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Advertising Budget – Summer 2002

In light of today’s economy, with sales down and profitability threatened, what percent of gross sales and gross profit do you budget for advertising? Which of the following methods do you use and what percent of your advertising budget are they: coupon flyers, product announcements, corporate identity devices (lighters, hats, key chains, etc.), Yellow Pages advertising, meet the customer events such as an open house, trade shows and others?
                                                             
Louise Woiteshek, Controller, Myers Forklift Inc., Santa Ana, CA

Loren Swakow: Advertising/marketing, what a dilemma! It is not necessarily how much you spend, but how you spend it. Yes, we still order hats and key chains. We use these primarily for the backroom guys. These users of our products very seldom get give-a-ways from the salespeople and appreciate the attention more. Besides, who is really going to wear the hat—not the purchasing agent, but the lift truck operator.

Yellow Pages advertising is another story. We have decreased our expenditures greatly in this area. More and more people are finding us through our website. The website has proven to be very inexpensive and beneficial. Definitely more bang for the buck when compared to Yellow Pages. I am sure each area of the country is different, though.

We did not decrease our advertising budget. We hired a retired salesperson to telemarket for our company. This has worked out extremely well. We supply the script and the list and Gordy comes in twice a week or so, sits at a desk and generates leads. Our script is based on the list he is supplied, whether it is customers no longer doing business with us, or SIC codes for trucking companies. The pay is minimal, but we do add to it when a lead generates revenue either through a truck sale or a new service account. We have since added a second retiree to our part time staff. No benefits, no management required, no problems.

This idea came from Gary Moore in Colorado. Our sales manager happened to be sitting next to him and they just started talking business. Networking at MHEDA functions continually proves beneficial to our company. The new ideas garnered are amazing. After all, we are not re-inventing the wheel.

Marla Cope: Our budget for advertising is around two percent of our gross profit. Despite the trend away from salespeople and toward e-commerce, we still believe the salesperson is the most important advertising tool we have. We can send out flyers and advertise in the Yellow Pages; however, people buy from whom they are comfortable with. Therefore, we find that advertising is only effective (unless they’re strictly price buyers, and you’re the cheapest) with follow-up by salespeople. A strong relationship between the salesperson and their customer can do more to garner new business through referrals than any hat, key chain, etc. will do. It is also helpful for salespeople to be involved in their communities through church, business, cultural and social activities. Supporting that involvement will go a long way in advertising your business.

Warren Gandall: A short direct answer to this question is just slightly less than one-half of one percent of our “Sales Bookings” projected for the current fiscal year. However, this percentage will vary from year to year depending on what advertising is required to support our Sales and Marketing Plan for a given year. The types of advertising we participate in and the percentage of sales bookings are as follows:

  • Visibility (Yellow Pages) .00042%
  • Image/Visibility (flyers, brochures, catalogs, performance reports) .00228%
  • Image/Visibility Events (shows, open houses, seminars, client appreciation) .00034%
  • Promotional Items (hats, shirts, mousepads) .00028%
  • Visibility (E-Business) .00047%
  • Public Responsibility/Citizenship (sponsorship of public events) .00034%
  • Other (market research, etc.) .00026%

This comes to a total of .00439 percent, which is just slightly less than one-half of one percent.

Bob Weeks: We budget one percent of gross sales for marketing. In today’s challenging environment, it is easy to cut this budget. However, we need advertising and promotion more than ever to meet sales projections. Following is how this money is spent:

  • 30% Website
  • 20% Trade Show
  • 15% Advertising
  • 10% Literature
  • 10% Open House and Seminars
  • 15% Miscellaneous

Material Handling Equipment Distributors Association

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