Budget Planning Of Advertisement Program
There are two basic approaches of setting the advertising budget – analytical and nonanalytical.
As researches show the vast majority of businessman use non-analytic methods, which are based on experience or on simplified decision rules. Judging by the frequency of use, the most important method of this kind is the orientation in determining the budget for the marketing of the company («percentage of sales method»). Using this method, the magnitude of the budget is determined as a percentage of sales last year, or the expected future sales period, or the average sales for several years. Value of the interest, in turn, is a traditional business or industry is focused on tradition or set intuitively.
Method is based on determination of the advertising budget as the difference between the overall marketing budget and all other costs of marketing, was named «all you can afford method». This method is on the contrary; however, long-term, orderly planning and often leads to the complete uselessness of advertising, as different situations require different minimal advertising costs to do to achieve something.
Method parity with competitors means that the company uses as a scale for determining the budget the costs of competitors. The disadvantage of this method, along with the disadvantages, which include other approaches are absent, as a rule, sufficient information about the activities of competitors. Greater medium-and long-term success in the market are companies whose share of advertising spending in total sales is significantly higher than the market share (percentage method of advertising – share of the market).
Determination of required advertising costs per unit of production has been called «per unit method». Advertising budget is the product of the planned sale in pieces to the piece of advertising costs. The method is used primarily in companies with a homogeneous structure of production and stable sales.
Models listed above significantly simplify the planning. However, they have virtually no connection with the purposes of marketing. To make informed budget allocation among the various marketing tools you need to know the effect of different size advertising budgets to achieve the goal and not be better to use these funds as part of another marketing tool.
Analytic approaches are based therefore on finding a functional relationship between the advertising budget and the level of achievement.
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