The first thing an advertising campaign is expected to accomplish is volume of sales. In obtaining vol ume the advertiser usually finds that he also de creases his selling cost per unit. Suppose you and a certain competitor are each making annually a mil lion boxes of your products. Assume that you each have been doing no advertising, but have sold thru salesmen alone, and your salesmen have cost you $100,000. This is a selling cost for each of you of ten cents a box. You each make a net profit of $50,000, or five cents a box.
Now suppose your competitor decides to put forth an extra effort to increase his volume and to popular ize his brand by advertising. A salesman can take an order for ten dozens just as easily as he can for one-twelfth of a dozen if the demand has been created. One of the purposes of advertising is to create de mand.
Suppose that next year, or the year after, your competitor appropriates $100,000 for advertising, making his total selling expense $200,000. But in doing this, the advertising so increases his volume of sales that he is able to dispose of 4,000,000 boxes. If it costs him $200,000 to sell 4,000,000 boxes, his sell ing cost is now five cents a box, while yours, without advertising is still ten cents. He not only makes four times the gross profit that you make, because he sells four times as much, but he makes another profit of five cents for every box sold, because he can sell a box at half what it cost you to sell one.
How will this affect you? You may not notice the effect while times are good and you and your com petitor maintain the same price. But let a crisis come, or let your competitor see that he can increase his volume of business still further by lowering his price to the consumer, and he can practically put you out of business any time he wants to. He holds you in the hollow of his hand. You are beaten any time he says the word. Thru advertising he has cut his cost to a place where he can make a good profit and still sell at a price below your actual cost.
12. Campaigns that have cut costs.—When Hart, Schaffner & Marx began to advertise, the house was doing an annual business of $1,500,000. Ten years later this had increased to $15,000,000. An inter esting comparison of selling costs and amounts spent for magazine advertising by four ready-to-wear clothing manufacturers was compiled by Printers' Ink about the time Hart, Schaffner & Marx reached the fifteen million mark. The selling costs include cost of salesmen only; the percentages are based on total sales.
13. Experience the best guide.—Advertising is a subject which is very much alive. It has few tradi tions, and only a sloWly growing body of principles. Two advertising experts may recommend entirely dif ferent solutions of the same advertising problem, and both of the solutions may be right. Two campaigns, to accomplish the same thing, have often been con ducted in entirely different ways, both proving suc cessful. Because of this plastic state of the art of ad vertising—because the one best campaign for a given advertiser must still be partly a matter of opinion—it is impossible to lay down a set of hard and fast rules for the planning of advertising campaigns. And yet certain general principles have been developed from experience. The advertising world has begun to compare experiences, and to find that in planning a campaign the advertiser or his agent usually asks him self certain fundamental questions which must be adequately answered before any campaign can be properly launched. It is our purpose in the follow ing chapters to outline some of these questions and to tell how the answers to them have affected the re sults of actual campaigns. We are to give the rec ords of tangible results, rather than the opinions of individuals. The reader will be expected to draw his own conclusions as to how the basic questions should be answered in planning a campaign for the business in which he is most interested.