What is an 'Advertising Budget'
An advertising budget is estimate of a company's promotional expenditures over a certain period of time. More pertinently, it is the money a company is willing to set aside to accomplish its marketing objectives. When creating the advertising budget, a company must weigh the trade-offs between spending one additional advertising dollar with the amount of revenue that dollar will bring in as revenue.
Breaking Down 'Advertising Budget'
An advertising budget is a part of a company's overall sales and/or marketing budget. Budgeting for advertising can be viewed as an investment in a company's growth. The best advertising budgets (and campaigns) focus on the customer's needs and solving their problems, not as a solution to the company's problems (an overstock reduction, for example).
Advertising Budget and Goals
Before deciding on a specific advertising budget companies should ask several questions to ensure that the budget is in line with its promotional and marketing goals.
- Which consumer is the target?: Knowing the consumer and having their demographic profile can help guide advertising spend.
- What kind of media is best for that target consumer?: More than ever, mobile or internet advertising (via social media) may be the answer, thought traditional media, such as print, television and radio may be best for a given product, market or target consumer.
- What is the right approach for the target consumer?: Depending on the product or service, should you appeal to the consumer's emotions or intelligence?
- How much profit can be expected from each dollar of advertising spend?: This may be the most important question to answer, as well as the most difficult.
Advertising Budget: How Much is Enough?
Companies can determine what level to set their advertising budget several different ways, each of which has its own positives and negatives.
- Spend as much as possible: This strategy, which sets aside just enough money to fund operations, is popular with startups that see a positive return on investment on their advertising spend. The key is anticipating when the strategy will start showing diminishing returns and knowing when to switch strategies.
- A percentage of sales: This is as simple as allocating a specific percentage based on the previous year's total gross sales or average sales. It is common for a business to spend 2-5% of annual revenues on advertising. This strategy simple and safe, but is based on past performance and may not be the most flexible choice for a changing marketplace. It also assumes that sales are directly linked to advertising.
- Spend what the competition spends: This is as simple as adhering to the industry average for advertising costs. Of course, no market is exactly the same and such a strategy may not be flexible enough.
- Budget based on goals and tasks: Decide on objectives and then the resources needed to achieve them. On the upside, this can be the most targeted method of budgeting and the most effective. On the downside it can be expensive and risky.
Guest post by Amanda Sides
In its simplest description, Facebook advertising is essentially placing ads within the Facebook interface with a goal of increasing visibility for your target audience. While it’s still relatively new when compared to other ad platforms (like Google AdWords), it’s constantly growing in popularity, which in turn leads to even better targeting options and updated features. So why exactly is this a great opportunity that shouldn’t be overlooked by nonprofits?
Why Facebook Advertising is Beneficial for Nonprofits
Minimal Costs. When comparing Facebook ad costs to other forms of online paid media, it tends to come at a very low cost-per-click (how much you pay every time someone clicks on your ad), contributing to low costs-per-conversion as well. As competition increases and more advertisers start utilizing Facebook as an ad platform, costs-per-click may start to increase, but for now it’s a relatively cheap way to get traffic and conversions.
Granular Targeting. Since users share so much information about what they like and who they are, this gives advertisers an advantage by allowing them to target very specific audiences. By having that ability, you can spend your marketing budget more efficiently and effectively. Here are just a few of the ways Facebook allows advertisers to target:
Retarget Site Visitors. Facebook offers a targeting feature where advertisers can show ads on Facebook to people who have visited their site before. You can even narrow this down to certain actions or page views, and tailor your ads specifically around that information. This enables you to show ads to people who you know are already interested in or supporters of your nonprofit, increasing the likelihood that your ad will gain some traction.
Testing & Measuring Performance
Before you get started, be sure to nail down your overall goals you want to achieve from this initiative. Do you want to send people to your Facebook page to promote more likes? Or do you want to direct people to your website to perform a certain conversion action? This will help guide your strategy, as you never want to lose sight of your ultimate end goals.
Once you’ve established your goals, be sure you set up conversion tracking so you have something measurable to let you know how you are doing.
When you first get started, be sure to write your ads with your audience in mind. Are you targeting moms of young kids or male college students? How about people who have certain interests, such as baking or running? You’ll want to tailor both your images and verbiage to that audience so it’s compelling to them and also conveys what action you want them to take on your website. You should always be testing your ads, to continually strive to improve conversion performance.
There are two places ads can display on Facebook, the right-hand column and directly in the newsfeed. Don’t neglect to monitor performance to see which works best for you; having this insight could help you hone your ad spend to get the most conversions at the lowest possible cost.
How Share Our Strength Increased Support using Facebook Advertising
Share Our Strength, a Washington, D.C. nonprofit fighting to end child hunger in America, wanted to increase registrations for its Bake Sale for No Kid Hungry , a national fundraising initiative that encourages people to host bake sales in their communities to help end childhood hunger. Those who were interested in holding a bake sale could register via the Bake Sale for No Kid Hungry website. Share Our Strength continually comes back to Facebook advertising to promote this campaign, since performance has proven to be successful season after season.
From the start (Fall 2012) through the most recent season, we’ve helped Share Our Strength and the Bake Sale for No Kid Hungry narrow targeting to focus ad spend on their heaviest hitting audiences, test ad copy, images and landing pages, as well as introduce new features and campaigns along the way, all contributing to significant improvements in conversion performance over time.
The results are the perfect example of why testing and tweaking to figure out what works best is so important.
- Conversion rate increased by 134%
- Cost-per-conversion was reduced by 64%
- Cost-per-click decreased by 20%
Not only is Facebook advertising one of the most efficient channels for their ad budget, over time through testing, it consistently improves, allowing for more efficient spending of that limited marketing budget.
For more details, read the rest of Share Our Strength’s Facebook Advertising story at Marketing Mojo.
About Amanda Sides
Amanda Sides is Account Director at Marketing Mojo, managing SEO, PPC, LinkedIn and Facebook campaigns for both nonprofit and for-profit organizations. She develops and manages tactics to improve performance and manages an account management team in Marketing Mojo’s Charleston, South Carolina office. Her clients have included MazdaUSA, SRI International, DS Cases, Share Our Strength and Taco Bell. Amanda graduated from James Madison University with a Bachelor of Business Administration degree with a concentration in Marketing.