How do you calculate effectiveness of advertisement?

Answer 1

Overall, you look at advertising expense as a percent of sales (advertising expense divided by total sales) and compare that to industry standards. If you are in an industry that spends 3% of sales on advertising, and your advertising expense is only 2% of sales, your advertising dollars are more effective than the industry average. On a more detailed level, you should evaluate each type of media and each campaign. This can be done by a random survey of your customers to see why they purchased from you (if all your customers are repeat customers - none of your advertising is working, if everyone heard your radio ads-but no one saw your magazine ad, you should drop the magazine ads). Often, coupons have a unique code identifying which publication they came from-so you can analyze which publications are producing more customers by looking at the coupons which were used. You can use a unique phone number in an ad and keep track of how many calls come in on that line. You might find that many people responded to an offer of 10% off, but very few people responded to an offer of free shipping. In all cases, you want to eveluate the business produced compared to the advertising dollars spent.