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Reviewed October 1993

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Contents

• Determine your trade area and target market
• Target market
• Select appropriate advertising media
• The media
• Outdoor and transit system advertising
• Determine an advertising budget
• Budgeting methods
• Cooperative advertising
• Develop an effective advertisement: Be creative
• General concerns
• Measuring the results of your advertising
• Consumer protection
• Professional help can make a graphic difference
• Acknowledgments
• References

Related publications

• MP656, Hometown Business: Keep Them Coming Back for More — Customer Loyalty
• MP657, Hometown Business: Let's Make a Deal — Vendor Relations
• MP658, Hometown Business: We All Pay the Costs — Stop the Shoplifters
• MP659, Hometown Business: Dynamic Displays
• MP676, Hometown Business: Plan and Control Your Inventory

Use our feedback form for questions or comments about MP660.

Hometown Business: Increase Your Sales, Invest in Advertising

Sharon Stevens and Betty Feather
Department of Textile and Apparel Management

Advertising is essential in today's business world. The question is not, "Should I advertise?" It is, "How can I effectively advertise?"

Advertising is an investment in building your sales. The future of your business will be influenced by your ability to plan and execute an effective advertising program.

Determine your trade area and target market

Before you know how to spend your advertising money, you must know your business, your trade area and your target market.

Ask yourself the following questions to help profile your business:

• Exactly what is my business?
• What quality of merchandise do I sell?
• What is my price range?
• What kind of image do I want to project?
• How do I compare with the competition?
• What customer services do I offer?
• Who are my customers?
• What are their income levels?
• Why do they buy from me?
• Which media do my customers use regularly?

Determine your trade area by identifying an arbitrary area, by plotting your actual area or by using a combination of these two methods.

Your arbitrary area is determined after considering:

• Your competition. How close are they? How many similar stores are there?
• Your merchandise. Is it exclusive or is it available in many different stores?
• Customer potential based on census information and target market.

To determine your actual area, find out where your customers live and plot those locations on a map:

• Use the addresses from layaway files and checks used to pay for merchandise to plot customer locations on a map.
• Hold a contest, drawing or coupon sale where customers fill out cards with their names and addresses. Plot the address information from the cards on a map.
• Use exit interviews or satisfaction surveys to get additional information.

Keep a record of names and addresses so that you do not duplicate any. Use the information later for direct mailings.

Target market

Determine your target market by using demographic information such as age, income, occupation, education, marital status and ethnic background. You can find information about the population in your market area in several places. In small communities, the county court house and local MU Extension center are good starting points.

In some areas there is an office of the State Department of Commerce, a chamber of commerce, a city hall or a local business association or merchants' association. In larger areas, there may be an office of the Better Business Bureau or the Census Department. In addition, local newspapers and radio stations often have demographic information.

Select appropriate advertising media

Begin by contacting all available advertising media in the area. Include newspapers, radio stations, television stations, magazines, outdoor billboards, transit systems and direct mail. Get rate sheets and circulation information from every available advertising medium, including demographics when available.

Look at the rate sheets and the number and type of people reached within your market area to determine media that will work for you.

Determine what the cost of advertising will be in each type of medium. Advertising costs are based on the projected audience reached. Television and radio advertisements ran during prime time reach larger audiences and cost more than ads ran at less desirable times. In newspapers, placement within the paper and the day of the week partly determine how many people will see your ad.

The media

Newspapers

Newspaper ads are particularly effective for promoting specific items. Space is sold in column inches — that is, the standard width of that paper's columns by the length desired. Your advertisement may be any multiple of columns and inches, although some minimums or specific size restraints may apply.

Using color in your ad increases the cost. Most newspapers will assist you without charge in planning and laying out your ad. Sometimes you can run the same ad multiple times for a decreased charge.

Television

Television is particularly effective with young customers. Time is sold in spots of 10, 30 and 60 seconds. Most television spots are 30 seconds. ROS or "Run Of Station" ads are the least expensive. When you purchase ROS advertising, the station airs your ad whenever there is room for it in the station's schedule. They are aware that you expect your ads to be aired at times that will bring you customers and will make an effort to give you good times if they can.

Ads to be aired at specific times are considerably more expensive depending on the programming. Ads aired during the news and during popular prime time shows are the most expensive.

For smaller retailers, local stations may sell advertising packages that allow the station to determine the time that the ad is aired but guarantee you a certain number of airings in the morning, afternoon, evening and night. These packages are called Day-Parted ROS packages and permit good exposure for significantly less money. A 90-spot, day-parted package may average only $22 per 30-second ad.

Radio

Advertising time on radio is sold in slots of 10, 30 and 60 seconds. During slow seasons, there may be a discounted rate if you allow the station to determine when the advertisement will be aired. The key to effective radio advertising is repetition.

Magazines

Space in magazines is usually based on the size of the ad and the number of times it is run. Typical ad sizes are one page, two-thirds page, one-half page and one-fourth page. Typical insertion times are one time, six times or 12 times. Magazine advertising, especially in magazines with a national circulation, tends to be very expensive.

Outdoor and transit system advertising

Cost information for advertising on buses and billboards is available from the companies in your area.

Direct mail

Direct mail costs are based on the amount of printing needed, type of mailer used (folder, envelope, etc.), postage and the cost of developing, maintaining or purchasing a mailing list.

Determine an advertising budget

The first step is to determine your annual advertising budget.

Decide where you are in your marketing cycle. If your business is well established, you may only need to remind your customers that you are there. However, if you are new or expanding, more money will be needed to get your message to the public.

Include all promotional costs in your budget. In addition to the media, budget for stationary, business cards, promotional brochures, gifts, mailings, entertainment, displays, exhibits and painting your store name on the company car as part of promotion.

Develop your advertising budget to coincide with your sales profile.

• After determining an overall dollar amount, allocate the timing of the ads to maximize their impact.

Little or no advertising money should be spent during slow retail times. For example, in January and February, as a result of bad weather, holiday sales and a short month, people usually do not make many purchases.

Advertising money spent during this time should do one of two things:

• Create a market
• Bring people into the store.

During strong retail times such as back-to-school and the holiday season, strong ads should urge people to spend their money at your store.

Budgeting methods

Form 1
Figuring your advertising budget

Percent of past sales plus growth

In the first column of Form 1, enter last year's sales figures by month and the yearly total. Determine the percent of sales each month by dividing the sales for the month by the total gross sales for the year. Record these percentages in column two.

In column three, enter last year's advertising expense figures by month and the yearly total. Determine the percent spent on advertising last year by dividing the amount spent each month by the total amount spent for the year. Record these percentages in column four.

If you have a new store or do not have these figures available, national averages for businesses similar to yours are available from trade associations and publications or the U.S. Department of Commerce.

Table 1, at the end of the document, lists some national averages for advertising. Another helpful estimate is to use 3 percent of retail sales as a starting figure.

At the bottom of column five, record your estimate of your total gross sales for this year. Now distribute that total over the 12 months. Use the percentages in column two to help you estimate. It is customary to estimate a percent increase in this amount.

Record the percent of estimated sales for each month in column six.

Now you have the information you need to determine your advertising budget and its distribution for the coming year.

Look at the percentages in columns two and four. If you have spent a larger percent on advertising than the percent of sales in a given month, you may want to adjust this amount. You can spend less during that slow time and save your advertising dollars for when people are buying; you can also change your approach to advertising for that time and try to increase your percent of sales for that month.

Use this information to determine the percent of your advertising budget you will spend for each month. Remember to adjust for high and low selling seasons and for special promotions. Record these figures in column seven. The total of the percents in column seven should equal 100 minus a small amount held back for emergencies and surprises.

At the bottom of column eight, record the amount in dollars that you will spend for the year on advertising. Determine the amount for each month by multiplying the total budget figure by the percent in column seven.

Use the percents in column seven to determine the monthly allocation and record these figures in column eight. This is the amount that you have to work with each month. You may want to make adjustments as the year progresses and you determine how well your advertising plan is working.

Competitive spending

This method is used when the competition is heavy in your area. After figuring your monthly percent of sales using the method above, additional money may be put into advertising based on:

• Whether your company is trying to cut into your competitors' sales or trying to maintain your share of sales against increasing competition;
• Which media and strategies you have selected to use
• Your advertising objectives.

Objective task

Use this method when you have a specific goal in mind. For example, you may move your store to a new location or expand your line of merchandise. Look at your objective (to tell the public about the new location and/or merchandise) and decide what role advertising will play.

• Is this a long or short term goal?
• Will there be any supplemental promotion?
• Is there difficulty in reaching the target market?

Subjective budgeting

Cautiously use your intuition and judgment to decide on an advertising budget — this method is only as good as the judgment of the person making the decisions. This is, of course, the easiest budget to prepare, but it also tends to be the least effective. You may spend too much or too little and won't know it until it's too late.

Cooperative advertising

In addition to your own budget for advertising, some wholesalers have cooperative advertising funds available for you to use. This is money that is available to the retailer to use in advertising on the condition that a particular brand and/or item is featured in the ad. These funds are generally limited, and you will need to pursue this option with your suppliers.

Cooperative advertising funds are based on a percentage of the cost of the advertisement. In the apparel industry, cooperative funds may pay for 50 percent of the cost of the ad. This means that you can double at least part of your advertising money if you use co-op money.

Manufacturers and vendors who offer cooperative dollars always have specific requirements for applying for and receiving payments from these funds and for how they are to be used.

Cooperative funds must be available equally to all customers within the rules established by the vendor. However, vendors are generally more interested in advertising that carries the name of major retailers. Smaller stores usually have to ask whether funds are available and be persistent in order to take advantage of them.

Develop an effective advertisement: Be creative

Radio lends itself to many different formats

• Straight announcer
  An announcer delivers the script. This is a direct and common technique that relies on the strength of the copy and the warmth and believability of the person performing to carry the message.
• Two-announcer
  Two voices alternate between sentences or part of the copy. The commercial moves at a fast pace and generates excitement. It may give a news flavor to the commercial.
• Announcer-actor
  An actor reacts to or supplements the message delivered by the announcer.
• Slice-of-life
  A dialogue that represents a true-to-life situation involving the listener in a problem that the product or service helps solve.
• Jingle-announcer
  A song or jingle offers two advantages. It is easily remembered, and because it belongs to the advertiser, it can be identified with the store or product. Be cautious in selection of the jingle because a poor selection can trigger an immediate negative reaction from the listener.
• Customer interview
  An announcer may talk with a customer who gives his/her favorable experiences with the store or product, or a customer may deliver the entire commercial.
• Humor
  Humor must be tastefully handled. It is especially appropriate for low-priced package products, products that people buy for fun, products where the primary appeal is taste, and products or services in high competition areas. Never make fun of the product or the customer, and be sensitive to situations that are not funny to a part of the population (e.g. handicapping conditions, illnesses, political situations).
• Combinations
  You can mix these techniques in countless ways. It might be effective to use the same jingle or the same message in several different formats over six months or a year.

Print has the advantage of being somewhat permanent

In a newspaper advertisement you can give specific information and readers can come back to it if they wish to check details.

These guidelines will help you develop effective print ads.

• Develop a concept. Remember AIDCA: Action.
• Use a benefit headline. Tell the customers why they should buy your product. What will they gain? Get their attention and stress the benefits.
• Use a dominant element. Whether it's art, a snappy headline or a logo, there should be a strong, dominant element in the ad.
• Give enough information about the product in the ad so that the customer can make a decision. Whenever possible, show the product in use. If there is not enough information, the customer will just pass it over. Be sure the price is clear.
• Keep your layout simple. Don't make the reader work to find the message or find out who you are. Make every word count. Keep sentences short. Put action in your words. Use terms your readers will understand.
• Consider the audience. Think of a specific customer and ask yourself whether he/she would like the message you have written.
• Make your ads easy to recognize. Concentrate on a specific selling message that you can carry through all your advertising. Develop an image in your advertising that will be associated with you. Be consistent with the clip art or logo that you use and the general layout and style. Be sure that the store address, telephone number and store hours are always included.
• Feature items that are wanted, timely, in stock and typical of your store. Specify brands when appropriate and take advantage of cooperative advertising funds. A highly desirable item featured in your ad and offered in an attractive way will bring traffic into your store.

Customers may buy other items if you have them properly priced and displayed.

Direct mail can target customers

This method is an efficient and effective way to reach people who already know about your store and have shopped there at least once. You can use your mailing list, developed from checks used to pay for merchandise and other techniques discussed above, to speak directly to your "preferred customers."

You can send these customers notices of special sales, preview opportunities or new merchandise. You can tell them how special they are by sending them thank-you letters for purchases and holiday greetings (in October or November when they are likely to be shopping). You can even send them special discounts or offer private sales.

If your mailing list is large, consider getting a bulk mail permit. Consult your local post office for regulations.

General concerns

Proofs and invoices are required for cooperative arrangements; ask for duplicate or triplicate copies.

Radio

• Be sure the radio station broadcasts your advertisements at the times you specified.
• Be sure that the copy is changed when you request. This is especially important if dates or a sale are mentioned in the ad.

Newspapers

• Generally, request that your advertisement be placed in the upper half of the paper (above the fold) if you have a choice.
• Check the copy for typographical errors before it goes to print. Double check dates, prices and times.
• Ask for "tear sheets" (copies of your ad), and keep them for future ideas.

Measuring the results of your advertising

There are a number of small, inexpensive things you can do to help you judge your advertising effectiveness:

• Coupons and direct mail responses give an immediate check on effectiveness. They can be coded differently for each medium so that you can tell whether some are working better than others.
• In radio ads, have listeners make their own coupons or mention the ad for a discount or giveaway.
• Try running two different ads at the same time. Include coded coupons so that you can measure the results.
• Try running ads in different parts of the paper; on different days of the week; or a series of ads over a period of time. Sometimes a newspaper will be willing to give you a "split run" — print one ad in part of its press run and another in the rest. For radio ads, try using different "discount phrases" on two different radio stations or at different times of the day.
• Ask your friends and your customers if they have seen/heard your advertisements and find out what they think of them.

Consumer protection

You must be aware of the regulations placed on advertising by federal, state and local governments intended to protect the consumer from fraudulent advertising.

It is your responsibility to be sure that your advertising does not mislead the consumer.

The Better Business Bureau, the Federal Trade Commission and the Missouri Attorney General's Office all have excellent publications that can give you general guidelines and answer questions you have about advertising.

Professional help can make a graphic difference

Most newspapers and radio and television stations have professional staff to help you develop your idea and produce your final advertisement. Usually these services are free.

Creative help may also be available from local vocational/technical high schools and colleges, junior colleges and trade schools.

If you plan to run a major, expensive advertising campaign, the cost of professionals from an advertising agency may be worth the investment. If there is a local American Advertising Federation Ad Club in your area, consider joining. They may provide many ideas that you can use.

Acknowledgments

The authors wish to express their appreciation to the many people who contributed their time and expertise to the development of this publication. Among them are John Blakemore, Department of Communications, Stephens College; Jim Drexler, MidAmerica Trade Adjustment Assistance Center; Michelle Granger-Wilson and Scott Wilson, Department of Fashion, Stephens College; Pamela Norum, Department of Textile and Apparel Management; Edie Pigg, Missouri Artisans Business Development Association; Mark Van Dorn, Yogurt Cafe; Mary Waters, Columbia Tribune; and Melchor Zelenak, Department of Family Economics and Management.

References

• Center for Apparel Marketing and Merchandising, Advertising That Sells. Department of Clothing, Textiles, and Merchandising, Oklahoma State University: Stillwater.
• National Association of Consumer Agency Administrators and the Society of Consumer Affairs Professionals in Business. Advertising, Packaging, and Labeling: Responsive Business Approaches to Consumer Needs. Sponsored by the Office of Consumer Affairs, U.S. Department of Commerce, October 1980. (Available from U.S. Government Print Office, Washington, D.C. 20402)
• Riso, Ovid. Advertising Guidelines for Small Retail Firms. Management Aids, Number 4.015. Office of Business Development. U.S. Small Business Administration. n.d:
• Sorbet, Elizabeth M. Do You Know the Results of Your Advertising?
• Weeks, Kathleen. "How to Plan your Ad Budget." Sales and Marketing Management, September 1987.

Table 1
Average percentage of sales invested in advertising¹ (net funds — before co-op advertising funds)

¹Sources for average percentage of sales invested in advertising:

• National Appliance and Radio-TV Dealers Association
• Accounting Corporation of America, Inc.
• National Automobile Dealers Association
• Advertising-Age
• Modern Beauty Shop Magazine
• American Booksellers Association
• Modern Photography Magazine
• National Retail Merchants Association
• Newspaper Advertising Bureau
• National Association of Chain Drug Stores
• Lilly Digest, Eli Lilly and Company
• National Home Furnishings Association
• National Retail Hardware Association
• Laventhol Krekstein Horwath and Horwath
• Jewelers' Circular — Keystone
• Menswear Retailers of America
• National Office Products Association
• National Association of Mutual Savings Banks
• United States Savings and Loan League
• National Sporting Goods Association

MP660, reviewed October 1993