all about advertising budget


"Advertising budget is an estimated amount an organisation decides to invest in its promotional expenditures over a period of time. An advertising budget is the money a company set aside to accomplish its marketing objectives."

It is difficult to measure the effect of advertising on business sales. Advertising is just one of the variables that affects sales in a period of time. As a percentage of sales, advertising expenditure varies from business to business. Because of such complications it is very difficult for business organisations to decide the size of advertising budget. There are various approaches that can be used to set advertising budget.

Approaches to Develop Advertising Budget
  1. Percentage of Sales Budget
  2. Competitive Parity Approach
  3. Objective and Task Approach
  4. All Organisation can Afford Approach
  5. Market Share Approach
  6. All Available Fund Approach
  7. Managerial Judgement Approach
Percentage of Sales Budget
According to this approach the business organisation have to set their advertising spending at a fixed percentage of either past or anticipated sales. This Approach can be followed by organisations operating in markets with stable and predictable sales pattern. As it is simple in application, it is most commonly used by small business organisations.

This approach has some disadvantages, as sales is not directly related to advertising, it get affected by different variables too.

Competitive Parity Approach
This approach is followed by organisations whose product is well established and operating in market with  predictable sales pattern. Organisations following this approach compare their advertising spending with that of its competitors. As the organisation is aware of how much its competitors are spending in advertising, it can logically decide its advertising budget either equal, more, or less to that of the competitors.

Here considering competitors advertising budget organisation should consider its objectives too, as the competitors objectives may not be similar or comparable.

Objectives and Task Approach
This approach is followed by big organisations having well defined marketing objectives, and business goals. Following this approach advertiser can correlate its advertising spending to marketing objectives. In long term this correlation is important to keep organisational spending focused on business goals.

All organisation can afford approach
It is difficult for small business organisations to invest heavily in advertising. Small business organisation's advertising spending depends more on their affordability. According to this approach advertisers base their advertising budget on what they can afford.


Market Share Approach
Similar to competitive parity approach, the market share approach bases its advertising spending on external market trends. With this method a business equates its market share with its advertising expenditures.


All Available Fund Approach
According to this approach all available profit is used in advertising spending. It can be too risky for any size of organisation as the all available fund is used in advertising and no fund is allocated to help business grow in other ways like- technology up-gradation, or work force development. This approach is useful for new business organisations trying to develop its brand.


Managerial Judgement Approach 
In long run managers gain expertise in their field of operation. Similarly, some of the marketing managers working over the years develops a feel for the market that permits them to arrive at appropriate decisions. According to this approach the organisations advertising spending depends on the judgement of experienced managers.

Comments

Post a Comment

Popular posts from this blog

Work certified and uncertified

Meaning of Work Certified  When contractor takes the contract to complete any construction work, it may complete in 4 or 5 years. but contractor has to pay different expenses for material, labor and others. So, it is very necessary to pay him some money of contract. This money is given on the basis of work done. So, any part of construction which is completed by contractor will be work certified if it is certified by an authority. Authority may be independent engineer or architect who can estimated the work. He will issue the certificate of work done after certifying the work of construction. On this work certified, contractor has right to get money of contract. Meaning of Work Uncertified Work uncertified means work done but not certified by authority. So, contractee will cut some money on the basis of work uncertified and will keep in his pocket. This will be retention money. Accounting Treatment of Work Certified and Work Uncertified  (I) Work  certified and work unce
Read more

Sale of Goods Act- Conditions and Warranties

Image
The Sale of Goods Act, identifies the terms, ‘Conditions’ and ‘Warranties’ as being of a prime significance in a contract of sale. Both the terms imply a promise that is made by the seller. However, the difference between Conditions and Warranties arises due to the nature of the promise that is made in each case. In the case of ‘Condition’ the impact is on the very essence of the contract; whereas, in the case of ‘Warranty’, the promise is in the nature of a collateral to the main purpose of the contract. It is thus evident that if there is a breach of either, a condition or a warranty, the effects will be different. Illustration 1:   Sita bought a wet grinder from an electric shop. The purpose for which the grinder was to be used was known to the seller. The grinder was unfit for the purpose. In this case there is a breach of an express condition by the electric shop and Sita is entitled to return the grinder and be refunded the money paid. Illustration 2:   Varuna bought a
Read more

E Commerce Security environment

THE ECOMMERCE SECURITY ENVIRONMENT What is eCommerce Security? eCommerce security refers to the principles which guide safe electronic transactions, allowing the buying and selling of goods and services through the Internet, but with protocols in place to provide safety for those involved. Successful business online depends on the customers’ trust that a company has eCommerce security basics in place. Privacy One of the most obvious eCommerce security basics is privacy, which in this situation means not sharing information with unauthorized parties. When you shop online, your personal details or account information should not be accessible to anyone except the seller you have chosen to share it with. Any disclosure of that information by the merchant would be a breach of confidentiality. The business is responsible to provide at least the minimum in encryption, virus protection, and a firewall so that bank details and credit card information remain private. Integrity A s
Read more