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Advertising Budget
Advertising Budget
Advertising Budget
One of the most difficult tasks facing advertisers and ad agencies is the decision on the optimum
money to be spent on advertising. Advertisers want to minimize expenditure and maximize
the returns. Though advertising expenditure is considered to be an investment, its
utilization has to be intelligent and profitable.
Though there are several accepted methods of arriving at the budget, the individual
brand budget will depend upon several factors such as profitability, marketing objective and
competitors position. The various methods, which are used, for setting advertising budgets are:
1. Percentage of sales method
2. Unit of sales method
3. Task and objective method
4. The competitive parity method
5. Brand history method
6. All you can afford method
7. The break even method
8. The quantitative method
9. Share of voice method
Each of these methods has certain advantages and disadvantages. In reality, a combination of
these methods will be used.
In conclusion one can say that this method is not appropriate as market situations
change rapidly and past sales alone are not an effective indicator of the companys
communication needs.
There is one problem involved in the use of this method of setting the
appropriation and that is: how does one determine just how much advertising and what type
of advertising will achieve the stated objectives. The present methods of research do not
give a direct link between advertising expenditures and achievement of the objectives.
Until more sophisticated methods are developed managers will have to face this problem
of uncertainty while deciding the optimum budget.