The 4-Step Ad Plan
In its simplest form, advertising budget planning has four steps:
1. Forecast your annual sales.
2. Forecast your monthly sales.
3. Forecast your monthly advertising budget.
4. Determine your monthly advertising schedule.
How much do you expect to sell this year? Annual sales figures can be projected by total company sales, by department or by product line. Project your sales based on industry averages. Then compare these figures to the history of your business to determine what's right for you. Comparing sales-per-square-foot data to your actual numbers lets you compare your store's performance with other's in your field.
Monthly sales figures also can be forecast using industry averages. When you complete the following exercise,you can decide whether these percentages apply to your situation or an adjustment should be made.
To forecast your monthly advertising investment, use Ad-to-Sales Ratios (advertising as a percentage of sales ratios) based on industry averages. When finished, compare these totals to the history of your business. Do these projections give you confidence that you can meet your sales goals? Should your investment be greater or less? Consider your competitive situation and any other special circumstances.
Step 1: Forecast Your Annual Sales.
Determine your store's square footage. Multiply that figure by the Sales per Square Foot figure for your type of store (similar size and location). Then enter this number in the Annual Totals section at the bottom of Column 2 on the blank 4-Step Ad Plan Chart. Download 4-Step Ad Plan here.
This is your forecasted annual sales figure.
EXAMPLE A: A typical jewelry store in a neighborhood shopping center has approximately 1,200 square feet and a sales per square foot average of $280 (from the Sales per Square Foot table). The example below assumes your actual square footage measures 1,000 square feet.
Step 2: Forecast Your Monthly Sales.
Use the industry averages for Monthly Sales by Store to fill in Column 1 of the 4-Step Ad Plan. Next, multiply each percentage by the forecast annual sales figure. This will give you monthly sales figures for Column 2.
EXAMPLE B: A typical jewelry store in a neighborhood shopping center does 8.6 percent of its sales in February (from the Monthly Sales by Store table).
Step 3: Forecast Your Monthly Advertising Investment.
Refer to the "Advertising-to-Sales Ratios Chart" on for a listing of average percent of sales invested in advertising by different types of stores. Enter this number in each of the spaces in Column 3 on the "Ad Planning Chart". (This number will be the same for each month.) Then multiply the dollar amount in Column 2 by the percentage in Column 3. This will give you monthly advertising figures for Column 4.
EXAMPLE C:
Step 4: Determine How You Should Schedule Ads Within the Month.
Sit down with your newspaper advertising representative to schedule your monthly advertising. When distributing your ad dollars over a month:
- Note the payroll days of large local companies.
- Consider when Social Security is paid.
- Be aware of heavy-traffic days for your location and special late-night openings.
- Tie in with national and local merchandising events.
- Keep up with current prices and inventory. Jot down items, prices and ad sizes in a daily log.
- Make a list ofthe month's heavy-traffic items.
- Check your seasonal sales charts and promote items before the natural selling season ends.
- Jump on new ideas or hot-selling trends that do not appear in last year's charts.
- Promote new and expanded products and departments.
- Emphasize frequency before ad size to reach greater numbers of prospects.
- Note special dates that offer additional sales opportunities.
- Support traffic throughout the month and throughout the entire store.
- Seek co-op dollars from your suppliers.
- Advertise more if you are in a less-favorable location or if your business is new or expanding.
- Increase your ad budget to combat stiff competition.
- Remember, stores that stress price usually promote more heavily.
- Schedule your ads for each month. Mark on your Planbook calendar which days your ad will run. Chart results to aid next year's planning. Note any unusual conditions on your calendar (weather, fads and shortages) that would cause unusual sales results.
