How much should you spend on advertising?

How much should you spend on advertising?

Use the free calculator below to help you decide upon an intelligent marketing plan and budget, and what your potential Return On Ad Spend (ROAS) will look like.

Sunday, 4th of August, 2024

Advertising budgets are important. But how much is too much when it comes to ad spend. And how much should you expect to make as revenue at the end of a campaign, or month. That's what we're about to hopefully discover.

1. Advertising Budget Calculator

Start with your Expected Advertising Budget (per Month) slide-control below.


2. The Basket Value

When it comes to important KPIs, the Basket Value is a crucial metric that tells us the average purchase value of a customer segment (per shopping session).

That means, let's say in general we have 100 customers buying goods. Each customer's "Basket Value" is the amount they spend on each visit/session of shopping.

Now when we segment that, the customers would be grouped by specific attributes. It could be based on their ages, or whether they're male or female, their locations, or their interests, and so on.

So why in the world is Basket Value so important?!

Here's an example of a chart that shows the average Basket Value of customers in particular B2B customer segments (Retail Resellers, Hotels, Hospitals), by month.

3. The Time Constraint

Let's put it like this, time is a limited constraint. That means, within a specific time, you have expenses, you have revenue and profits, and you have the number of customers you can serve.

If you focus on customers with a low Basket Value, you would need to be able to sell to several of those customers within a single month to meet your target, or sell to ONE single customer who's Basket Value meets that same target.

To give you more context, let's say you are selling headphones, and part of your cost of sale (expenses) is the marketing and advertising cost. Right?

Now, if it costs you 500 USD to advertise on a specific platform, and you get 100 customers from that campaign, your Customer Acquisition Cost is 5 USD per customer.

If the average customer's basket value was 15 USD, you only made 10 USD from that sale.

But if 1 customer purchased 2000 pieces of that 1 headphone, the benefits would ideally be far greater.

The cost of advertising can be very expensive. So strategic use of your advertising expenditure is required.

 

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4. Defining Business Goals - What do we want to achieve

Because the cost of advertising can be very expensive, important to define business goals in order to understand and have a clear picture of what we want to achieve.

This could be long term planning, with the focus on building the brand's marketshare and not looking towards short term profit, or this could be a direct cost vs profit marketing campaign where we would want to make every penny spent on advertising to translate directly to our profit center.

For small and medium sized business, the latter choice might be a better strategy, but at the same time, working on the branding as well along the way.

buyer-persona-cost-effective-customer-targeting

5. Customer Identification - Who do we want to sell to

So why, is this important..?

When you identify your ideal customer, or better referred to as your Buyer Persona, you're able to better target in your ad campaigns to that specific Buyer Persona.

This means, that instead of targeting 2000 people who wouldn't bat an eye at what you're offering, you're targeting a very specific Buyer Persona that would have a much higher probability of converting to a customer.

That would then typically translate to saving ad expenditure.

The example infographic here is for a company that would potentially be a furniture brand or supplier.

6. Platforms - Where to advertise

Once you've identified your ideal customer, the next part of the game is reaching out to them, or targeting them.

And there are a thousand and one ways/channels to do that. Some ways include Linkedin Business Pages, SupplierValley Q&As, SupplierValley Blogs, Alibaba Company Listings, SupplierValley Buzzword System, SupplierValley Targeted Publishing and so on.

While there's a lot of choice and room for growth, for small or medium businesses with smaller teams, it's always best to focus on a few channels, and really put maximum effort into those platforms. Or delegate the responsibility to others while you focus on other areas.

The cost of advertising, and how much you have to spend, can vary greatly.

And by targeting the right customer segments, in the right places, you can potentially save money by not throwing it all on a large segment of customers with low basket values, and unrefined buyer personae.

pexels-leeloothefirst-7598018

Have we helped you calculate your ad budget? Do you have any suggestions, feedback or need help/advice?
Leave a comment below, or simply get in touch with us. We'd love to hear your thoughts.

You can make a difference.

What’s behind the global tiny home boom?

What’s behind the global tiny home boom?

Wednesday, 31st of July, 2024

July 2023 to 2024, the global demand for the purchase of tiny homes, is averaging a 100 thousand to a million searches every month on Google, the internet's search giant. And it's not that hard to see why.

But let's first rewind a bit. Over 20 years ago, January 2004, the search giant's trends reported for tiny homes were comparatively -nothing.

comparative-demand-for-tiny-homes-from-2004-to-2024-google-trends
Chart from Google Trends on the Comparative Demand for Tiny Homes from 2004 to 2024

But then in in 2006, in 2008, 2010, and 2012 little tiny shockwaves or spikes of interest appear to have hit; By the 11th month of 2013, a gradual climb with occasional hiccups along the way, would finally lead the way to today where demand for tiny homes could be said to be soaring.

But why tiny homes? Why are people appearing to be obsessed with "living big in tiny spaces"?

As one buyer put it, what motivated them to move out of a 4 bedroom, 3000 sqft house into a tiny home was the need for a luxury space at an affordable price.

For someone else, the concept of a tiny home appealed to them when they realised the amount of waste with regards to time, energy, and resources of having a large (and old) home, that seemed like constant maintenance.

From what we understood, the appeal for tiny homes can also be a substantial financial choice. As someone said,

"After eight years of 10% increases doubled our rent on a fixed income, we discovered that rent in a decent RV park (after waiting out the waitlist) was back to the 2010 rent costs.

We traded our 7yo paid off wheelchair minivan for a 30yo used but cosmetically acceptable campervan.

Six years later we were able to upgrade to a 6yo tiny home (bumper pull), and the payment on THAT with rent is still less than the apartment when we were priced out..."

What's an experience like seeing your tiny home for the first time?

Another buyer from northern British Columbia, who bought their own tiny home back in about 2021, said they expected their tiny home to be, well, tiny, but were quite surprised by what they saw,

"...the tiny home was going to be this shock thing when you walk in, it wasn't a shock thing whatsoever..."

So should one consider investing in a tiny home?

Tiny homes can be a great business not simply for the construction, fabrication, and furnishing, and the several supplier companies alone, but also for people who's objective is business and investments.

In September 2023, Booking.com published a piece that reported an increase in demand for entire places on the Booking.com platform.

Some of the types of travellers that would likely find appeal for these tiny homes could include families, remote workers, and long-stay renters.

In which areas would tiny homes be more in demand?

People's objectives for renting entire places for themselves revert back to who they are. For families holidaying or travelling, a potential objective could be ultimately aligned with experiences; Cityscapes and geographies with experiences in the vicinity of that tiny home, or off-the-grid living could be a good start. For remote workers, perhaps it could be the romanticizing thought of living "off-the-grid", away from the city life.

While we see a number of people opting for tiny homes due to personal reasons, for someone who's objective is primarily business and investments, a tiny home in a delightful out-of-city location, could make an attractive choice of property for remote workers, holiday makers, off-the-grid families, and perhaps drive some interesting and seasonal rental yield numbers.

When it comes to property, the location, and the buyer/renter persona greatly matters.

So what really led to the boom? And how did this boom become a trend?

While data for this is still not fully available to us today, some key insights could perhaps provide a slightly broad picture of what led to the boom for tiny homes.

As published by the U.S. Department of Housing and Urban Development Office of Policy Development and Research, in the 'U.S. Housing Market Conditions 4th Quarter 2005' report1,

"Affordability declined in 2005 due to higher home prices. The family earning the median income had 121.1 percent of the income needed to purchase the median-priced existing home in 2005, down 11.5 percentage points from 2004 and about in the middle of the affordability indexes reported during the 33-year history of the NATIONAL ASSOCIATION OF REALTORS® affordability series."

"REALTORS® sold a record 7,072,000 existing single-family homes in 2005, a 4.2-percent increase from 2004 and the fifth consecutive year with a new annual record."

"Builders took out single-family and multifamily permits for 2,141,200 new housing units in 2005, the second highest ever and an increase of 3.4 percent from 2004. Single-family permits set a new annual record with 1,678,700 new home permits issued in 2005, up 4.0 percent from 2004"

As referenced previously, we've seen that one type of tiny home buyer is someone who opts for a more affordable purchase. Just in the US, as per the above report, we saw an increase in sales for single-family homes, the decline in affordability due to higher home prices, and the increase in builders obtaining single-family and multifamily permits.

If we took just that particular data, one conclusion that can be drawn is that affordability in home purchasing was one of the factors influencing the increase in consideration for tiny homes.

One tiny home company Founder, Douglas Smith of Beechwood Tiny Homes, in response to a question on what he thought led to the tiny home boom we're seeing, said,

"...Housing crisis mainly. Tiny homes are less expensive, but when they are built properly they won't be $30,000."

Beyond just the housing crisis, the year 2010 saw the launch of Pinterest, and Instagram, some picture-oriented social media platforms that likely drove sentiments towards tiny homes, amongst many other factors.

By about 2010-2011, as per Google Trends' stats, interest towards tiny homes appears to have started gaining momentum.

While financial factors would be a significant factor in driving tiny homes consideration, it can be said that traditional media hype appears to have also played a big role in fueling interest for tiny homes.

It can also be said that if we look at the comparative statistics for tiny houses vs tiny homes, we see that after a skyscraper-city charting for tiny houses, interest appears to have subsided. While for tiny homes the interest appears to be plateauing after a gradual climb.

What that could suggest is that the search intent went from "houses" to "homes" perhaps suggesting a more lifestyle-oriented search intent. That means, potentially a family-oriented decision maker looking for a "home" and not merely a "house".

Still, something to keep in mind is that adoption of a term overtime could not be solely associated with lifestlye. It could also be associated with common phrases and market terminology in a particular geography.

Has the boom peaked?

Based on the motivational factors fueling interest in tiny homes, we could understand that people will always require solutions to problems such as financial constraints, easier property maintenance, etc. However, the solution could not be purely limited to tiny homes. Tiny homes are a lifestyle choice end of the day, and it definitely isn't everyone's cup of tea.

Based on trends in the last decade, interest for tiny homes seems to be active and stable leading an idea that this trend isn't likely going away anytime too soon. However, in tiny homes is a trend that could be said is particular to geographies with suitable infrastructure.

When cities become denser and more populated, city planners and building regulations could influence decision making that could impact many industries.

From limiting the height of buildings, to launching landmark projects to influence other industries, and so on.

For example, a city that becomes increasingly metropolitan could see a denser population growth, leading to a higher cost of living near landmarks and transportation hubs. This could then lead to stacked living with high-rise apartments covering the landscape in that locality which would help bring down the cost per square foot of real estate space.

When city planners then decide to limit the height of high rise buildings in metropolitan districts, this could influence a higher price for real estate closer to the business hubs, while developing real estate demand in surrounding districts away from the main city. Which then could influence the need for engineering smoother transportation solutions to the main hub of business, or other landmark hubs.

While the tiny home boom does not appear to be declining, it's important to have a broader perspective for the development of a district, an emirate, country, or key industries. These industries can have waterfall effects on international trade, and are therefore interesting points of consideration for decision makers across the board.

Supply Chains & Industries Benefiting From Tiny Homes

When it comes industry and influencing supply chain growth, the impact of tiny homes can be quite lucrative for suppliers, and service providers.

As like any home, supplies for fixtures and fittings including lighting, flooring, roofing, plumbing, and so on would be demand drivers, although in comparison to hotels, apartments, or other large scale projects with dense/stacked living it could be understood that this demand is perhaps nothing.

However, when it comes to the service industry, tiny homes invites a whole industry vertical for bespoke and more manageable boutique construction service companies. This could effectively translate to driving up demand for professional service providers the like of carpenters, architects, interior designers, roofing experts, and so on. For trailer type tiny homes, camp grounds, distant moorlands and desert encampments could transform into becoming living on the go and living in style, inviting a completely new vibe and lifestlye to people and places.

 

Footnotes:
1. https://www.huduser.gov/periodicals/ushmc/winter05/USHMC_05Q4.pdf

Do you supply products and services to the tiny home industry? Get in touch with us to feature your business.