Methods of Setting an Advertising Budget

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Advertising puts your organization in the public eye. Whether online or in print, repeated exposure is what makes potential customers think of your organization the next time they need a service you offer. So how much do you invest in this exposure? Setting a reasonable advertising budget that will yield the desired results is the goal. Here are some things to consider when formulating an advertising budget.

What's the Destination?

Start by determining your primary goal. Are you looking to promote a campaign or a program? Do you want to increase awareness about a certain topic or issue? What is your "call to action"? You have to understand what you're looking to gain from advertising before you invest in it.

Spend some time determining who your target audience will be and how to best reach them. For example, mass-market campaigns entail more external components, such as billboards or public-transportation ads. While costly, these components are likely to reach the biggest audience. You also should consider the time line for the advertising, because the time of year can make a difference in the cost.

How Will You Advertise?

After assessing your goals and target audience, you should determine what methods to use: online, print advertising, radio or external advertising, such as billboards and public-transit ads? Gather estimates for each medium. Talk to the advertising representatives about your projected goals and what you're hoping to accomplish. They can make recommendations about which medium would suit your needs best.

Sample Budget

A general rule of thumb is that an advertising budget is 3 percent to 5 percent of annual revenue. For example, if your annual revenue is $100,000, you should spend $3,000 to $5,000 on advertising. Using this estimate, prioritize the media you researched and include multiple components to diversify your outreach. For example, you could spend $3,000 on a print ad in a highly circulated newspaper and $2,000 for an online ad on a partner agency's website.

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