Plan Your Advertising

Budget

By
V. Mahesh Kumar
&
N. Manikandan

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The Nature and Types of
Advertising
 Advertising
• Paid non personal communication about an
organization and its products transmitted to a
target audience through mass media
• Promotes goods, services, ideas, images,
issues, people, and
anything else that
advertisers want to
publicize or foster

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Advertising Objectives

 Specific Communication Tasks

 Accomplished with a Specific Target Audience
 During a Specific Period of Time
 INFORMATIVE ADVERTISING – builds
PRIMARY Demand
 PERSUASIVE ADVERTISING – builds
SELECTIVE Demand
 COMPARISON ADVERTISING – compares one
brand to another
 REMINDER ADVERTISING – keeps consumers
thinking about product.
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Advertising
 It's probably the toughest part of any
business. How much to spend, where to
place the ads, how often, what message
to send, and to who?

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 The Five Ms
• MISSION – sales goals, advertising objectives

• MONEY – factors to consider: a) Stage of PLC, b)

Market share and consumer base, c) Competition and
clutter, d) Advertising frequency, and e) Product
substitutability.

• MESSAGE – message generation, message evaluation

and selection, message execution, social-
responsibility. (AIDA?) Know what this is?
(Awareness, Interest, Desire, Action)

• MEDIA – Reach, frequency, impact; Major media

types, Specific Media vehicles, Media timing,
Geographical media allocation.

• MEASUREMENT – communication impact and sales

impact.
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Major Decisions in Advertising
 Objectives Setting
 Budget Decisions:
• a) Message Decisions
• b) Media Decisions
 Campaign Evaluations

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How much to spend?
 The most common answer to this question is,
"How much have you got?" Advertising has a
way of depleting your bank account very
quickly.
 If you asked 100 businesses that question, the
most common answer would be, "a percentage
of gross sales."
 This not only works for advertising but most
other budgets too.

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Advertising Budget Factors that
MUST BE CONSIDERED

 Market Share & Consumer Base

 Competition & Clutter
 Advertising Frequency
 Product Substitutability
 Stage in the PLC (Product Life Cycle)

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General Steps in
Developing and
Implementing an
Advertising
Campaign

FIGURE 19.1
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Percentage of Sales Method
 A specific percentage of that amount is allocated for
advertising.
 Depending on the business this amount may be a daily,
weekly, monthly or quarterly expense.
 The percentage amount will also vary depending on your
profit margins, industry, location and market size.
 Most business operate with an advertising budget of 2-5
percent of their previous years gross sales.
 If you are new in business, you can obtain industry
standards from associations or trade magazines devoted
to your type of business.

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Cont.,
 One of the main reasons most
businesses like this form of budgeting is
the safety factor. Rather than having to
"predict" the future and adjust, they are
always dealing with a "known" amount.

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Sales objectives method
 Using this method, advertising managers
will set sales objectives they feel are
attainable in the current business
climate.
 Advertising and promotion is then used
as needed to help realize the sales goals
regardless of what happened in previous
years.

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Up side
 The up side is that if the advertising is
done correctly it becomes an investment,
not an expense and can fuel more
advertising at later dates. The company
grows and expands at a faster rate than
it would with the percentage of sales
method.

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Down side
 The down side is that advertising based
on a bad promotion or incorrect
advertising can be very costly. Suddenly
future advertising becomes an expense
not an investment. Costs like this cannot
always be recouped quickly and may
start a downhill slide that can destroy a
company.

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Save money by unadvertised
testing
 Ever go to a store and find an "unadvertised
special?" This is the store's way of testing the waters
for a specific product or service. If the product tests
well, the store can run future ads promoting the product.

 Another advantage: Several products can be tested

against each other and the winners are promoted later
with a greater expectation of success. Service
businesses can test additional services at a discount to
customers when the primary service is purchased at full
price.

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How to budget for an individual
ad
 Advertising is like eating an elephant. It's done in small
bites not one big one. You will run several ads over a
period of time rather than one large ad. How much the ad
will cost depends on the answers to the following
questions.

 All advertising must accomplish a specific definable goal.

What will this ad do for your business? What is the short-
term benefit to the company for running this ad? The
long-term benefit?

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Cont.,
 Is this ad financed by the percentage of sales method or
a sales objective percentage method? What is the dollar
amount allocated to this ad? Co-Op funds available?
What is the expected revenue this ad will produce?
 Are comparable ads being run for competitive products?
What size ads do they use? Can you run similar size
ads?
 What is the specific time period for achieving the
advertising goal?
 What form of evaluation will be used to assure that the ad
is working or not working?

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How to evaluate your ad results
 Advertising that doesn't work is like an
employee that doesn't work...it's costly. You
must be able to track whether the ad is
working or not and why.
 Create a "tracking sheet" for each and every
ad you produce in each type of media. This
sheet will be filed with a copy of each print ad
and the script for each radio or TV ad.
 Each sheet will contain two major tracking
areas.

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First tracking area.
 The history of the ad.
 When was it run?
 What media?
 What days?
 What was the cost of each run?
 What was the cost for the entire run of this ad?
 What amount was paid by co-op advertising, if
any?
 Art and design charges?

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Second tracking area
 The goal of the ad.
 Who was the ad directed toward?
 New customers?
 Regulars?
 Were projected sales met? If so, why?
 Adequate inventory?
 Proper staffing? Weather? Other events that
drew traffic to your area?

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If projected sales were not met
 why?
 Competing sales by competitors? Better
promotions or products available
elsewhere? Conflicting civic events?
Other events that drew traffic out of your
area? Error in the ad? Weather?

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Conclusion
 Advertising doesn't have to be hard. But,
it does require study, testing and
planning. The most important lesson in
advertising that almost everyone misses
is, tracking customer response and
income produced by advertising. Does it
pay to advertise in the media you've
chosen?

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Any Queries…?

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