Thursday, June 13, 2013

The Why and How of Advertising

With the advent of social networking, tweeting, web sites, interstitials, ad words, search engine marketing, etc., many small and medium sized companies have chosen not to advertise in the more traditional sense, i.e., print, newspapers, magazines, trade shows, TV, radio, signs, direct mail etc. or chose only one media channel rather than several complementary media channels. This decisions  are usually based on what kind of market or audience you are trying to reach and the budget. Unfortunately the budget usually decides what  and where you will spend your money rather then your audience.   

The basic strategy behind advertising regardless of audience or media channels remain consistent. It is just that there are more media channels today and less time to really understand their impact on our business. The purpose of advertising is to inform, persuade or remind potential customers that you offer the highest value product or service. It follows that before you design any advertisement  uniquely for your target audience you should know how you want to be positioned in the minds of the potential and existing customers. This includes knowing what type of media they use most often, the demographic and psychographic profile of your audience and ensuring you have strong creative that appeals to your audience. Show and tell rarely produces results and you need to appeal to your customers at the emotional level.

Now having said all that what are the basic steps in creating your advertising strategy?

 Develop Objectives

Once the decision to advertise has been made, the objectives of the advertising must be set. Typically advertising objectives are grouped into one of three functions; inform, persuade, and remind.

 Information advertising is used when a new product or service is launched. Done properly and ethically this type of advertising gives consumers the knowledge (features and benefits) necessary to make informed purchase decisions.

Persuasion advertising is the most common form of advertising. It is used to generate demand for a particular service in a particular market where competition for market share exists. The goal is to differentiate a product or service from others in the same market. Having a product differentiated in the minds of consumers can be beneficial since it usually allows for more pricing flexibility.

Reminder advertising is important once a service is established. This form of advertising can be especially important for firms that operate in a seasonal environment. You may want to “remind” consumers you are available to provide a variety of services throughout the year. The correct objectives for your advertising strategy can be easily determined from an analysis of the current marketing environment.

Select Media Channels

The media channels you select to get your message to the target audience depends on three elements: reach, frequency and impact. 

Reach is the number of unique consumers exposed to a particular ad at least once during a specified time period (usually a month or quarter).

Frequency is the number of times within the period that a consumer is exposed to the ad. A common rule is that most consumers need a minimum of three exposures before the ad registers with them.

Impact is a qualitative value of the advertising media. For example, will your ad have a greater impact in the local business paper or the local entertainment magazine?

To calculate total number of exposures multiply reach times frequency. This is known as Gross Rating Points or Impressions. A higher number of impressions implies more frequency, but tells us nothing about the potential impact of the ad on customer decisions. To measure the overall potential of an ad, including impact, combine all three elements, (R x F x I). This is known as the Weighted Number of Exposures (WE). A higher WE implies greater overall exposure.

Set Advertising Budget

You can set your budget any number of ways. Small businesses often set the budget based on what they think they can afford. This can be costly if the budget is too low or too high. Under-advertising may not produce any results at all. Over-advertising will result in some ads that do not generate sales. A better way to set the budget is to define objectives for the advertising and identify the tasks necessary to realize the objectives. Most advertising is priced in term of dollar cost per thousand exposures or CPM (the M is the Roman numeral for 1000). Higher impact ads usually, but not always, have a higher CPM associated with them. The media or media channels with the greatest combined reach, frequency and impact and a CPM within your advertising budget is the one to use.

Evaluate Results

Surprisingly, no definitive measures exist to evaluate the results of an advertisement on sales. The best way to evaluate advertising for small businesses is to:
  1. Keep track of the number of new contacts
  2. Ask every new contact how they heard of you
Now this last pint is very important since this can easily be tracked through web traffic analysis for smaller companies who do not have the staff or resources to follow up  on this. This will provide you with the information to judge your ad’s effectiveness in convincing consumers to contact you. As contacts become customers track their contribution to revenue. One new customer may be sufficient to justify a series of advertisements.


Advertising can be used effectively to increase sales. However, before creating an advertisement, know whom you want for customers and what type of media they use. Craft your message to communicate the features and benefits of your service that they will find most valuable. Focus on reach, frequency and impact and set a realistic budget. Be prepared for a lag time of one or two periods from ad placement to response. Finally, evaluate the results of your advertising to decide on the most cost effective level of future advertising.

In my next article I will tackle "Picking the Right Advertising Channels" of media for your company .

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