Why a Formal Ad Budget?

A formal advertising budget is necessary because it offers the following benefits:

• Firm control of your advertising investment
  
• In-store selling tie-ins to build extra sales
  
• Elimination of poorly timed promotions
  
• Better response rates on individual ads
  
• Full use of cooperative ad allowances
  
• Time saved in ad handling
  

Your advertising budget is an indispensable part of your planning process, so give it the attention it deserves. The process is uncomplicated. Simply determine your projected sales, and then apply a percentage of sales for your advertising investment. Advertising planning and budgeting can be as simple or as complex as you like. For example, you can make one budget for your entire company or create separate budgets for each department-or even each merchandise line.

Take a look at your sales levels by quarter or by month. Examine your sales numbers to determine seasonality, and peaks and valleys, with the intent to distribute your advertising budget accordingly. For example, toys always have a disproportionate share of sales during the fourth-quarter holidays, so it's smart to advertise toys when customers are in the market to buy them.

Consider special events, holidays and merchandising opportunities as you consider your distribution of monthly ad dollars.