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Advertising budget

Brief description on advertising budget, factors to consider while setting the advertising budget, different methods etc.

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Advertising budget

  2. 2. Important objectives of advertising are:- TO INFORM TO REMIND TO PERSUADE
  3. 3. To inform the customers about the new product. To build a company image. Giving information regarding the features of the new product. Giving ideas about the new uses of the product. Provide a good impression about the product.
  4. 4. Persuading the buyers to purchase the product as soon as possible. Encouraging buyers to switch from competitors product to our product. Changing the perception about the product. Building brand preference.
  5. 5. Reminding the customers that the product is readily available in the market. Reminding the buyers where to buy the product. Reminding buyers that the product may be needed in the near future eg: Umbrella
  6. 6. It defines how much to spend on advertising. It is one of an important decision. It will not be same for every companies & industries.
  7. 7. Stages in the product life cycle:- New product have to spend more on advertising than existing products. Market share and consumer base:- Companies which have high market share usually require less for advertising. eg: Apple products. Advertising frequency:- Number of repetitions needed to put.
  8. 8. Competition:- A product which facing high competition have to spend more on advertising. Product substitutability:- Commodities like beer, soft drinks, cigarettes etc require heavy advertising to establish a different image.
  9. 9. Setting advertising objectives. Determining tasks to be performed to achieve advertising objectives. Setting advertising objectives. Determining tasks to be performed to achieve advertising objectives.
  10. 10. Preparing advertising budget. Approval. Allocation of advertising budget. Monitor & control.
  13. 13. The name itself gives an idea about this method. The amount which is affordable by the company will be taken as the budget for advertising. Eg: If a company is willing to spend 3 lakhs for promotion purpose, then it will be the advertising budget of that particular company.
  14. 14. A fixed percentage of sales will be allocated for promotion. Budget is set based on the availability of funds & not on the basis of market opportunities. It encourages competitive stability, which means our competitor will also spend approximately same amount for promotion.
  15. 15. In this method the company is spending the same percentage of sales on advertising as their competitors. Managers believe that if they are following this method it will help to maintain the market share. It helps to prevent promotion wars.
  16. 16. Promotion budget is prepared after analyzing the overall objectives of the company and also the tasks to be performed to achieve the goals. Then consider the cost required to perform the task. The sum of the costs is the proposed promotion budget. Implementing this method is very easy.
  17. 17. In this method the judgment of experienced & senior managers are taken and based on that prepare the advertising budget. The estimation will be approximately correct. Certain factors like availability of funds, stage in the PLC, nature of consumers etc are noted.
  18. 18. Also known as ‘Increase over Last Year’s Budget’. The budget of previous year will be taken as a benchmark and calculate the current year’s budget by adding or subtracting from it. Advertising cost is increased due to increase in price level of advertising inputs. So it is called as ‘incremental budgeting’.
  19. 19. In this method cost incurred for advertising will be taken as an investment & not as an expenditure. According to this method we are investing on advertising with an expectation of returning something more than invested. Income generated from advertising will extends over a particular time period.
  20. 20. According to this method, the advertising budget is prepared using statistical methods like simulation, multiple regression, probability etc. It computes the budget based on the factors which influence the budget. It can be utilized only by experts.
  21. 21. It can be considered as a substitute to the mathematical models & statistical methods. Experiments & tests are taken over chosen market areas, consider the results & prepare the advertising budget based on the observations. All the disadvantages faced by other methods can be eliminated using this method.
  22. 22. It can be considered as a pre-arranged plan designed for the expenditure of funds on advertising. Advertising budget is the money assigned for advertising campaign for a definite time period. The advertising manager after discussion with marketing manager will prepare the advertising budget.
  23. 23. Marketing management by Philip Kotler.