Do you invest enough of your gross revenue in advertising?
It’s a puzzle many small businesses struggle to solve: “How much should I spend on advertising?”guide to matched betting
Borrell Associates, a Virginia research company, regularly surveys local businesses and ad agencies to study both online and offline advertising trends. The surveys often ask businesses about their advertising budgets, and the most recent version – released in early July – was no exception.
Of the ad buyers and businesses surveyed, 81 percent represented independent businesses, 11 percent represented large corporations and 6 percent represented franchises.
The average gross revenue of the businesses represented was $3.1 million. Out of all the respondents, 39 percent had annual gross revenue under $1 million; 25 percent had revenue of $1 million to $5 million; and 20 percent had revenue over $5 million. Some respondents – 10 percent – did not know their company’s annual revenue.
The Average Doesn’t Tell The Story
The average annual ad spend of those companies was $128,300, or 4.6 percent. But the average doesn’t tell the real story.
In fact, 16 percent said they spent nothing on advertising in the past year. Another 28 percent said they spent less than 1 percent of gross annual revenue on advertising, and 16 percent said they spent between 1 percent and 2 percent on ads.
Altogether, 60 PERCENT of the respondents spent 2 percent or less of gross revenue on advertising.
The numbers stunned Borrell founder Gordon Borrell. “It’s remarkable to me they can stay in business spending less than 2 percent of gross revenues on advertising. That’s probably why their business is shrinking or at least flat-lined,” he said during a webinar reviewing the survey data.
Here’s my take on this data. Your competitors aren’t spending much on advertising, and that means you could gain an advantage by investing a little more than they do.
No matter what business you’re in, you’re competing for customers’ time, attention and money. When you spend more than your competition on marketing and advertising, you win more customers. It’s that simple.
What qualified as advertising in the survey? The list included broadcast TV, cable TV, newspapers, search engine marketing, social media, banner ads, event marketing, streaming video, text messaging, email sponsorships, and directory listings.
Mark Whittaker, a Pittsburgh-based online marketer, helps small businesses and start-ups find customers with search and social media advertising, content development and digital marketing strategy. Write to him at mark (at) whitmarkdigital.com and subscribe to his bi-weekly email.