PALO ALTO, California, Feb. 28 2018 /PRNewswire/ — With the arrival of the digital era, advertising platforms have begun to offer highly innovative models. Advertisers now pay for specific results such as clicks, records of potential customers, and even specific sales, in the case of e-commerce. With this, marketers began to see advertising as an investment, and not as an expense.

This 2018 new challenges and technologies that adapt to the unstoppable evolution of the consumer are emerging. Within this context, Adext, provides the basic points worth considering before distributing your budgets this year and, thus, generate more customers:

1) Your target market: In order for the budget you assign to your ads to bring you the results you’re expecting, the calculation shouldn’t be random or hypothetical. It has to be a realistic amount that’s designed around what you’re offering and who you’re offering it to. Once you’ve clearly determined which niche market you want to reach and which media your target audience is on, it’s essential to choose the one that will guarantee you the highest return on investment. Make estimates and projections on the scope and conversions.

2) Your company’s needs and priorities: Analysing companies similar to yours can be very helpful, especially if you’re looking for a reference parameter on how much to allocate for each media or find out how close you are to the industry average. While there are companies that invest significantly more in advertising than the average, others can spend less and get even better results. What does that depend on? It generally depends on the life stage of the product or service. If you’re about to launch your product or service, you’ll probably need to allocate a higher budget to create brand awareness and get attention. On the other hand, if your product or service has been on the market for a while (at least 5 years) and the brand is well-known, a few awareness campaigns might be enough.

3) The transition to digital media and devices: According to Forrester and eMarketer reports from just 2 years ago, digital marketing budgets never exceed 30% of a total marketing budget. Today, it’s estimated to be around 40%, and this percentage will continue to increase in coming years. Digital media is at the top of the list of the most relevant marketing channels and has a significant impact. Remember: you must have a presence on the digital media your target market is on. Today, the average consumer spends over 8 hours a day on online devices, and more than half of these are on social networks.

How to Calculate Your Advertising Budget

There are multiple methods that can help you plan and design your budgets. Adext shares some of the most popular methods:

1) Traditional method:  This is definitely the simplest and most common method. It consists of setting aside a percentage of your projected annual sales revenue and assigning it to your ads. For example, suppose you decided to invest 5% of your total budget on advertising and your projected total revenue for this year is $1,000,000 USD. That would mean you’d have to allocate $50,000 USD to invest in advertising. If you’re not sure what percentage to allocate to your ads, you can always use the industry average as a starting point.

2) The sales unit method: This method involves knowing how much money it costs you to promote the sale of a product or service at a specific price. For example, if it costs you $10 USD to advertise a product or service that has a retail price of $200 USD, you’d need to invest $2,000 USD to sell 200 units and generate an income of $40,000 USD.

3) The maximum permissible method: It’s usually a method applied by dismissal or intuition, where the maximum percentage allocated to advertising is everything the budget allows for. This method should be used when you either want to put everything toward advertising or because that amount is all that’s left of your budget.

4) The tasks and objectives method: This is a truly meticulous, but highly effective, method. It’s based on having a brilliant marketing plan with clear objectives. This method involves making a list of priorities and putting them in order according to their importance. Once you’ve set your specific advertising goals, you should determine the activities you plan on doing to meet them, as well as the estimated price they’ll cost you. If your company is relatively new and it’s already clear what these different activities may cost you, this method is definitely for you.

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About ADEXT Corp.

With presence across 30 countries, Adext delivers superior digital advertising results using Artificial Intelligence (AI) and Machine Learning (ML) to manage budgets and cleverly optimize audiences on Google AdWords and Facebook.

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SOURCE Adext