Calculating an advertising budget for your jewelry store is vital to your store’s overall growth strategy.
The key point to remember is that sales are a result of marketing efforts, not the other way around.
By developing a realistic advertising budget you are setting your store up for future sales success.
Regardless of which method you use to determine your budget don’t forget the importance of your store’s location in the formula.
Your physical store
is a powerful form
of advertising in
and of its self
There is a reason why the real estate mantra is, “Location, location, location.”
Is your store located on a busy street corner?
If so you are probably paying for that exposure in the form of higher rent.
That great exposure in the form of rent needs to be a part of the calculations.
Is your store tucked away off the beaten path?
The lower rent you are paying means that you will have to invest more in advertising to drive the clients to your front door.
As you start the process consider having a range for your budget and not simply one number.
The reason is that if you have a range you have the built-in flexibility to take advantage of upswings in your business and new advertising opportunities that might come up throughout the year.
A single advertising dollar amount locks you in from a budget standpoint with no wiggle room.
The recommended range of 9 to 12 percent of your projected annual gross sales multiplied by the gross markup made by your average transaction gives you the room for growth that you need.
I just felt some eyes glaze over when they read that formula.
Now would be a good time for an example.
Example: For this example, we will say that your jewelry store is projected to sell $1 million dollars this year with a gross markup of 94% and a rent of $30,000 per year.
The first step:
Multiply 9% of sales by $1 million and 12% of sales by $1 million.
This gives the range of $90,000 to $120,00.
Next step:
Multiply $90,000 by 94% (your gross markup) and $120,000 by 94%.
This gives you a range of $84,600 to $112,800.
Last step:
Subtract $30,000 ( the rent) from $84,600 and also from $112,800.
This gives you a range of $54,600 to $82,800.
This represents the proper range for your advertising budget.
Often I hear the range of 5 to 7 percent of gross sales bantered about as an acceptable formula from store owners.
The serious downside to that is that it does not take into account the best advertising you can buy and that is location.
If your location is great than the rent will reflect it but also you will need less to advertise it.
The opposite is true with a jewelry store off the beaten path.
Rent is less, however, it will take more of an advertising push to get people through the door.
A simple 5 to 7 percent range does not address the issue of location.
You end up spending too much or in many cases too little.
Need further proof?
Change the rent to $60,000 a year.
The range quickly becomes $24,600 to $52,800 because your location does the bulk of the advertising for you.
The 5 to 7 percent rule cannot work as a blanket statement.
Stay a step ahead of your competition by knowing how to calculate an effective advertising budget for your jewelry store.
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The host of “Inside the Jewelry Trade” Radio Show – Jewelry Business Strategist – President of Four Grainer LLC. Author of the business books “A Reason To Chant,” and “A Reason to Chant – Jewelry Trade Edition.” Rod lives in Atlanta with his wife and two almost-human cats.