Let’s cut to the chase: inflation impacts everything—gas, groceries, housing, and yes, advertising. It’s easy to see why business owners may feel frustrated when the same marketing budget doesn’t stretch as far as it did just a few years ago. But here’s the deal: expecting the same results with the same ad spend in today’s market is like expecting a $2 gallon of milk when it’s now pushing $5. It’s just not realistic.
Why Advertising Costs Are Rising
Google and Facebook are businesses too, and they’re not immune to inflation. Costs for everything, from labor to server maintenance, are rising, and they’re passing those costs along to advertisers. As demand for online advertising continues to grow—especially with more businesses competing for limited attention—prices climb higher.
No ad agency can control how much Google or Facebook charges. Our job is to maximize the results of your budget within the framework these platforms set. But even the best strategy can’t change the fact that $10,000 in 2024 just doesn’t buy what $10,000 bought in 2018. It’s not that your agency isn’t working hard; it’s that the landscape has changed.
The Real Solution: Advertising to Sales Ratios
So what should you do? One approach is to rethink your budget by using advertising-to-sales ratios. This method ensures your budget aligns with your goals and current market realities.
Here’s how it works:
- If you’re aiming for growth: Plan to spend 7-10% of your revenue on advertising. This helps you get in front of more people, build your brand, and drive higher sales.
- If you’re looking to maintain: Stick to the 5% range. This keeps you visible, but don’t expect big growth leaps.
- If you’re cutting back: Understand that spending less now will likely hurt your business more than it helps. Saving money on ads today will cost you in lost customers tomorrow.
The key takeaway: It’s not about “saving” money—it’s about positioning your business to survive and thrive, especially in a competitive and inflated environment.
Don’t Let Budget Cuts Hurt You
When inflation hits, it’s natural to look for areas to cut costs. But slashing your ad budget might be the worst move you can make. If your competitors are still spending while you’re pulling back, guess who wins? They get the leads, the sales, and the growth while you’re left wondering why things went south.
In a world where inflation drives up costs across the board, you can’t expect yesterday’s dollars to deliver today’s results. Instead, focus on using a smart, sales-driven budget to fuel your advertising and keep your business competitive.
At the end of the day, we’re here to help you navigate this, but it’s crucial to understand that ads cost what they cost—your agency can only work with the resources you give them. Want better results? Make sure your budget reflects today’s market, not yesterday’s prices.