Understanding Advertising Budgets
Are you advertising on platforms like Google or Facebook? They usually don’t require a minimum budget, allowing you to start with as little as the cost of a cup of coffee per day. But, despite advertising for a while, you might not see any results. So, how much should you spend to get a good return on investment (ROI)? One crucial factor to consider is share of voice (SOV), which indicates how effectively your ads are reaching your target audience.
The Importance of Share of Voice (SOV)
Share of voice (SOV) measures the proportion of advertising within a specific market or industry occupied by a brand or advertiser. For instance, suppose there are around 1000 monthly searches for solar panels in Sydney on Google. If your competitor’s ad appears 200 times out of these searches, their share of voice is 20%. If your ads are seen 500 times, your share of voice rises to 50%. Achieving a high share of voice can give you a competitive advantage, allowing you to dominate search results and capture the attention of potential customers.
Consider this scenario: if your competitors’ ads are seen by 50% of the audience while yours are seen by less than 10%, where do you think potential customers will go? This underscores the importance of exposure.
Avoiding Common Pitfalls: Strategic Budget Allocation
One common mistake among small advertisers is targeting a large market with a very small budget. For example, if your competitor spends $1,000 per day advertising while you spend only $10, it’s nearly impossible to make an impact.
So, what can you do with a limited marketing budget? Focus your advertising on a smaller market to maximize exposure. For instance, if your target audience is in Sydney but your budget is limited, focus on specific areas such as the eastern suburbs to increase your share of voice in the market.
To illustrate further, consider baking a cake. You have a limited amount of frosting to spread over the cake. If you try to cover the entire cake with a thin layer of frosting, it won’t be enough to make the cake taste delicious. Concentrating the frosting on a smaller portion, such as the top layer, ensures each bite is rich and flavorful. Similarly, allocating your advertising budget to a smaller, targeted audience maximises effectiveness and ensures a higher ROI.
Take Action:
Start with a budget that matches your target market’s size, aiming for at least a 20% share of voice. If you see positive results, gradually increase your budget to reach an 80% share of voice in that market. This strategic approach strengthens your business over time, allowing you to compete effectively with competitors. Once you are strong enough, you are ready to enter a bigger market.
Do you find this approach agreeable? If you need further assistance, reach out to us. We offer strategic digital marketing services that deliver visible results, at competitive prices. Check out our packages here.