How Much Do Retailers
Need to Spend on Advertising?

hen I opened my pottery store in 1988, every kind of advertising found its way to my doorstep. The newspapers, the radio stations, the specialty items, and the big-event folks all had a terrific way for me to spend my advertising dollars, according to them. The local New York Times-owned newspaper gave a seminar on advertising venues for business people like me. They put the base figure for an advertising budget at 15 percent of gross sales.

A new business owner full of enthusiasm could waste a whole lot of money in the wrong advertising areas, and I am certain I wasted my share. How do I know? Advertising is not easy to measure. But experience has shown me it can and should be done.

When times are tough there’s a great temptation to cut our advertising, but I’ve found that other strategies work better.
I take the time to listen to advertising sales pitches, attend seminars, and gather advertising information at every opportunity. Our business world is constantly changing so I read newspapers and magazines for their ads. I clip appealing ads for my files.

I watch what the big budget advertisers are doing with their money. I’ve learned that advertising works; you just have to learn how to use it.

All of my research over the years has allowed me to recognize a good deal and turn down a bad one. Recently, the local radio conglomerate asked small business owners to a breakfast session to hear how we could buy currently unused radio airtime for 60 percent off the regular price. We were guaranteed prime time 50 percent of that time. They had only 30 of these contracts and they insisted it would be best if I reserved one NOW as six were already sold!

I thanked them for the breakfast, the free dinner gift certificate and the information. I told them I would see how it fit my numbers and my plan. But, I did not tell them my thoughts that this is not the best use of my ad dollars and I can get a better radio deal when I need it.

The tried-and-true formula

If you’re establishing your advertising budget and plan, or evaluating an existing plan, consider the advice of experts Jane Bunch, a business counselor from the Small Business Development Center in Tampa, Fla., and William E. Gregory Ph.D. who teaches advertising at Florida Southern College in Lakeland, Fla. Both were recent guests on the Craft Retailers Association for Tomorrow (CRAFT) teleconference, entitled “Common Issues, Common Concerns: Advertising.”

Both are very familiar with American craft retail stores and the CRAFT member retailers on the telecon were from across the United States, representing large and small galleries.

Bunch and Gregory, as well as CRAFT members, suggest starting at approximately 5 to 6 percent of gross sales for your advertising budget. If you’re located in a mall, use 1 to 2 percent. Most of us on the telecon were using a 3 to 4 percent. If you can spend a little more, do.

To plan for spending advertising dollars, first take January’s sales and divide by the year’s total sales. This will give the percentage of sales for the first month. Do this for each month. You then have the sales pattern for the year. If possible, do this for the last couple of years.

If January shows 10 percent of the year’s sales, then set aside 10 percent of your 5 percent advertising budget for January. If 20 percent of sales are in November, use 20 percent for November. Spend according to your sales pattern.

Evaluate and adapt regularly

Revisit your advertising strategy every two to three months. See what seems to be working. Train your sales staff to ask, “How did you hear about our gallery?” We keep a record of those responses.

Coupons are a way of measuring response. When we send coupons, we attach the returned ones to the sale slip and evaluate at the end of the program. There are statistics that show many people do not use the coupons, but they do serve as a trigger to visit the business.

In the busy months, when all the major advertising is going on, don’t worry about being buried: advertise, anyway. You need to be there. Stick to your plan. Even when times are tough, find a way.

Setting up a solid advertising plan can give a retailer real peace of mind. When an unexpected event or opportunity comes along, you will know whether it will fit the overall plan and the overall budget, and therefore make a better decision.

A few other suggestions

According to Bunch and Gregory, direct mail is still the most effective advertising for craft retailers. It goes directly into the hands of our targets. They also suggest using ads in the local newsletters of targeted groups.

A well maintained mailing list is essential. Most point-of-sale (POS) software allows one to gather that information. In my stores we know who bought what since 1993 and the staff knows how important this information is. We sort out who we want to receive our direct mail. We never share our mailing list.

Don’t overlook NPR (National Public Radio) if you are using radio. It’s our target market and the only one where customers will thank you for supporting it.

Be firm with the media. If they mess up an ad, insist on a free replacement. Ask for good placement. Do not let them put you in the gutter. It is your advertising
dollar.

Educate yourself — there are some great resources available. Start by finding the nearest Small Business Development Center. Go to their advertising seminars, which have a minimal charge. Use their certified business counselors. It’s free objective advice. Their goal is to help you, as a member of the business community, survive and grow.

Gloria Brooke is president of the Craft Retailers Association For Tomorrow (CRAFT) and owner of Brooke Pottery, Lakeland, Fla. She also serves on the Advisory Board of The Small Business Development Center in Tampa, Fla.