Where Advertising Budgets Really Come from

    • 1373 posts
    August 21, 2010 6:13 PM PDT

    Where Advertising Budgets Really Come from

    by Paul Weyland, reprinted with permission of RBR.com
    The last time I saw my dentist for a routine cleaning, her assistant took my blood pressure. I asked her why, and she told me that more people visit the dentist than the doctor and sometimes they discover hypertension or other problems the patient didn’t know he had.  “Wow Paul, your blood pressure is really high,” she said. “That’s funny,” I responded. “All my life it’s been low.” I freaked out and immediately made an appointment to see my doctor.

     

    I told the doctor what the dental hygienist said. So, he took my blood pressure again, sighed and said, “Paul, you’re fine. Now open your mouth.” As I did, he took a tongue depressor and a flashlight, looked into my mouth and said, “Go back and tell your dentist that I think you might have a cavity.”

     

    Here’s the point. Nearly every week I encounter advertisers who say, “We budget four percent of our gross revenues on advertising.” Of course I ask how they arrived at that four percent figure and the client says, “Well, they say that’s my industry’s norm.” Drilling deeper, I ask, “Who are they?” and I usually find that the client learned this from an accounting consultant at his industry’s state or national convention. An accountant? An accountant is giving clients advice on advertising expenditures? Shouldn’t that be our job?

     

    The problem with the accountant’s four percent model is that it’s old and outdated. In fact, the four percent figure has been recommended by accountants since at least the early 1960s (when the bogus “frequency of 3” was established?). Do you think advertising clutter has gotten better or worse since the ancient era of Mad Men? Advertising Age magazine tells us that advertising clutter has increased 100 percent, from 2,500 commercial impressions a day in the 1990s, to 5,000 commercial impressions a day, today.

     

    People determine advertising budgets in all kinds of crazy ways and it’s usually based on some low-ball scheme. Some business owners just budget what they think they can afford. Others try to spend what they think their competition is spending (if you’re being competitive, wouldn’t you want to outspend your competition?).

     

    Other businesses base their spending on mathematical formulas like DAGMAR, which stands for Defining Advertising Goals for Measuring Advertising Response. This system was developed in 1961 to link advertising objectives to the mental stages of consumers through the buying process. Do you think that along with clutter, the mental state of buyers might have changed since 1961? And many businesses simply use the 2-5 percent model they learned from “they”? I’ll bet Coca Cola spends more than two to four percent of gross revenues on advertising.

     

    With the unprecedented increase in clutter, perhaps it’s time to reeducate clients on the amounts they budget for advertising before the accountants do it for us. Clients need to know that it’s much harder now than it was in the 1960s to break through the ever-thickening white fog of commercial noise. They need to know that this is a different world and that old 60’s based spending models need to change. Keep in mind that “frequency of three” was established in the 1960s.  So if you’re still subscribing to that pretzel logic, then in today’s world shouldn’t we be trying to achieve frequencies of nine or ten?

     

    If we want bigger budgets, we’d better get busy preaching and begin the process of modifying advertisers’ behavior on advertising spending before the accountants do it for us (if we can’t out- charm the accountants we’re in real trouble). Show the client what they’re really up against in 2010. Remind them that we are no longer living in the 1960s.  “Mr. Client, you’re not still wearing beads and sandals, why are you still subscribing to those old ‘60s advertising beliefs?”

     

    Clients should budget to own a piece of your audience for life, not just rent them for a while with a short sale. Tell your customer that the goal should be to own as much of your station’s inventory as they can. “Why should you buy a spot an hour Mr. Client? Because we LET you. Because you can.” Ask for more and back up your price by providing excellent long-term advertising strategies (if your stations could use some help in that area call me).

     

    Stop asking the client what his budget is and start telling him what it should be. Can you imagine going to a doctor who tells you that you need open heart surgery, followed with, “By the way, what’s your budget for this?” Take what you normally ask for a month and start asking for that amount per week. What? That’s right. Try it. What you think is expensive may not be expensive at all for your client, once you’ve sold him on value. Value after all, always supersedes price. Heck, you can always come down a little if you have to. But when all you sell are cheap packages it’s really hard to go up. And by asking for more, you get the client’s full attention. Think about it. All the rest of his vendors ask for real money. We ask for chicken poop. No wonder they don’t take us seriously.

     

    It’s important to find out where these budgets really come from. Most clients are pulling the number out of their rear ends. You know they are. At best, they’re counting on low-ball 1960s strategies from accountants. Let’s take that ball back. After all, advertising is our territory. And we’d better defend it from the accountants before they pull out the rest of our teeth.

     

    (source: Paul Weyland is a sales trainer, author and coach specializing in long-term local direct broadcast sales.  Contact him at 512 236 1222. Read Paul’s book Successful Broadcast Sales, available at bookstores or on line.)


    This post was edited by Rod Schwartz at March 5, 2024 2:06 PM PST