In the business of footwear, or any other industry, knowing how to measure advertising effectiveness to know how to adjust operations is always the concern of many business owners.
To compete in the current market conditions, no matter what the business is, the shop owners cannot ignore marketing and advertising activities. The main purposes of this activity are to promote the image of products/services and brands and then to attract as many potential customers as possible and ultimately to increase conversion rates. However, the budget spent on marketing, advertising, as well as the effectiveness achieved depends on the type of goods, target customers and how the shop owners act in reality.
Tips on how to measure advertising effectiveness in the footwear business
Why measure marketing effectiveness?
You can’t advertise your products without knowing how effective this activity is, because then, you’re just wasting your budget and resources. In business, marketing or advertising needs to affect the actual profit. Therefore, measuring the effectiveness of marketing campaigns (online, offline) in generating sales is an extremely important activity that any marketing expert and anyone who is doing business need to be aware of.
Methods of measuring advertising effectiveness in footwear business
To measure the effectiveness of advertising and marketing in the most accurate way, it can only be calculated as a ratio of advertising costs to the actual revenue achieved. The advertising to sales ratio is an important indicator in marketing activities. It indicates the contribution of marketing and advertising activities in the total sales of a store or a business.
The ratio of advertising expenses to revenue usually includes five components of cost ratios: Cost for sales force on sales revenue; Advertising expenses on sales revenue; Promotion expenses on sales revenue; Marketing research expenses on sales revenue; and Administrative costs for consumption on sales revenue. However, for small business models, it may only take into account the first three components: cost for sales force, advertising costs and promotion costs on sales revenue.
Calculation formula: Advertising to sales ratio = types of marketing expenses/total revenue
In the footwear business, you can calculate this rate by day, by week or by month. However, note that it is necessary to calculate and track continuously over a few months to accurately shape the effectiveness of the marketing campaign.
Some examples of ad-to-sales ratio are Nike’s 2003 cost of sales ratio which was $ 304,000,000 / $ 10,697,000,000 = 2.8%; Reebok’s ratio which was USD 106,000,000 / USD 3,485,316,000 = 3%; Sony’s ratio which was 1,684,000,000 USD / 62,031,000,000 USD = 2.7%. According to general statistics on the ratio of ad-to-sales ratio of all industries, the ratio of the footwear shops is around 2.5%.
Advertising costs: loosen or tighten?
The effect of measuring advertising effectiveness with the above formula is to help shoe shop owners to make decisions for tightening or loosening the budget for sales and marketing activities.
Typically, the lower this ratio (around or below 1-2%), the more the effectiveness of marketing activities in promoting the brand and persuading target customers. If the ratio is too high (over 3 – 4%), you should review your actual actions, consider marketing activities more carefully and also adjust marketing forms if really needed. Without doing so, the business would be inefficient or even at a loss and come to dissolution.
Hopefully through this article, you will be more active in measuring marketing effectiveness in the shoe business and making the smartest decisions.
We wish you luck!