Many entrepreneurs struggle to attract customers and often view advertising as something extra and optional. It’s a common scenario where investment is focused on the product, whilst marketing and advertising budgets are funded ‘from whatever’s left over’. But what if it’s precisely those advertising budgets that could be the key to your success?
According to the latest WARC report, global advertising spend is set to rise by 8.2% in 2024, reaching a record total of over $1 trillion. These aren’t just figures – they’re opportunities! We’ll explain why below.
In this article, we have highlighted five key points:
— The role of advertising in the business world.
— Analysis of advertising expenditure in Ukraine and globally.
— Reasons for and benefits of increasing advertising budgets.
— Record-breaking expenditure on advertising campaigns and their success.
— A comprehensive approach to promotion.
Read on to find out whether your business needs a strategically balanced advertising budget.
Why do businesses need an advertising budget?
As competition is an integral part of the business environment, companies go to great lengths to compete for the attention of their target audience. And customers are free to choose the best option for themselves from among dozens of alternatives.
Advertising has the power to influence consumers’ decision-making.
Advertising helps brands connect with their audience, either to tell them about themselves or to remind them they exist. Or to offer something specific.
In today’s business environment, advertising not only helps to boost sales but also facilitates communication between a company and its target audience by conveying the right messages. But how much should you invest in marketing to achieve the desired results? Let’s take a look at what the analytics reveal.
Analysis of advertising expenditure in Ukraine and worldwide
The pandemic and military conflicts have had a negative impact on the global economy as a whole. These trends have also affected the advertising industry. However, despite inflation, the market has not only held its ground but is also showing positive growth.
Global industry statistics
For 2023, global advertising expenditure is forecast to grow by 4.4%, whilst an increase to 8.2% is expected for 2024.
The analysis presents data obtained from the WARC survey. The five largest technology companies — Alibaba, Alphabet, Amazon, ByteDance, and Meta — together accounted for more than half of global advertising expenditure in 2023.
As these companies are leading the market, their advertising revenue is expected to grow by 10.7% in 2024.
The research firm predicts that:
— social media will see the fastest growth, with spending on these platforms in 2024 rising to $227.2 billion;
— television will also grow and could reach $33.0 billion;
— retail media (digital platforms, websites and apps) will also become one of the fastest-growing advertising channels. Spending will rise to $141.7 billion. It is expected that 37.2% of spending will go to Amazon.
The market situation in Ukraine
The All-Ukrainian Advertising Coalition has compiled a study of the advertising market for 2023 and forecast trends for 2024 across the country. According to the AAC’s findings, the market grew by 77% in 2023.
Next year, it is forecast that:
— digital advertising will continue to grow at a rate of 15–20% and is expected to reach approximately 40 million UAH;
— for TV advertising, the VRK forecasts 60–65% growth, with the budget potentially reaching 500 million hryvnias;
— growth in the radio advertising market is forecast at 20%;
— and the market for outdoor advertising — by 46%.
Therefore, if you want your business’s offerings to be in demand, you need to set aside a sufficient advertising budget. Determining the optimal proportion of advertising expenditure within your overall budget depends on the size and niche of your business, as well as your objectives. These are highly individual factors, so there is no one-size-fits-all formula.
On average, marketing costs typically account for 10% of total expenditure for small businesses and around 20% for large companies.
Reasons for and benefits of increasing advertising budgets
If you take a strategic approach to setting advertising budgets, what may at first glance seem like a waste of money will turn into an investment for your business. Advertising plays a crucial role in business in terms of generating sales, increasing brand awareness, and reach. If you are starting to plan your advertising strategy and budget for 2024, here are a few key reasons to plan your advertising spend carefully:
Why do businesses invest in advertising?
Without a budget, it is very difficult to develop and implement an effective advertising campaign. If you allocate a sufficient budget for promotion, you will be able to:
— conduct thorough research into your target audience;
— develop a relevant message that will attract customers;
— create a campaign designed to achieve your business objectives.
Developing an advertising budget strategy enables businesses to avoid unnecessary expenditure. It also provides an opportunity to track the effectiveness of their efforts and monitor the marketing process.
What do businesses gain from investing in marketing?
The advertising budget is just as important as other operating costs. Here is a list of the benefits a company gains from effective advertising campaigns:
1. High reach among the target audience
Without investment, your advertising efforts will lack focus and will fail to generate high-quality leads who are likely to choose your products or services. Moreover, advertising does more than just attract new customers. Crucially, this form of communication helps maintain your business’s presence in the market.
2. Advertising is a branding tool
A strong brand is essential for any business. A well-designed advertising campaign can convey a clear brand positioning to the target audience, ensuring brand association and recognition.
3. Advertising provides and highlights a competitive advantage
Firstly, investing in advertising gives a business a significant advantage over competitors who do not prioritise it sufficiently. You can stay one step ahead of them and attract more customers through effective promotion. Secondly, advertising presents the company’s offerings in the best possible light. It provides an opportunity to highlight the strengths of a product or service, as well as the benefits of making a purchase for the customer.
4. Advertising has a direct impact on sales
The final and most important benefit of investing in advertising is the prospect of increased sales. An effective advertising strategy will help you generate potential customers. If you manage to attract high-quality leads and create an appealing message, success is guaranteed.
In addition to the key benefits that advertising offers businesses, there is also the opportunity to change outdated or negative perceptions of the business, build a positive image, and leave a lasting impression.
Record spending on advertising campaigns and their success
The faster a business scales up, the more it needs to invest in advertising. It is a misconception that business giants do not need marketing because everyone already knows them. In reality, maintaining such a wide reach requires significant resources. We’d like to share some practical case studies with you.
We have already written about the projected share of expenditure that Amazon is expected to account for in 2024, so we would like to take a closer look at the company’s advertising efforts.
Just how much does Amazon spend on its advertising campaigns?
In 2022, the company allocated a record advertising budget of $20.6 billion. Of this, as much as 26 million was spent on the most expensive advert in the history of the Super Bowl (the final game in professional American football). Scarlett Johansson took part in the campaign.
“We drive customers to our stores primarily through a range of marketing channels, such as sponsored search, social and online advertising, third-party customer acquisition, television advertising, and other initiatives,” — Amazon states in its report.
Advertising expenditure by Ukrainian banks: trends and examples
The financial services sector leads the way in terms of advertising budget growth. According to WARC statistics, investment is expected to grow by +11.5% in 2024.
According to the latest data from the National Bank for 2023, Ukrainian banks have begun to increase their spending on marketing and advertising. Compared with total expenditure in January 2023, which stood at 15.642 million UAH, the figure rose 21-fold in July to reach 332.834 million UAH.
The top three advertising sponsors were:
- PUMB: spent a record 63.825 million hryvnias.
- PrivatBank: came second with expenditure of 45.402 million hryvnias.
- Universal Bank: came third with expenses of 32.994 million hryvnias.
It is important to note that all these investments involve a comprehensive approach to promotion, as they are aimed not only at advertising but also at marketing.г.
Marketing aims to influence customer choice, whilst advertising is responsible for establishing a connection between an offer and people who might be interested in it.
It’s not all about advertising
As we can see, Ukrainian companies resumed their growth in 2023 and, despite the challenges posed by the war, are moving towards a return to pre-war levels. As the analysis shows, during the first year of the full-scale war, public sector clients on Prozorro purchased advertising worth 262 million UAH. The most popular categories were services for publicising performance results, the development and placement of informational materials on social media, billboards, radio, and television, and the running of advertising campaigns. Let us illustrate the research with some striking examples.
Monobank surprised its users with a marketing stunt staged right at a concert by the singer DOROFEEVA. Oleg Gorokhovsky, the bank’s co-founder, took to the stage and promised 100 hryvnias to anyone who typed “I love DOROFEEVA” into the support chat. In this way, the bank reached 52,000 people, from whom it received requests.
In addition, we will highlight the largest clients for advertising and marketing services in 2023. These are PrivatBank, with 40.1 million UAH, and Ukrposhta, with 23.9 million UAH.
PrivatBank commissioned the placement of informational and promotional content in the media, on radio and TV, as well as internal PR campaigns, reputation and communication strategies, and SEO optimisation. The bank invested 3 million hryvnias in the development of its YouTube channel alone.
At Ukrposhta, the largest share of expenditure went on online advertising — 13.2 million hryvnias. In addition, nearly 6 million hryvnias were allocated to the “Mystery Shopper” market research project.
Results
From the data presented, we can conclude that effective advertising is a key tool for business development in an increasingly competitive environment.
Global trends show a significant systematic increase in companies’ spending on various types of advertising. This is driven by the development of companies’ marketing communications with potential customers. This trend poses a challenge for businesses, as setting marketing expenditure and advertising budgets based on “residual” budgets does not yield the expected results.
An increasing number of case studies highlight the importance of optimal budgeting and strategic planning for these expenditure items. This approach enables organisations to achieve success and maintain their competitiveness in the market.
Are you looking for an effective marketing strategy for your business with transparent budgeting? Get in touch with the experts at Solve Marketing.
