In studying the different methods of determining the appropriation, one must bear this fact clearly in mind: It is just as unprofitable to spend too much as it is to spend too little; and the more quickly an advertiser can get his business into a condition in which it is possible to fix his advertising appropria tion on some carefully selected and tested basis, the more certain will be his success.
8. Basing the appropriation on cost per inquiry and per most scientific method of determining the appropriation is that adapted by a certain mail-order specialty house. They know ex actly how much they can afford to spend to make a sale. After years of careful record keeping, they know what proportion of inquiries can be turned into sales and the cost of the follow-up literature for each inquiry. These advertisers usually place contracts for only a few advertisements in a publication at a time, carefully checking the cost per inquiry, and dis continuing the advertising whenever the cost per in quiry proves excessive.
The following quotation from Shryer's "Analyti cal Advertising," is taken from the records of such an advertising campaign conducted several years ago. The advertiser used various styles and sizes of copy, but the analysis has reference only to a two-inch, single magazine column advertisement which was run uniformly in a large number of mediums.
The advertisement offered a combination of merchandise selling for slightly less than $30. A small payment with the order, with regular monthly instalments for the balance cov ering a period of nine months, secured the goods. Most of the advertising was placed at the old "publishers' rates," which accounts for an advertising cost considerably less than the present price for space. Had the present rates been paid, practically all the results would have shown a loss.
The copy was "inquiry copy." Each inquiry was followed up under one-cent postage with a series of letters to the number of five. Each piece of copy was keyed differently every month, giving opportunity for analysis on each sep arate piece of copy run in any publication. Eighteen pub lications were tried with more or less consistency. A record is here given of returns from one publication (System) by months and also a record of the total returns received from all eighteen publications.
9. Basing the appropriation on a proportion of the profits of the previous year.—An increase in the ad vertising appropriation is one of the most definite in dications of a desire to grow. Some advertisers at the end of the year, instead of putting the profits of the business into surplus, put a certain amount into advertising for the coming year. One advertiser rea sons that, as his business increases, he will need new plants and additions to his present factories. Each year he lays aside a certain amount of his profits to ward the day when he will need these new factories. He also realizes that to obtain demand sufficient to require new factories, he must increase his advertising. He decides that if his profit amounts to twenty per cent, he will put five per cent of that profit into ad vertising and five per cent into surplus. If his profit amounts to thirty per cent, he will put ten per cent into advertising and ten per cent into surplus.
10. Basing the appropriation on amount spent the previous year.—Many advertisers have no more defi nite basis for estimating their appropriations than the amount they spent the year previous. If this amount is used simply as a starting point from which to figure a possibly increased appropriation, there is no objec tion to its use. But if the advertiser blindly appro priates for one year the same amount he spent the year before, without regard to the developing needs of his business, he can hardly expect to meet changing conditions or to make progress.. One of the leading advertising agents will not take an advertising ac count unless the advertiser is willing to increase his appropriation at least fifteen per cent each year, pro viding his business warrants it. He does not care to handle an account unless the business of the adver tiser is to grow, and he estimates fifteen per cent as the lowest normal, healthy increase of a business that does consistent advertising.
11. Basing the appropriation, on the space desired. —To make the desired impression with certain. ad vertising campaigns, it is advisable to use a certain amount of space or else not to attempt advertising at all. If an advertiser wishes to dominate and to use only full pages, it will cost him a certain amount of money.