The budget is the quantity of economical and financial resources that a company (client) allocates for the communication of its brand, with different objectives:
• Increase the sales of the product
• Increase the demand of the service
• Get more consumer awareness of the brand
• Reach the company’s image the enterprise wants to have
The advertising agencies have theresponsibility of transforming the marketing objectives of the client into communication objectives, and insert them into a great and solid communication strategy which modifies the public’s attitudes.
If the strategies are logical with the marketing objective, the budget allocated in the campaign must be get back to the company in the first instance through the campaign. Then, the sales income makeequal to the costs and expenditure which that sales generate (advertising), which is denominated break even point. The break even point is reached in any of the stages of the campaign, and it is the consequence of a great demand of the product, its good distribution and the correct communication. If this relation is not reached, the company couldn’t invest more in advertising because it will neverget the inversion back.
• If the Company has limited resources, the budget is going to be established before the objectives.
• If money is available, the company can see how much money it will take to achieve the objectives you have established.
Things taking into consideration:
• Marketing objectives
• Financial resources
• Nature of the market
• Size and demographics of the targetaudience
• Position of advertiser’s product or service.
In order to keep the advertising budget in line with promotional and marketing goals it is important to know:
• Who is the target consumer? What are the specific demographics of this consumer? (age, employment, sex, attitudes, style of life, etc.) The company should compose a consumer profile to give the abstract idea of a “target consumer” thatcan be used to shape the advertisement.
• Is the media the advertiser is considering able to reach that target?
• What is required to get to the target consumer to purchase the product? Which appeals are most likely to persuade them? (Rational or emotional)
• How much profit is earned for each dollar spent on advertising? What relation has the advertising expenditure with the impact of theadvertisement or campaign?
With the idea of the market conditions, the company has to decide how best to advertise, how the money dedicated to advertising will be allocated. There are different methods:
1. Percentage sales method:
• The most common method used by small companies
• An advertiser takes a % of the sales and allocates that % of the overall budget to advertising
• Safer for smallbusiness if the ownership feels that future returns cannot be safely anticipated
• When figuring advertising expenditures, it is recommended for well-established companies
• Effective if the business compares its sales with those of the competitor
2. Objective and task method:
• Used by most large enterprises
• Allows the advertiser to link advertising expenditures to overall mkt objectives,which keeps spending focused on primary business goals
• The business needs to establish concrete mkt objectives and then develop complementary advertising objectives, and then determines how much it will cost to meet them
3. Competitive parity method:
• Compare its advertising spending with the competitor’s one
• Knowing this the company can spend more, less or the same on its own advertisingin order to remain competitive
• It is important for small business to be aware of the actions of the competitors but is not always an advice to follow a competitor’s course
4. Market share method:
• Similar to competitive parity, bases its budget on external market trends
• Allows business to equate its market share with its advertising expenditures
5. Unit sales method:
• Takes the...