How Much Money Should I Spend on Advertising?

How Much Money Should I Spend on Advertising?

John Haggard

The surest way to overspend on advertising is to not spend enough to do a job properly. It’s like buying a ticket three-quarters of the way to Europe; you have spent some money, but you did not arrive.” – Charlie Mortimer, General Foods

Much like a jet that speeds down the runway with all engines open at full throttle in order to lift off the ground, advertising works the same way, if there is not enough gas (“cash”) behind the advertising campaign, the ad campaign will crash. This is because all campaigns require at least two components to be maximized in order to generate a return on investment: Reach and Frequency. Reach is the total number of different persons exposed to the message, and Frequency is the average number of times that each person is exposed to the message. 

Before pay-per-click and social media became a dominant force in the campaign mix, a Frequency of 3 was generally accepted as the metric to achieve in order to move those in the market to buy. Today a frequency of 5 to 9 times is necessary for maximum resonance or brain opportunity awareness. One of the reasons for such a high frequency is that the number of distractions today are far greater than they were just 15 years ago. For example, often times when people sit down to watch a big screen TV, they also have their cellphone nearby to reply to text messages as well as a laptop computer to respond to email and to search items of interest on the internet. With such a high number of  distractions, it is easy to see why a much higher frequency is required today versus 15 years ago in order for a marketer to break through the number of distractions to be heard and evaluated.

This is how Frequency can maximize the resonance of digital campaigns according to leading audience research company, Nielsen.

In terms of cost to reach the optimal frequency of 5 to 9, the U.S. Small Business Administration “recommends spending 7 to 8 percent of your gross revenue for marketing and advertising if you’re doing less than $5 million a year in sales and your net profit margin—after all expenses—is in the 10 percent to 12 percent range.” If you are introducing a new product or service, or have not advertised your business before, a start-up recommendation is spending 12 percent to 15 percent or even more if your service or product has a high profit margin.

But all of the above advice is of little value if the advertising message does not connect with the prospect. For this reason, the headline of your ad is the most important part of your ad. As advertising agency guru, David Olgilvy, once said, “If you haven’t done some selling on your headline, you have wasted 80 per cent of your money.”

For more tips on how to build creative campaigns that connect, go here.