Budgeting

An advertising budget refers to the amount of money

allocated by a company or agency for expenses related
to the promotion of its products or services.

Effective budgeting for advertising requires an in-

depth understanding of the qualitative and quantitative
background behind the advertising.
There are basically 2 approaches
Top down approach: In top down approach budget is fixed and is passed on to
various departments and these budgets are predetermined without theoretical
basis.
Top down approach includes,
a)affordable method
b)arbitrary allocation
c)percentage of sales
d)competitive parity
e)return on investment
A)Affordable method : In affordable method the firm determines the amount to be spent in various areas.

B)Arbitrary allocation : Here the budget is determined solely by the management on the basis of what was
felt as necessary . There is no objectives or purpose for advertising and promotion.

C) Percentage of sales method - The percentage of sales method is a forecasting tool that makes financial
predictions based on previous and current sales data.
This data encompasses sales and all business expenses related to sales, including inventory and cost of goods.

D)Competitive parity - is a budgeting method in which a company spends the same amount of money on
advertising and marketing as its competitors.
As a business strategy, competitive parity is designed to defend a competitive position by not overspending
on promotion and marketing budgets.

E)Return on investment (ROI): It is rarely used in practice .In this method promotion is an investment and
not an expenditure Hence we cannot say increase in sales is the result of promotional effort .
 2.Bottom –up approach:
A bottom-up budget is a budget that is first generated by individual departments and
then “pushed up” to senior management.
The name “bottom-up” reflects where the budget originated and where it goes within
the organization.
Types:
Objective and task method: In this method specific objectives are set first and based
on this the budget is allocated.
Step1:Define the communication objective
Step2:Determine the strategy
Step 3: Estimate the cost say to adopt strategies .