For each of your products you will be required to set an Advertising Budget and allocate this across up to five media channels. This is done through the Advertising menu:
How much should I spend on Advertising?
To achieve a reasonable level of sales you should aim to spend a competitive amount on Product Advertising as long as your available cash balance allows.
The effectiveness of your advertising budget and allocation (mix) is measured by a product-specific Awareness rating. This is the awareness of your product in the minds of customers.
You can compare the Awareness rating of your product with your competitor’s through the Market Summary report:
We can see that My Mountain Bike is well below our competitor’s Awareness rating and so we should consider increasing our total expenditure, as well as ensuring it is allocated in an effective manner across media channels.
How do I allocate my Advertising Budget?
The Market Research report is an essential source of information to determine the optimal promotional mix for a given marketing budget. This report outlines the Product Dimension Sensitivities, Media Viewing Habits, and Advertising Reach.
Step 1: Identify Customer Sensitivity to Advertising Expenditure
Under the Customer Preferences heading on the Market Research report we can see how responsive customers in each market are to promotional activities (Awareness):
| Market | Demand Responsiveness |
| Kids | High |
| Road | Low |
| Electric | Medium |
| Cruiser | High |
| Mountain | Medium |
Step 2: Allocate your advertising budget Identify the segment’s media viewing habits
You will need to consider your customer’s viewing habits by referring to the Media Viewing Habits chart (below) to help you allocate your budget for each channel.
| Segment | Search | Digital Video | Social Media | Television | |
| Kids | 20% | 50% | 15% | 35% | 25% |
| Road | 50% | 25% | 20% | 20% | 30% |
| Electric | 10% | 25% | 30% | 50% | 30% |
| Cruiser | 25% | 45% | 20% | 35% | 20% |
| Mountain | 35% | 25% | 45% | 25% | 15% |
It is important to keep in mind that as you spend at higher amounts the level of your target audience diminishes. The Advertising Reach chart shows us the percentage of our target audience that can be reached at different advertising spends:
Note: This amount on the chart is not total advertising spend but spend per media channel.
For example, an investment of $1.2m in any channel will reach approximately 30% of the audience. Then by looking at the Media Viewing Habits table above, we can see that for the TV media channel this would reach 30% * 35% = 10.5% of the Kids market, and 30% * 25% = 7.5% of the Mountain market.
The curve is initially steep, up to about $1.5m expenditure (per channel). However, beyond that the curve flattens so the increase in audience reached becomes
less as you spend more.