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Advertising budget for your business. How to calculate

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What cost per click to set, what budget is needed for advertising, how much to spend, whether “this” is normal or not, what conversion should be - all these questions come down to one thing - how to calculate the advertising budget.

How to calculate an advertising budget: the most simplified formula

Let's take a look cost per click for any advertisement, it doesn’t matter what you do.

The cost per click is made up of cost of goods/services, what you are selling minus expenses(all costs, call center services, all services, domains, postings for one particular product (divide and average these values).

Multiply on website conversion(or Instagram profile, lead form, VKontakte page - any selling platform).

AND multiply on operator conversion or sales department conversion(call center), because you still need to call people so that you are guaranteed to receive money (processing applications and working with objections).

Let's use an example.

(Product price 3,500 rub. minus all costs 1000r.) X(landing page conversion 3%) + ( every second application is confirmed) X 45% = approximately 34 rub.

This is the maximum cost per click that we can pay and at which we will break even. That is, you will not earn anything at all.

Now you need to start from this rate (34 rubles). This is the maximum you are willing to pay to Facebook, Vkontakte, Yandex, etc.

Just keep this meaning in mind. Every project or business should have some kind of benchmark. You need to know how much the application costs.

Pay what you are willing to earn.

This is not a strict indicator. If we take our example, then 34 rubles. – this is an indicator, if you increase it, you go into negative territory.

Advertising budget. How much money is needed?

Now a reasonable question arises: what budget do I need for advertising?

Not only on initial stage, but also after.

Initially, you need to determine HOW MUCH money you are willing to invest in advertising.

Before addressing this issue, you need to think about metrics.

The higher the conversion rates of the site and operator, the lower the cost per click.

The better your performance, the more you can afford, the more you can invest in advertising.

And already bother with indicators such as CTR, daily budget, etc.

When you know your sales funnel inside and out, it doesn’t matter how much money you invest in advertising.

It just depends on how much money you put in your pocket and how much money you invest in growing your business.

All of the above applies to those who already have a website, sales department, etc.

What should newbies do?

First, we invest money to get some first indicators. The cost per click will be higher.

Within 4-5 days, the indicators will stabilize and you will understand what cost per click suits you and whether you need to invest further.

Later, when the cost per click suits you, you can increase the budget indefinitely. There is already a sales system and there are indicators.

In order for the number of applications and clients to grow in the future, you need to work on the conversion of the selling platform, with the sales department (or e-mail newsletter).

If the cost per click is growing and you want to make it lower, you need to work with the audience and with conversion (tools in the sales system), we also work with the audience to show advertising to those who need it.

Then we invest a budget regarding whether we want to do it quickly (invest most profits) or gradually (without investing large budgets).

Summarizing the advertising budget

You need to know your average numbers and build on them to calculate your advertising budget.

Cost per click = (product cost - costs) X website conversion X operator conversion.

Be sure to read this material as well:

If you have any questions - write in the comments, and also share on social networks and put stars.

I really hope you found this information useful;))

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How much to spend on advertising? This question plagues both experienced and young managers. But, unfortunately, instead of finding a rational answer, most prefer to postpone the decision, hoping that it will not affect the business.

As a rule, new companies spend most of their efforts on satisfying the needs of existing customers, and this makes sense. However, many underestimate and underestimate attracting new clients, believing that their reputation for excellent service will do all the work for them. Unfortunately, this doesn't work.

The famous American marketer Stuart Henderson Britt once said: “Doing business without advertising is like winking at a girl in the dark,” and he was absolutely right. It is necessary to invest in advertising and marketing.

To effectively manage your advertising costs, you need to know exactly how much you spend, where you spend it, and how much profit this spending generates. The easiest way to do this is to use this key performance indicator (KPI) - share advertising expenses or DRR.

The share of advertising expenses is the ratio of the amount of advertising expenses to the income that it generated. This important business The indicator allows you to evaluate the effectiveness of advertising campaigns across the entire business and compare it with the performance of other companies.

Advertising costs include everything related to attracting new customers - non-obvious ones must be added to the direct costs: wages personnel involved in the process of attracting customers (sales managers, consultants, promoters), the cost of various marketing materials (costs for the website, souvenirs), etc.

For example, the company “Default Inc.” spent 50,000 rubles on advertising on the Internet in January, which in turn brought orders totaling 1 million rubles, then the share of advertising expenses will be equal to:

DRR = (50000/ 1000000) * 100%= 5%

This means that the company “Default Inc.” spent 5% of my income in January on advertising.

The big question is: “How much to spend?”

There is no clear answer to this question. Typically, the higher-margin product or service a company sells, the more it can afford to spend on advertising.

In order to approach this issue more prepared, you need to find out how much businesses in your field of activity spend. Many large companies publish their financial statements in the media or on its website to report to its shareholders. This is a great opportunity to evaluate the share of advertising costs and draw a general conclusion for yourself.

Increasing the advertising budget, as a rule, brings additional sales, but does not guarantee this. The relationship between the amount of spending and attracted income is difficult to predict, so tracking the RRR indicator for a sufficient time and analyzing its changes is the most important way to assess the correctness of the size of the advertising budget.

For example, you know that by spending 1 million rubles on advertising a new product, you will attract 10 million in income, but by increasing the advertising budget to 2 million, you can only attract 12 million in income. In such a situation, it may be more profitable to allocate an additional 1 million to promote other products.

What to consider?

An important point is that companies often use several channels to attract customers (advertising on the Internet, radio, television) at the same time and it becomes difficult to attribute new sales or transactions to a specific source. Therefore, these channels should be separated using various techniques.

For example, on a website it is possible to use dynamic call tracking, which allows you to determine the source of sales attraction right down to the query that the client entered in the search engine. In the case of offline advertising, promotional codes or individual phone numbers can be used for tracking.

Also, when comparing the share of advertising expenses with other enterprises, their size and specifics should be taken into account. It often happens that major players are unprofitable advertising campaigns, in order to show its leading position in the market and attract additional investment.

The more data we receive about sales, the more balanced and correct conclusions and decisions we can make.

Conclusion

Marketing activities, including direct advertising and sales, are necessary for everyone commercial enterprises to make a profit. It is difficult to determine exactly how much you need to spend on advertising in order to get sufficient profit. Some businesses are successful with advertising spend as low as a few tenths of a percent of revenue, while others are as low as 25%.

Small companies often cannot afford to enter the federal advertising market (for example, television), but can focus on less expensive methods: advertising in search engines, email marketing, smm, working with recommendations, btl advertising, loyalty programs, etc. .d.

The main question for any company should not be “how much to spend,” but “how to spend it most effectively.”

Coca-Cola.

The Coca-Cola Company is the largest manufacturer of carbonated drinks and needs no introduction. Coca-Cola has been on the market for 123 years and holds more than 3.2% of the global beverage market. If you do the math, about $2 billion of this drink is drunk every day in the world. This brand, worth $59 billion, is the most valuable beverage manufacturer. The company includes about 500 different brands that produce 3,500 drinks. The Coca-Cola logo is the most recognizable on earth. 94% of all inhabitants of the earth recognize the colors of this brand. The company uses tin cans for its products. Each year, 300,000 aluminum is used in the beverage industry in the United States (approximately 18% of the country's aluminum production).

It is known that "Cola" uses ingredients such as phosphoric acid and coca leaves - plants. These are completely ambiguous and controversial additives! Cocaine is obtained from the leaves of such a plant, and phosphoric acid is a strong chemical element that is harmful to health. US Highway Patrol uses Coke to clean roads from road accidents.

Almost everyone knows this corporation. Anyone who uses a PC has had their first experience using the Windows OS and various Office programs. Everyone also knows the company's founder, Bill Gates, who opened Microsoft in 1975. As of 2016, the company's value reached $75 billion. Microsoft spends no less than Coca-Cola on advertising. The annual contribution is 2-2.5 billion dollars. Few people know, but initially, in 1989, the project “ Microsoft Office" was created for the Mackintosh PC.

McDonalds.

"Mac-Duck" is the largest network fast food in the world (31 thousand restaurants). The value of the network for 2016 is $39 billion. It was founded in 1940 by the McDonald brothers, and already in 1948, the chain acquired the concept of “fast food”. McDonald's is now present in 119 countries around the world. In each country, the company uses only local products.

The first restaurant of this company in Russia opened in 1990. People queued for hours to visit this place.

Google was officially registered in 1998. Initially, they planned to call the search engine “Googol”, but by an absurd accident, its name remained as we know it. The company's value is $83 billion. In 1997, the owners search engine tried to sell it for $1 million to Yahoo representatives, but were refused. Now Google allows itself to buy 1 company per month. It is not surprising if the cost of the search engine is about 83 billion dollars. In 2004, about a thousand company employees became millionaires.

Samsung.

The company, valued at $36 billion, consists of 85 enterprises employing 370 thousand people. The founding date of Samsung (translated from Korean as “Three Stars”) is 1938. The company accounts for 17% of GDP South Korea. But the main revenue comes from smartphones and tablets (80% of total income). This is not surprising, because Samsung has the largest line of smartphones and tablets in the world. At the same time, the company's advertising expenses amount to 4 billion per year. However, much more is spent on the development of new technologies (10 billion per year).

Initially, these guys were engaged in the creation of sewing machines, and only in 1933 they were modernized to produce cars. In memory of this time, the company logo has been preserved, indicating the thread threaded through the eye of the needle. In 1962, Toyota began selling in Europe and was considered a supplier of inexpensive but reliable cars. Now, in the workshops of this auto giant, cars appear every 6 seconds, and this is an undoubted record. In addition to creating cars, Toyota builds houses in Japan, produces motor boats and works in the field of robotics.

As of 2016, the company's value is $42 billion. Advertising costs amount to 1.7 billion per year.

Apple.

The Apple company (worth $154 billion), founded on April 1, 1976, is popular in almost every country in the world, just like its founder, the late Steve Jobs. The company's products are a huge success everywhere. Once upon a time, the first Apple PC sold for $666.66. The company's first iPhone was created in 2007 and gained great popularity among consumers. Every employee of the company received the device for free. Since then, product updates have traditionally been done once a year. Also, Apple spends just over $1 billion on advertising every year.

In 2015, the company’s revenue amounted to 234 billion, which is 37 billion more than revenue in federal budget RF.