Are Your Clients’ Ad Budgets Too Low?

adbudgets2022

Did you know that 50% of planned media channel investments are too low for maximum payback? And by allocating the appropriate amount of money into ad budgets, your clients could see a 50% increase in their return-on-investment?

Percentage of Revenue That Should Go Into Ad Budgets

How much of revenue should be put into your clients’ ad budgets? Nielsen researchers find that between 1% and 9% of revenue can improve ROI, with the median brand spending approximately 3.8% of revenue on media. However, appropriate spending on ad budgets is not the only factor that goes into improving ROI. Keep in mind that essential and non-​essential industries will have varying ad budgets based upon their necessity for consumers. The looming recession is not ideal for ad budgets, but it is important to maintain advertising, or your clients’ customers will forget about the brand.

Factors That Impact Clients’ Advertisement Strategies:

Short-​Term and Long-​Term Goals

As the economy evolves, so do businesses. Therefore, you should expect to keep prospects’ long- and short-​term goals in mind. Clients are expecting flexibility, and Reed Smith, a law firm partner, backs the idea that the terms of media buying agreements are under heavy review. Media owners expect marketers to lock into ad buys to prevent from them from exiting deals. After all, marketers worry that their goals will be negatively impacted by the potential recession, and they’ll want the flexibility to cut costs.

Overspending or Underspending

Businesses need to stay relevant to consumers and show competitors they don’t intend to give up any market share. For example, digital video campaigns are trending for advertising and businesses are adapting their ads to fit this. However, Nielsen reports that these plans are typically underinvested in by brands:

  • 66% of digital video plans
  • 60% of display plans
  • 43% of social plans
  • 31% of TV plans

Underspending is an issue. Nielsen’s survey found that 50% of the planned media listed above had investments that were too low to reach maximum ROI. In contrast, if your client is overspending on one media format, you might want to encourage them to focus on a multi-​channel marketing strategy, which would optimize their channel mix. This approach would deliver a better outcome than cutting the ad budget which would risk reducing their sales volume.

Understanding Ad Spending in Specific Business Categories

The Digital Audit, available at AdMall by SalesFuel, is a data-​driven tool that helps you see where your clients and their competitors are spending their ad budgets. Using this report, you can understand whether your clients are advertising in the formats where they can reach their target audience. If they aren’t, you have the opportunity to suggest the changes they should make.

Evaluating Media Effectiveness

Should you encourage your clients to try new media formats? It might be a worthwhile investment. For example, almost 40% of U.S. desktop and mobile ads don’t reach their audience per Nielsen’s findings.

Nielsen analysts also report that the following percentages of consumers recalled a brand after ad exposure in the following formats:

  • Podcast 71%
  • Influencer 80%
  • Branded content 82%

Now that you have this knowledge, show your clients that investing in the right amount and kind of advertising will help them make an impact on their target audiences.

In other words, factors such as the clients’ ad budgets being too low, not balancing their short-​term and long-​term goals, not keeping up with the competitions’ ad spending, and not knowing the right approach, demographics and best media type to use will negatively impact your clients’ ROI. Consider these factors and use AdMall's Digital Audit to be better prepared for your next sales conversation.

Photo from Unsplash.

Kyla Snodgrass

Kyla Snodgrass

Kyla Snodgrass is an industry trends analyst at SalesFuel. She is responsible for local account research and reports. Kyla is a Miami University alumna holding a Bachelor of Arts degree with co-​majors in strategic communication and fashion design.