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How much should you budget for online advertising?

By Snap Agency September 27, 2013

The reality is businesses need to advertise their products and services. The question is where do you spend your advertising budget and how much should you spend. The starting point is to clearly define the expected outcome from ad spending. Are you looking for brand awareness or sales? Are you launching a new company or product line, or are you an established business that wants to maintain and grow?

If you a launching a new company or product line, the question is what do I need to spend to get to a break even. The investment and timeline with a negative return answers this question.

Traditional corporate/business cost of sales (including advertising) was 10% of revenue. If you are an established business, that might still be a good metric. The real question in this scenario is where do I spend the budget.

First start with where is your target customer looking for your product or service. Google says that 97% of Americans look first online for products and services. The question is where are your target customers looking? If everyone was looking online for what they need, there would be no magazines, TV, Radio or junk mail.

For online advertising, the question is still, where are your target customers shopping? The easy way to find out is to get online and check. Is your competition on eBay, Amazon, Google Paid ad placements? The price points will be different on all three channels and the advertising cost is different on all three channels. Which channel has price points where you can compete and make the numbers work? Our experience (7 .com stores, 6 eBay stores and an Amazon store) not all products work on all three channels. eBay fees will typically be 10%-12% of sales, Amazon fees are 15% of sales and we have a budget of 10% for paid advertising. Online advertising enables you to measure the Return On Investment for every dollar spent.

Check for next week’s post for the unique characteristics of target buyers on eBay, Amazon and .com stores.