RAB Research Archive

What's Your Advertising Budget?



Jon was sharing his Customer Needs Analysis form with me last week and drew my attention to a section where he says he "always gets pushback" from the team. It was a section designed to get the client to tell the advertising budget and sales volume of the business. Salespeople ask clients to invest money all the time. It's part of the 7-Steps To Selling Success, and part of the normal sales process. Why is asking about money so difficult?

When it comes to determining a prospect or client's advertising budget, we could simply ask them during the C.N.A. as Jon's form was attempting to do. The problem with that is most often you will not get an accurate answer. It seems clients feel being totally honest in this area would result in us having information we aren't entitled to or would use improperly. Honest money discussions are best saved for later in the relationship when a deep trust has been developed. This can rarely be accomplished on a prospecting call or an initial C.N.A.

In my experience, there are four nonthreatening questions you can ask any client and they have no trouble answering. The answers to these questions will give you a general idea of their annual sales, and from there you can cross-check that number with the RAB's Ad-To-Sales Ratios / Ad Spending By Category report. This report shows you the percentage of gross sales that advertisers in the category spend on advertising nationally. It's a great starting point for the discussion.

Here are the four nonthreatening questions:

In an average week, how many people visit/shop your store?

What percentage of those people buy from you during that visit?

When they buy from you, what is the average amount they spend?

How often do they repeat this buying from you in a year?

Having the answers to those four questions will give you the average sales volume in a week. It will also help you determine the annual value of a new customer. The amount they spend times how many times they do it.

With those answers, you take the average sales volume for the week, multiply it by 52 and you can determine annual sales. Then use the Ad Spending By Category report, and you will have what the industry averages are for spending on advertising in that category. Then as you prepare your presentation you can use those averages as a starting point for the investment level in your proposal. This also leads to more specific questions about how the clients' numbers compare to the national averages — as trust is built.

Money discussions are rarely easy. Using these four questions will give you and the prospect the comfort to be able to start the conversation in a nonthreatening way.

Jeff Schmidt is the SVP of Professional Development. You can reach him at Jeff.Schmidt@RAB.com. You can also connect with him on Twitter and LinkedIn.

Source: Jeff Schmidt, RAB





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