The cost-of-living crisis isn’t just affecting families, it’s a trickle up nightmare that’s digging its teeth into businesses too and brands are businesses. One of the first places many brands unfortunately choose to sever spending is in advertising but in such an evolving and competitive landscape, is this really a wise move?
Allocating their advertising budgets effectively while achieving their desired outcomes is a difficult balance to find for brands at the best of times and these are not the best of times. Deciding the optimal amount to spend on advertising campaigns has a significant impact on how the brand is perceived by its audience and the all-important bottom line.
Drawing insights from industry benchmarks, today I’ll be exploring some of the key factors that brands should consider when determining their advertising budgets in these tumultuous times.
Understand Your Objectives
To establish an appropriate advertising spend, brands must first have a clear understanding of their business objectives. Each objective, whether it's enhancing brand awareness, generating leads, driving sales, or launching new products, requires a specific level of investment. By aligning advertising goals with overall business objectives, brands can allocate their resources more strategically.
Benchmarking
According to Forbes, companies typically allocate between 7% to 12% of their annual revenue for marketing purposes. However, this benchmark can vary based on factors such as industry, competition, and growth goals. Companies in competitive markets or those aiming for rapid growth may need to invest closer to 20% of their revenue in marketing. By using this benchmark as a starting point, brands can evaluate their own situation and make informed decisions.
Evaluate Your Growth
The growth stage of a brand also impacts advertising spend. Startups and companies in the early growth phase typically allocate a higher percentage of their revenue to marketing to establish brand recognition and attract customers. As a brand matures and gains market share, the allocation may decrease but remain essential for maintaining customer loyalty and driving continued growth. Assessing the growth stage is crucial when determining the appropriate advertising spend.
Invest in Digital
In 2023, the digital landscape will continue to dominate marketing efforts. The rise of social media, influencer marketing, search engine optimisation, and programmatic advertising necessitates allocating a significant portion of the advertising budget to digital channels. As the reach and engagement potential of digital platforms surpass traditional media, brands are encouraged to invest wisely to maximize their impact.
Monitor and Optimise
Constant monitoring and optimisation of advertising campaigns are key to improving efficiency and achieving better returns on investment. Analyse campaign performance using metrics such as reach, engagement, conversion rates, and cost per acquisition. By leveraging analytics and employing a test-and-learn approach, brands can make data-driven decisions, refine their strategies, and optimise their advertising spend.
Seek Advice
Navigating the advertising landscape can be complex, particularly for brands without in-house expertise. Engaging with consultants can provide valuable guidance and insights on budget allocation. These professionals bring experience and industry knowledge, assisting brands in developing comprehensive advertising strategies that align with their needs and budget constraints.
Find the Right Agency
Hiring the right agency can make a significant difference in maximizing your brand's visibility and reaching the right target audience within budget. Consider the following when shopping around for an agency and asking for pitches.
- Different agencies specialise in different industries, media channels, or campaign types. Look for agencies that have experience in your specific niche or industry. Evaluate their portfolio to see if they have successfully executed campaigns like what you have in mind.
- Agencies come in all sizes, from small boutique firms to large multinational agencies. Consider the advantages and disadvantages of each. Assess your brand's needs, budget, and the level of attention you require to make an informed decision about agency size.
- Creativity is the lifeblood of advertising. A successful agency should have a team of skilled and innovative professionals capable of crafting compelling campaigns. Review the agency's creative portfolio, paying attention to the quality and effectiveness of their work.
- Working with an agency is a collaborative process. The agency should be an extension of your brand, understanding your values and goals. A good agency will actively involve you in the decision-making process, providing regular updates and seeking your feedback. Compatibility and a strong working relationship are vital for long-term success.
- Transparency is crucial when dealing with an agency. It is essential to understand how they measure success and how they communicate campaign performance. Inquire about the metrics they use to track results and the frequency of reporting.
- Finally, discuss the budget openly with potential agencies and ensure they can work within your financial constraints. Beware of agencies that promise exceptional results at unusually low costs. Instead, focus on finding an agency that offers a fair and transparent pricing structure and can deliver value for your investment.
Of course, the best way to find the right agency for your needs is already staring you right in the face. Check out hundreds of the world's very best agencies right here at Creativepool and start your next great creative partnership on your own terms for a price that suits both parties.
