O. Peckham, one of the most famous advertising consultants. It must be said that Peckham developed this method only for goods sold in pharmacies and supermarkets. (Nevertheless, it is perfectly acceptable to use it as a supplement to the goals and objectives method.)
There is only one limitation for the Peckham method: within the product category under study, there must be a clear correlation between "vote share" (the brand's advertising spend as a percentage of total advertising spend for all brands in the category) and "market share" (volume of sales in volume). expressed as a percentage of total category sales). The presence of such an interdependence can only be said if there is data on the advertising costs of individual brands and their market shares. Of course, it must be borne in mind that the correlation may turn out to be “unnatural”, since the budgets of other brands in the category may already be based on the share of voice and thus create a false interdependence. And yet, in the yearly period that we are considering, in many industries, whether it be consumer goods or industrial products, there is a strong relationship between voice share and market share.
So, if the above correlation can be established, Peckham recommends setting the new brand's share of voice at 1.5X the market share that the brand should have by the end of its second year. If we know advertising volumes and sales volumes for the industry as a whole, we can easily translate the received share of the voice into the size of the advertising budget. Converting the planned market share into sales volume in real terms is also not difficult.
But how do you determine what market share a brand should have in two years? This is where the principle of order of brand entry into the market comes in handy.
To determine market share, determine the order of exit. In virtually all product categories, whether consumer goods or industrial goods, a brand's market share depends on the order in which it enters the market. In this case, we are talking about market share in units, not in monetary units. For some reason, the first brand, the “pioneer” of the market, wins the largest market share, the second the next largest, and so on.
The amount of initial investment is 1,400,600 rubles.
Break-even point for 3 months of work.
Payback period - 17 months.
The average monthly profit is 101,260 rubles.
2. Description of the business, product or service
3. Description of the market
We will conduct a SWOT analysis of your project activities.
Strengths of the project | Weaknesses of the project |
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Project Opportunities | Project Threats |
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4. Sales and Marketing
5. Production plan
Let's outline the main stages of launching a printing house.
1. Registration with government agencies
Opening a printing house does not require special permissions and licenses, so before opening it is enough to register yourself as individual entrepreneur with a simplified taxation system (6% of income), as well as open a current account.
2. Search for premises and repair
As for the placement of the printing house, certain requirements are imposed on it:
- Quadrature from 40 m2;
- Extraction / ventilation of the room;
- Possibility of future expansion warehouse space for finished products.
As a room for a small printing house, an area of 40 sq. m. Too small areas will not work due to the fact that they will not allow to place all the equipment (and this is at least 5-6 cars). Plus, it is necessary to give space to operators, to allocate a warehouse for storing materials and finished products. Finally, you need to allocate an area for visitors, place a soft sofa and chairs. Rental payments for an area of 40 sq. m. depending on the location will be about 28 - 40 thousand rubles per month.
3. Purchase necessary equipment and inventory
To open a printing house, you need the following equipment:
- Offset RIP Digital Printing Machine the vast majority of printed products);
- Cutting plotter (this is an apparatus for accurately cutting any stencils or images from various materials);
- Booklet maker (device designed for binding documents (binding sheets with a staple);
- Laser MFP;
- Thermopress multifunctional (specialized modern equipment, which allows you to qualitatively transfer all kinds of images to different surfaces, is used to apply the desired images to caps, mugs, T-shirts);
- Cutter (used to cut paper into even pieces and align the edges);
- laminator;
- A computer;
- Consumables: paper, thermal film, oracal, magnetic vinyl, paint.
Due to the high cost of new equipment, you can look for supported options, then the price will be about 2 times lower. This business plan lists equipment that has been in production for no more than three years.
| Name | Quantity | Price for 1 piece | total amount |
| offset printing machine | 1 | 680 000 | 680 000 |
| Cutting plotter | 1 | 110 000 | 110 000 |
| booklet maker | 1 | 47 000 | 47 000 |
| Laser MFP | 1 | 37 000 | 37 000 |
| Thermopress multifunctional | 1 | 39 000 | 39 000 |
| Cutter | 2 | 4 150 | 8 300 |
| laminator | 1 | 7 500 | 7 500 |
| A computer | 2 | 27 000 | 54 000 |
| Cutting table | 1 | 6 000 | 6 000 |
| Wardrobe | 1 | 7 100 | 7 100 |
| Table | 1 | 3 900 | 3 900 |
| Chair | 6 | 800 | 4 800 |
| Microwave | 1 | 3 000 | 3 000 |
| Electric kettle | 1 | 2 000 | 2 000 |
| Sofa | 1 | 12 000 | 12 000 |
| Total: | 1 021 600 |
* Consumables include: paper, offset printing material, printer cartridge, cardboard, metal/plastic springs, calendar loops, magnetic vinyl, oracal.
4. Personnel search
The most difficult thing will be to find professional printers, since quality work will require experience and specialized education. It is better to search for such specialists on the hh.ru portal; access to a resume will cost 15,000 rubles. You will also need an experienced sales manager and administrator-managers who will deal with meeting customers, calculating costs and transferring finished products. It is also more expedient to search for them on the above site or to search through friends or social networks.
5. Marketing policy
6. Organizational structure
The main employee of your printing house is a printer who prepares materials and the printing machine for production, adjusts and prints all types of printing products, prevents maintenance and repairs of the printing machine, monitors compliance speed modes and print graphics. The printer's work schedule is 2/2 to 12 hours a day, the salary is the highest in the enterprise (45,000 rubles), as candidates with work experience and specialized education. Ideally, these employees should be generalists and be able to work with a plotter, booklet maker, and thermal press. But even in this case, it is necessary to hire assistants who will carry out the work under the supervision of printers. In the first months, when the customer base has not yet been developed and there are few orders, two printers are enough, then without assistants with a salary of 45,000 rubles. not enough.
The next employee to be involved is the sales manager who makes the calls potential clients and offers printing services. The manager can work remotely, his work is paid depending on the number of services provided (15%). The candidate must also have experience in the field of sales, must develop selling scripts for conversations, submit monthly reports to the director on the number of completed contacts and conversions.
It is also necessary to hire a designer on staff who develops layouts for leaflets, booklets, business cards, postcards, calendars, and also prepares files for printing. Designer's salary - 30,000 rubles, working hours - 5/2.
Reception of clients and their consultation is carried out by the manager. He also calculates the cost of orders, receives incoming calls, responds to customer messages, etc. Since the printing house works every day, there is a need to hire two managers who work in shifts, their salary is 25,000 rubles per month.
| fixed costs | Salary | The number of employees | Sum | Average salary per month per employee |
| Supervisor | 30 000 | 1 | 30 000 | 48 173 |
| Manager | 25 000 | 2 | 50 000 | 25 000 |
| Sales Manager | 20 000 | 1 | 20 000 | 38 173 |
| Printer | 45 000 | 2 | 90 000 | 45 000 |
| Designer | 30 000 | 1 | 30 000 | 30 000 |
| Insurance premiums | 30 000 | |||
| Total payroll | 250 000 |
The full calculation of the payroll for 24 months, taking into account the bonus part and insurance premiums, is presented in the financial model.
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