Advertising 101: Part 2

Andrea has completed part two of her series which appears below. Thanks Andrea!
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In the previous post I did an overall introduction to advertising in relation to marketing and PR. In response, I got messages of support and suggestions which I greatly appreciate -I’ll try to sound less like a textbook this time- and encourage you to write me if you have more questions and ideas.

Now I want to talk about how to go about your budget for advertising, keeping in mind that it is a necessary expense. A start up company will spend approximately 1-5% of their projected annual sales for marketing. This includes websites, advertising, direct mail, any collateral materials, brochures, trunk show expenses, etc. So if one expects to do 1 million in sales for the year, the estimated annual expense for marketing will be $10,000-$50,000. Once you look at that number match it up with your goals and see if you can safely accomplish them for the amount you set aside. You may have to increase your budget, or decrease it depending.

It’s also very important to know how to allocate that money into different categories. Some people use percentages, but I prefer the crystal ball method (my highly technical term). I know that as a DE, I will need a very nice website, I know that I will probably do one or two trunk shows in a year, I know that I will need postcards printed up for both events, I know that I will need a lot of media kits for my sales reps. Just those alone would eat up a few thousand dollars. I then have to decide where to place my advertising. I will now say something that you won’t hear too often from me:

Print and online advertising are the most effective forms of advertising for a fashion company.

I usually don’t make broad assertions like that, but it has been my experience that radio and television are just not the right media for a DE. Pay attention to your local stations and see how many designers are on there.

Just because you are small and have a small budget, doesn’t mean that you can’t participate in advertising. Think about the size of your company and what you can effectively handle. Are you going to advertise in Vogue or Nylon? Probably not. The reason being that you couldn’t handle the response from that kind of exposure (not to mention the $50,000 you would need for one print ad). There is a kind of balance you need to achieve with your advertising that keeps things level. You only want to advertise where it will do you the most good.

Example: X-Fashion

X-Fashion is a small start up company specializing in street wear in SF. They have a small following and have about 10 accounts around the city. Their goal is to grow their existing accounts and gain a few new ones inside the bay area. What will they do? They want to influence their local market where they already have a consumer following. By advertising in their local entertainment publication (targets young hip dudes and chicas) or their local news outlet (fashion section/lifestyle targeting fashion forward dudes and chicas) they will be influencing the end consumer who will create a demand for more retail outlets, which will make X-Fashion more desirable to retail outlets that don’t currently carry X-Fashion. I mention this possible scenario because of the business plan post. The only time you do this kind of marketing is when there is already an established customer base in a region, otherwise you are trying to influence customers that don’t know you, and have no reference point for your product…so in essence, it would be futile. Let me give another example on the other side of things

Example: Figment of my Imagination Clothing, LLC

Figment Clothing is an absolute industry newbie producing fashion leg wear and accessories. They would like to target hip boutiques in urban as well as non urban areas. They have registered for their first trade show, sent invitations and media kits to all their prospective accounts, as well as a press release announcing their coming out to local and regional news outlets. Traditional advertising will not work for this company. They want to get buyer’s attention. The way to do this is to advertise within the wholesale network…i.e.: putting ads on the tradeshow website (if allowed), advertising in the market programs (tradeshow guide), etc.

So, you see the difference is in the target. When you nail down who the target is, you can choose the right media for your message.

So now that we have gone over budget and allocations, the next post will deal with your actual campaign and how to compose it. I will post some examples of ads that I feel are effective. I will also go over the golden rule of print media…Size and Frequency.

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6 comments

  1. Mike C says:

    A start up company will spend approximately 1-5% of their projected annual sales for marketing.

    The spend can be more variable than that.

    In our first year, we spent 15% of sales on marketing. 99% of that was on advertising.

    In our second year, we spent almost 28% of sales on marketing. About 98% of that was on advertising.

    This year to date, we’ve spent 20% of sales on marketing. About 98% of that was on advertising.

    We sell direct and have more in common with direct mail merchants than with DEs in the more traditional mode covered extensively in KF’s book.

    In our business, we don’t really think in terms of “how much am I going to spend on advertising this year?” so much as “how much am I willing to pay to acquire a new customer?”

  2. andrea says:

    Hi Mike:

    One typically spend the most money on acquiring new customers. You spend much less retaining and upselling existing customers.It depends on your goal

    Your system works for you and that’s great. I probably wouldn’t suggest it, I think the return on your investment could be better, just my opinion. You mentioned that you don’t put out a budget for the year; Mike I will be perfectly honest that I think that is a good way to spend way too much on advertising…but respectfully, I don’t know your specifics.

    I would be curious to know your numbers and see what percent of a return you get on your advertising program…just the geek in me talking.

  3. andrea says:

    Great article!

    I think that new media is awesome. After all, FI is certainly a part of that revolution. What I got out of the article was that using non-traditional means to promote your company is a powerful tool(which is true). It addresses trends in consumer behavior that are really new. There are pitfalls tho’. I am of the mind that the company dictates the methods used to advertise, which usually involves a carefully planned mix. Being a DE is great for these new media blitzes, especially with the tell-all kind of programs out there like Project Runway and other types of celebritizing-gritty-this is how we do it kind of shows. Having a blog is almost necessary. If there is one thing I could say about being a designer is that everyone wants to know about it…apparently it’s glamorous!

  4. Mike C says:

    You mentioned that you don’t put out a budget for the year; Mike I will be perfectly honest that I think that is a good way to spend way too much on advertising…but respectfully, I don’t know your specifics.

    Our advertising is designed to drive qualified traffic to our website. We primarily use keyword advertising to do that.

    The key metric for us in choosing how much to spend is cost/new account. Once we’ve determined that, the “budget” boils down to “as high as possible.” We can write down what we think “as high as possible” will be, but it is an irrelevant number since we really only care about how much each new customer costs.

  5. Miracle says:

    Your system works for you and that’s great. I probably wouldn’t suggest it, I think the return on your investment could be better, just my opinion.

    One thing to consider is that Mike is a manufacturer selling direct to consumer, as opposed to a retailer or a manufacturer selling wholesale only. He has higher profit margins to work with and when compared to other manufacturer—>consumer companies, his budget is not out of line. It is common for direct mail/internet merchants to spend a higher percentage of their budged on advertising.

    If he were solely a DE, selling primarily to wholesale accounts, then yes, the number would be too high. But since that is not his business model, the % is not unreasonable.

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