Advertising as an investment.

Advertising pitches the specific benefits of your product or service to potential customers, as well as why they should use your business instead of a competitor's. As a result, it can prove to be a great business and revenue generator, if planned and budgeted carefully. Advertising isn't an added expense, it's an investment in your business and should be held accountable and treated like any other investment.

Budgeting

The best way to start thinking about your investment is by laying out an advertising budget. In figuring out your budget you may be tempted to try to outspend the business down the street or simply use whatever is left over after your expenses have been covered, but remember to treat advertising like any other part of your business and allocate the right amount of money to get the right response. In other words—spend what it takes to advertise correctly. You'll see a much greater return on your investment than you would trying half-hearted approaches.

Budget your advertising for a full calendar year; you'll have enough time to track your advertising and compare your results to your previous year's sales, taking into account seasonality, sales, and slow periods. To budget effectively, you'll want to project your sales for the upcoming sales year and then decide what percentage of that you want to spend on advertising. This will give you a direct, accountable relationship between your advertising and your sales growth.

Only you know the correct percentage of your sales budget, and only you have an understanding of how well your business will be affected by advertising.

Tracking

The way to know if you're generating a return on your investment—and whether to change the amount you're investing—is to track your advertising response. It can be as simple as keeping good records of changes in your foot traffic, sales, response to coupons and offers, and answers to questions such as, “How did you hear about us?”

Comparison of a month or sales period when you are using new advertising methods to the same time in the previous year is an easy way to see the most obvious changes due to your advertising. Additional ways to track specific advertising include special tracking phone numbers used on your ads, or coupons and offers with unique promotional codes attached to ads. When your customers call the tracked phone number or used the special coupon, you'll know they heard about you through the ad.

You know how well you need your advertising to perform based on your business objectives and sales volume. Simply setting a reasonable budget, building the right advertising campaign, and tracking your results carefully will put you on the right path to not only knowing how well your advertising is working, but also how you can improve and optimize it for the future.