Methods for Setting Advertising Budget
- 1. METHODS FOR SETTING ADVERTISING BUDGET CHAPTER 7
- 2. THE METHODS • Objective task method • Historical method • Percentage past sales method • Percentage of future sales method • Competitor parity method • The market share method • Affordability method • Marginal method • The unit method
- 3. OBJECTIVE TASK METHOD 1. Set advertising/promotion objectives 2. Decide what techniques to use 3. Set up budget
- 4. HISTORICAL METHOD • Based on previous year advertising/promotion budget • Maybe add for extra activities or inflation
- 5. PERCENTAGE PAST SALES METHOD • Look at past year sales turnover • decide budget for following based on certain percentage of last year sales figures • Example: sales 2008 rp 50 billion, adv budget 2009 10% X rp 50 billion= rp. 5 billion
- 6. PERCENTAGE OF FUTURE SALES • Look at sales target of the following year • Establish advertising budget percentage of sales target • Example : sales target of 2009 rp. 60billion. Adv budget 10X rp. 60 billion=rp.6billion
- 7. COMPATITOR PARITY METHOD • Find out direct competitor advertising budget • Set budget to compete with direct competitor method • Danger: if competitor has bigger market share
- 8. MARKET SHARE METHOD • Find out direct competitor’s budget • Establish advertising budget by considering both the competitor’s budget as well as yours and their market share
- 9. AFFORDIBILITY METHOD • Based on what the company can afford after calculation of all marketing costs such as production and distribution have been calculated, and also based on projected sales
- 10. MARGINAL METHOD • Advertising and promotion budget is calculated based on what sales turnover will happen with promotion efforts • Example with promotion, sales will increase rp. 2 billion, therefore part of that rp.2 billion will be for promotion
- 11. THE UNIT METHOD • All cost to market a brand is calculated (production, distribution, promotion) • Advertising/promotion budget is incorporated in the price • Example price of a bottle of soft drink is rp.2000. advertising cost is already incorporated within the price.
- 12. DISCUSSION • Which methods do you think would be used by big. Competitive multi national companies? Why • Which methods do you think would be used by local, family owned and small companies? Why?