BUDGETING IMC

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BUDGET SETTING

• NAMEVISHAL
• ROLL NO16001432086

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MEANING OF ADVERTISING BUDGET

• An advertising budget is the amount a company set
  aside for its promotional activities. Advertising
  budget is used by a company for marketing the
  products and services to the customers.
  Advertising budget includes money for doing
  advertising research, getting creatives made,
  printing material, allocating money to
  advertising media and ensuring proper
  implementation of ad campaigns

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FACTOR AFFECTING THE ADVERTISING BUDGET

• 1. Degree of competitiveness in market
  Monopoly/Duopoly/Oligopoly
• A monopoly firm does not have to worry
  about the promotional spends as it is the only
  player in the market. For duopoly, where market
  is dominated by two dominant players, the
  promotional budgets would be high to outperform
  each other. In an Oligopolistic market, where the
  market is cluttered and there are many players,
  promotional spends has to be higher as the
  frequency of advertisements has to be increased
  to get noticed among so many players. Thus
  depending upon the competition the advertising
  budget is set.
• 2. Market Share Market leader/Market Follower
• The advertising budget for a market
  follower will be decided by the tactics of the
  market leader. To improve market share one of the
  investment is to increase promotional spent.
  Thus, where a company stands is a deciding factor
  in advertising budget

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• 3. Product life-cycle stage Introduction/growth/m
  aturity/decline
• The advertisement budget would be higher at
  the introduction and growth stages as it has to
  introduce the product in the market and establish
  itself among the competitors so the frequency of
  advertisements would be high and so would be the
  budget. As the product reaches maturity and
  decline stages the promotional spent would be
  lower.
• 4. Advertising Frequency An ad can be played
  only once or can be be multiple times. Also, it
  can be daily, weekly, fortnightly, monthly etc.
  Depending upon the requirement, the advertising
  budget is altered.

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BUDGET SETTING METHODS

• 1. Percentage of Sales Method
• It is a commonly used method to set
  advertising budget. In this method, the amount
  for advertising is decided on the basis of sales.
  Advertising budget is specific per cent of sales.
  The sales may be current, or anticipated.
  Sometimes, the past sales are also used as the
  base for deciding on ad budget.

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• 2. Objectives and Task Method
• This is the most appropriate ad budget method
  for any company. It is a scientific method to set
  advertising budget. The method considers
  companys own environment and requirement.
  Objectives and task method guides the manager to
  develop his promotional budget by (1) defining
  specific objectives, (2) determining the task
  that must be performed to achieve them, and (3)
  estimating the costs of performing the task. The
  sum of these costs is the proposed amount for
  advertising budget. The method is based on the
  relationship between the objectives and the task
  to achieve these objectives.

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• 3. Competitive Parity Method
• Competition is one of the powerful factors
  affecting marketing performance. This method
  considers the competitors advertising activities
  and costs for setting advertising budget. The
  advertising budget is fixed on the basis of
  advertising strategy adopted by the competitors.

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• Thus, competitive factor is given more
  importance in deciding advertising budget. For
  example, if the close competitors spend 3 of net
  sales, the company will spend, more or less, the
  same per cent for advertising. Here it is assumed
  that competitors or leaders are always right.
  If not followed carefully, this method may result
  into misleading.

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• 4. Expert Opinion Method
• Many marketing firms follow this method. Both
  internal and external experts are asked to
  estimate the amount to be spent for advertisement
  for a given period. Experts, on the basis of the
  rich experience on the area, can determine
  objectively the amount for advertising. Experts
  supply their estimate individually or jointly.

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• 5. Affordability In this method the budget for
  advertising is decided based on availability of
  funds. Mostly for small companies the funds
  available varies from time to time based of
  business performance. Hence marketing spend vary
  throughout the year based on availability of
  funds.