Advertising is a part of complex actions aimed at promoting of the company by means of which the main goals are achieved - increase in sales and profit. But if the company faces certain problems with manufacturing workload and reduction of profit, as a rule, it is inefficiency of advertising expenses to blame. This article deals with the problems of advertising efficiency.

Henry Ford’s known expression runs as follows: Half of the money the company spends on advertising is wasted for nothing. If we apply the expression to the window market and take into account the expenses spent by window companies on advertising, an impressive amount turns up. An advertising budget of the companies involved into the window market reaches up to 1 mln. dollars per year, which is rather essential for any business. Thus, about 0.5 million dollars per year are spent in vain. Therefore this issue is very significant for the companies involved in the window market.

Putting complex promoting programs of various window market products life the marketing center О.К.Н.А. Marketing manages to deny the Ford’s law. These programs include not only analyzing of effective advertising sources but also work out step by step actions of promoting a company into the market. The effect of such actions will be measured in real money.

The marketing center О.К.Н.А. Marketing has made the research, the data of which have shown that huge publicity expenses are not always worthwhile. We are dealing with the advertising of the companies directed on an individual consumer B2C (Business-to-consumer). The practice shows that advertising is not the cause of all company’s troubles. Even the best advertisement will not necessarily lead to the expected results if the business doesn’t work effectively on any of its stages. In this case advertising is not efficient and will hardly change the situation in the company. As a result a plastic window distributor will spend more than 100$ to canvass an average individual client, sometimes the practice shows that the expenses make up as much as 280$.

To get a clear idea of what we are going to talk about in this article we shall introduce the following notion – publicity expenses on an individual customer average order. According to the window companies statistics the average order comprises about 8 sq. m and its average cost “on a turnkey basis” is approximately 1650$. If the window sales volume intended for an individual consumer is divided by the average 8 sq. m  order we shall get the number of finished orders. Then the charges on advertising intended for B2C are divided by the amount of orders and we get publicity expenses for 1 average order.

According to the calculations made by the branch marketing center О.К.Н.А. Marketing, an advertising can be considered effective if a company has spent not more that 30$ for 1 client canvassing. Ideally expenses should make up 20$. The branch marketing center ascribes such companies to the first most advanced group. Unfortunately one has to admit the fact that there are not many companies of that kind in the Moscow market.

To the second group we shall ascribe the companies that spend on a customer canvassing from 30$ to 100$. This group consists of the companies that either have just gone into the market and want to increase their sales substantially or have made mistakes in their advertising campaign. On the whole such kind of advertising is acceptable.

Finally, the companies that spend more than 100$ for one customer canvassing are ascribed to the third group. From the branch marketing center О.К.N.А. Marketing experience there are companies that spend as much as 280$ for an average order. These expenses can be called excessive, or plainly speaking it is waste of money. Especially if we take into account that the profit of a company minus office rent, wages and other factors makes up approximately 15-20%, for some companies it may be even less than that. In this case a company receives the so-called “gold” clients, as about 17% of the order cost goes for advertising. It is worth noticing, that these are only publicity expenses that are counted, and the general expenses for the company promotion, organization and sales offices are not taken into consideration.

Systematization of the companies according to advertising expenditures

Group	Costs for  1 order, monthly.	Describtion
1 group	till 30 $	Progressive
2 group	30$ – 100$	Efficient
3 group	more 100 $	No efficient

The reference of the company to the second or third groups is not always connected with the mistakes made during an advertising campaign, the reasons for that can be various.

Variants of principal causes resulting in advertising efficiency reduction

1. Suppose, advertising works effectively, the company gets constant calls but the percentage of the made transactions from such calls is very low. In this case there is a problem of inefficient work of the company on the whole. One of the reasons can be the low professionalism of the sales managers who cannot find a client, reveal his needs and carry out sales by means of consultation.

“Alive calculators” have been out of date for a long time among customers. One can hardly find a person who would save on a purchase that is rather expensive and should serve a long term period. These data have been confirmed by the researches made by the marketing center among the consumers. The following expression comes into mind: “We are not rich enough to buy cheap things” – and it describes the logic of a potential consumer very well.  The reason of the employees’ inefficient work can be either weak motivation of the marketing personnel or absence of elementary training in sales techniques. Managers in this case work very deftly, even slowly, being not very well qualified and skilled. As a result the following situation occurs: while the manager settles the invoice the other company has already consulted the client and even arranged the measurement of the windows. Well, competitors of the company may work in the same pace, but not necessarily. In this case, the company is more likely to lose a client, and besides the expenditures of the company start to grow as a result.

2. Low percentage of repeated orders, or in other words the orders “on recommendation” can be identified as the second reason of advertising inefficiency. By this we mean that the client has placed an order on his friends’ or acquaintances’ recommendation. Percentage of repeated sales in some companies can be as high as 80% annually; this figure can be higher at the season’s peak. If the company has less than 40% of such orders it means the work is carried out inefficiently at some stage – or there are problems with the quality of the production, or with the quality of installation or after sales maintenance or observance of the treaty commitments. No matter how efficient the advertising may be the costs for a client canvassing will still be very high.

3. Insufficient number of calls into the company is not always the main reason of the advertisement failure; another thing can be the constantly busy telephone lines. Advertising in this case works effectively, but the company may face communication problems, which induces a client to address to competitors. As a result the company expenses are growing all the same.
There is a number of other reasons in the company’s activities that are not taken into account by the management. But if the manufacturing potential is not realized fully or sales volumes are reduced while the development of the window market is evident, then in such cases marketing and advertising departments are to be blamed for inefficient and non professional work. It often happens that to overcome the existing problems they increase the advertising budgets, and consequently expenses of the company, at the same time profitability is diminishing. Cost of an involved client turns out to be up to 200-280$. What does the company earn in this case?


Summary

The significance and importance of advertising on the window market can hardly be underestimated. The amount and efficiency of publicity expenses were more than once discussed in mass media. However it is vital to understand that advertising is only one side of the marketing complex which the company should effectively work with. The discussed above typical mistakes made by the companies result in profit reduction and expenditures increase. Moreover advertising can not necessarily bring positive results. The branch marketing center О.К.N.А. Marketing works out individual programs of the company promotion on the market in each separate case. To find a mistake it is necessary to make a profitability research of a company and the window market on the whole, only after these action can one deny the Ford’s law.