Lord Leverhulme, the founding father of Unilever, famously grumbled that half the money he spent on advertising was wasted; the trouble was, he didn't know which half. If the head of one of the world's biggest advertisers, with all the mighty resources at his command, could feel that way, it's hardly surprising that many small and start-up companies find advertising a challenge. The sheer range of options for anybody contemplating advertising for the first time is bewildering, from local newspaper ads to mobile text messages, banner ads on the internet, or a fully fledged national TV campaign. And unlike many other aspects of running a business, advertising has an aura of smoke-and-mirrors about it, an indefinable characteristic called creativity whereby it seems that success cannot be guaranteed through process, method or scientific evaluation.
Yet, in the right hands, advertising has immense power to propel brands from zero to hero in a short space of time. Would the number 118118 hold any resonance if it weren't for that pair of moustachioed runners? Would budget airlines have taken off without those newspaper ads cluttered with bargain flights?
The first thing to understand about advertising is what it is and it isn't. Unlike other forms of communication, such as PR or sponsorship, it's a message that you can control. Says Ben Kay, managing partner at advertising agency Swarm: 'Advertising is the easiest way to make sure you can get the right people to hear about your product at the time you choose, in the place you choose and in the way you choose. Done well, it can spread new news, build understanding, change attitudes and ultimately drive different behaviour.'
Warns Simon Mathews of communications planning agency Rise Communications: 'Advertising is very good at making potential customers aware of your product, but not necessarily at convincing them to buy it.' They're not going to buy a new Mercedes until they've had a test drive and spoken to their mates.' So step one is to let the world know you exist; step two is to get them to try it - somewhat easier with a new ice-cream than a luxury car.
What advertising can't do, says Kay, is 'paper over the cracks'. If you haven't got the product or the service right, advertising will simply expose your shortcomings, and disappointed customers may never come back. Over-claiming in your advertising is another way to shoot yourself in the foot.
Next question: when should you start advertising? You shouldn't think about it until you're ready in every sense: the product is tried and tested, and you're able to meet the demand that advertising will (you hope) generate. That may mean having retail distribution, an operational e-commerce website or sales people to take the orders - as well as product in stock. Carphone Warehouse's launch of its free broadband service was a classic recent example of being unable to fulfil demand created by advertising.
In truth, the question is more complex than that; major retailers often won't stock a product unless it has a significant advertising spend behind it - a chicken-and-egg situation. And in the early days, other forms of communication, especially PR, may be far more cost- effective to get your business under way (see accelerator2). 'New businesses often start with a point of differentiation, a competitive advantage that will sustain them early on,' says Mathews. 'They move on to advertising and other forms of communication when that's no longer enough.' Nobody stays newsworthy for ever, in other words.
Setting a budget is tricky. Do you set aside a percentage of sales and then work out how to spend it, or decide how you want to advertise and then work out the cost? There are no easy answers, and the approach you take will depend on the scale of your ambition. It's cer- tainly easy to start advertising from a low cost base: give away 100 T-shirts with your logo, or take out small ads in your local newspaper. Experiment to find out what works.
For those on a faster track, Rise's Mathews advocates a more methodical approach. 'Look at your retail sales ambition - the size of sales you want at the end of the year. Then do a customer valuation exercise, looking at average customer spend, price points and how often they buy, and work out how many customers you need to deliver that ambition at the end of the year, building your communications as much as you can around high-spending customers.'
The ad-to-sales ratio varies wildly from one industry to another; you need to establish that your spending on advertising is eventually repaid from sales. But, depending on the product, it may take years to get a return as the brand becomes more established and sales build up incrementally. But Kay warns: 'The greatest mistake some small companies make is to invest 50% of their cash in two months' worth of advertising, expecting immediate returns, and end up with a severe cashflow crisis. Approach your advertising strategy like you do your business strategy, on a considered and long-term basis.'
The budget is, in any case, tied up with your choice of media or advertising channels. To achieve any sort of impact in national TV advertising with less than a six-figure sum would be challenging - most commercials cost far more than that just to make, without paying for airtime. National newspapers are also expensive; radio, cinema and magazines far less so. The digital world, meanwhile, offers options that are appealing to cash-strapped small businesses, such as payment by results, whereby you pay only when somebody clicks through a banner ad to your website.
Adds Chris Rendel, who runs the Windmill Partnership, a small independent creative and marketing agency: 'The barriers to entry in advertising are much lower than in the past. That's true with search-engine marketing, but also in television, where you can mount a campaign using daytime TV and minority channels for very modest cost.'
The trick is to understand your target market - potential customers - and find out what media they consume. If you're selling ski jackets or golf memorabilia, specialist magazines would be one of the most cost-effective media. Avoid taking on an ad agency that has a vested interest in one type of communication. Most agencies specialise in certain kinds of advertising and will recommend that to you.
Rendel argues that small agencies such as his own, by contrast, approach their clients with an open mind, tailoring the advertising approach to their budget and their business. 'We've even advised people not to advertise on a number of occasions, maybe to spend the money on a good website instead,' he says.
For many small businesses, it's tempting to cut out the agency and create and buy your own advertising. If you have creative skills in-house, that might work up to a point, but would you try to do the job of the professionals yourself in other areas of your business?
Selecting an agency can be a challenging process in itself: there are hundreds to choose from, and they will all tell you that they are the one you need. Personal recommendations can be a good start; another approach is to go to the AAR - an organisation that helps to match agencies with advertisers, according to their needs. Says Martin Jones, head of advertising at AAR: 'If a small advertiser comes to us, we would usually point them towards four or five agencies that might match their needs, without doing the full due-diligence. And for someone who really is new to advertising, we may recommend that they see a communications planning agency first, who will help them to define what they need.'
Don't choose an agency if you don't get on with the people there, advises Kay. Other questions to ask include: do they really listen to you; and do they have experience of a similar challenge and audience?
Cost is also an issue in choosing an agency. Once it was the norm for ad agencies to take a 15% commission on the media you bought; so the more you used your advertising, the more expensive it became. Nowadays, most agencies are content to be paid a flat fee, and some will even agree to be remunerated according to results.
When you've settled where you're going to advertise, and how much you're going to spend doing so, it's time to decide - if you haven't already - what you're going to say about yourself. If you're using an agency, you need to give it a brief from which to create your advertising. What's the essential message you want to convey to customers? Ice cream for people on a diet? Fashion at prices teenagers can afford? Car hire with an eco-twist?
'Think about where your product sits relative to its competitive brand set,' says Mathews. 'Try to understand its strengths and weaknesses.' The trick is to see it through your customers' eyes. 'Ask yourself, why would I buy this one versus the others on the shelf? The answer gives you the focus of the communication.
'You don't need to convene expensive focus groups - try talking to your customers, or those in the target market.'
And Rendel adds: 'Make your advertising single-minded. Inexperienced advertisers often want to put everything in their advertising rather than concentrating on one or two points. But that simply leaves consumers confused, and they don't take away anything. It's better to keep it simple and classy - not too elaborate, exotic or tricksy.'
Above all, many would argue, the trick of being a successful advertiser starts with knowing exactly what customers want, providing it in your product or service, and then communicating this proposition clearly and succinctly in your advertising. The rest, they might argue, is just detail.
PAUL LINDLEY - ELLA'S KITCHEN TAKES THE TELEVISION ROUTE TO THE SUPERMARKET SHELVES
Ella's Kitchen was conceived three years ago when Paul Lindley, a manager at kids' TV channel Nickelodeon, tried in vain to buy some healthy snacks for his children on holiday in Canada. Filling that gap tied in with Lindley's desire to start his own business and spend more time with his children. The enterprise was named after his daughter Ella, now aged seven.
'Part of what drove me was to do something with a social angle; I wanted to get into supermarkets straight away so I could really make a difference, and that meant national advertising,' says Lindley. Since children were his primary audience, that also meant being on TV.
With little funds but considerable ingenuity, Lindley approached his former employer and proposed that they give him advertising airtime in exchange for a share of his revenues - pointing out that it would be good public relations at a time when advertising unhealthy foods to children was under attack. The TV channel agreed to give it a go and helped Ella's Kitchen to make its first commercials, also starring Ella.
At this point, Lindley had only samples of his initial product - a range of organic smoothies - and no distribution, but with the help of a letter from Nickelodeon's parent Viacom, he persuaded Sainsbury's to stock the product. Since then, Ella's Kitchen has branched out into baby foods, has got its products into Tesco and Waitrose, and has sold more than four million packs, with a first-year turnover of £1.5m.
Says Lindley: 'I think TV really works for us because our brand is highly visual and children really relate to it.'
BILL STEVENSON - SPICE OF LIFE CLICKS WITH ONLINE FOODIE AUDIENCE
Bill Stevenson worked for 25 years in the IT industry, the last 12 contracting out his services, until he concluded that he could make more money by setting up a company to market his own e-commerce software.
Drawing on his love of Indian food, Stevenson set up a demo site, www.spicesofindia.co.uk, to show how the software works - only to find it becoming a success in its own right. Since early last year, Stevenson has worked full-time at the business. Offering 1,300 varieties of Indian groceries online, it targets those in rural areas who lack specialist shops on their doorstep.
'I didn't have much experience of search-engine optimisation before I started, but I knew it would take months for the likes of Google to fully index my site, so I decided to use two forms of paid advertising,' he says. 'We used pay-per-click advertising with Google and Yahoo!, and off-the-page advertising with top food magazines like Delicious, Olive and BBC Good Food, as well as titles like Heat and Hello.'
Stevenson was dumbfounded to discover that none of the magazine advertising worked. 'We spent £10,000-£12,000 but only got around 10 responses.'
He focused on tuning the website to get higher up the search-engine rankings. Spices of India now ranks among the top hits for many of the key search terms, and revenue is running at £400k per annum, and he expects to hit £1m by the end of the year. 'I'd like to do some TV and radio advertising at some point,' he says, 'either as a branding exercise or to push particular products, but at the moment we're still too small for that. But it will happen in time.'