Advertising Budget

The budget is an expression of the expenditure plan. It is estimated to meet the financial
requirements of advertising plans so that advertising objectives with planned strategies may be
realised within a given time frame. It is a statement of proposed advertising expenditure; a guideline
for allocating the available funds to the various functions and activities of advertising.
Advertising Budget is the amount of money which can be or has to be spent on advertising of the
product to promote it, reach the target consumers & make the sales chart go on the upper side and
give reasonable profits to the company.
Methods for Setting Advertising Budget
1. Percentage of Sales Method: 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.
Example, the last year sales were Rs. 3 crore and the company spent Rs. 300000 for advertising.
It is clear that the company has spent 1% of sales in the last year. Based upon the past, the current
and the expected sales, amount for advertising budget is determined. This method is based on the
notion that sales follow advertising efforts and expenditure. It is assumed that there is positive
correlation between sales and advertising expenditure.
Merits: The method offers following merits:
 It is based on sales volume. Advertising Cost can be off against profits earned from the sales.
 This method encourages relationship between promotional costs, selling price, & profits.
 It maintains competitive parity. All firms spend percentage of sales for advertising.
 It keeps the company in constant touch with the sales target to be achieved.
Demerits: The method has been criticized on following grounds:
 In absence of specific guidelines, it is not possible to decide the appropriate per cent of sales.
 Long-term planning is not possible because a long-term sales forecasting seems difficult.
 Stage of product life cycle is not considered.
 It is, to some extent, inflexible.
2. Objectives & Task Method: This is the most appropriate ad budget method for any company. It
is a scientific method to set advertising budget. 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
method is based on the relationship between the objectives & the task to achieve these objectives.
 a) Determine main objectives of marketing department.
b) Set advertising objectives in terms of sales, profits, brand loyalty, competitive stability, etc.
c) Determine advertising task in terms of various advertising activities to achieve the objectives.
d) Make sum of costs of all the activities. It is the estimated amount for advertising.
3. Competitive Parity Method: Competition is 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. Thus, competitive factor is given more importance in deciding advertising budget.
Limitations: Manager must be aware of following limitations of the competition parity method:
 In case of a new product, the method fails to guide for deciding on advertising budget.
 It is difficult to know in which stage of life cycle the product of close competitor.
 Company differs in terms of sales, profits, financial conditions.
 Advertising is not the factors that affect the sales; interplay of many factors determines sales.
 The method can make a sense only to followers. It is not applicable to a market leader.
4. Affordable Method: The method is based on the company’s capacity to spend. Company with a
sound financial position spends more on advertising and vice versa. Under this method,
budgetary allocation is made only after meeting all the expenses. Advertising budget is treated as
the residual decision. If fund is available, the company spends; otherwise the company has to
manage without advertising. Thus, a company’s capacity to afford is the main criterion.
Limitations: Following are the limitations of the method:
 The method completely ignores the role of advertising in the competitive market environment.
 It leads to uncertain planning as there is no guarantee that company will spend for advertising.
 Except company financial position, other factors advertising, competition are ignored.
 This method only guides that a company should not spend beyond its capacity.
 There is possibility of bias in deciding advertising amount.
5. Expert Opinion Method: Many firms follow this method. Both internal & external experts are
asked to estimate the amount to be spent for advertisement for a given period. Experts supply
their estimate individually or jointly. Internal experts involve company’s executives, general
manager, marketing manager, advertising manager, sales manager, distribution manager, etc.
Merits: Expert opinion method offers following merits:
 The estimates tend to be more balanced as various executives and experts are involved.
  The budget is more accurate and realistic.
 It is the only option when a company is new, having no past experience.
Demerits: However, the user must be aware of following possible demerits:
 It is not a scientific method. Personal value, experience, and attitudes play vital role.
 It is difficult to fix responsibility as many experts contribute to budget estimates.
 External experts are not fully aware of the company’s marketing situations.
 Possibility of prejudice or bias cannot be ignored.
 All opinions, right or wrong, are given equal importance.
6. Unit of Sale: The unit of sale determines the size of budget. A fixed amount per unit is allocated
for advertising purposes. If Rs. 1,000 per vehicle is assigned to advertising, the budgeted amount
will be Rs. 100,000 for 100 vehicles. The unit of sale is the basis of budgeting for durable goods
& industrial goods. The advantages & disadvantages of the percentage sales approach are also the
advantages & disadvantages of the unit-of-sale approach. It is inflexible & illogical.
7. Marginal Approach: The cost-and-benefit analysis offers the basis of budgeting and the costs of
advertising. The marginal contribution of each unit of each media is a guiding factor in
estimating the cost per unit. The aggregation of these costs of units is taken as the total cost of
advertising. The marginal costs & benefits should be equal in determining the optimum level of
advertising. If these factors are estimated, this approach may provide a rational solution not only
for determining the size of the appropriation, but also for the allocation of funds in the budget.
8. Return on Investment (ROI): In the percentage-of-sales method, advertising budget depends on
the level of sales. But advertising causes sales. In the marginal analysis and S-shaped curve
approaches increase in advertisement budgets may lead to increases in sales. In other words the
advertisement budget can be considered as an investment.
Measuring Advertising Effectiveness
The managerial responsibility in the area of advertising does not come to an end with the execution
of an advertising programme. Evaluation of advertising or advertising effectiveness refers to the
managerial exercise aimed at relating the advertising results to the established standard of
performance and objectives so as to assess the real value of the advertising performance. This
evolution exercise is also known as advertising research. It is an attempt to measure whether the
time, talent and the treasure invested in the creative activity has resulted in attaining the goals of
profit maximization to the advertiser and satisfaction to the consumers at large.
What is to be measured? It is quite obvious that in the area of ad effectiveness evaluation, the
advertiser is to measure the ad effectiveness.
Ad effectiveness evaluation is a research activity & to establish the cause & effect relation between
the efforts and the results. This ad effectiveness in five areas markets, motives, messages, media
and overall results.
A.Pre-testing methods:
1. Check-list test: A check-list is a list of good qualities to be possessed by an effective
advertisement. A typical check- list provides rating scale or basis for ranking the ads in terms of
the characteristics. These characteristics may be honesty, attention getting, readability, reliability,
convincing ability, selling ability. The ad that gets highest score is considered as the best.
2. Opinion test: Opinion test or consumer jury test is one that obtains the preference of a sample
group of typical prospective consumers of the product or the service. The members of the jury
rate the ads as to their head-lines, themes, illustrations, slogans, by direct comparison.
3. Dummy magazine and port-folio test: Dummy magazines are used to pre-test the ads under
conditions of approximation resembling normal exposure. A dummy magazine contains standard
editorial material, control ads that have been already tested and the ads to be tested. The sample
households receive these magazines and the interviews are conducted to determine recall scores.
4. Inquiry test: It involves running two or more ads on a limited scale to determine which is most
effective in terms of maximum inquiries for the offers made. These inquiry tests are used
exclusively to test copy appeals, copies, illustrations, and other components.
5. Mechanical tests: These mechanical tests are objective in nature unlike the one already
explained. These help in provide good measures as to how respondent are eyes and emotions
reaching a given advertisement.
B. Concurrent Testing Methods:
1. Co-incidental surveys: This is called as coincidental telephone method also whereby a sample
of households is selected, calls are made during the time programme broadcast, the respondents
are asked whether their radio or television. The results of the survey are used to determine the
share of response for the advertisement or the programme.
2. Consumer diaries: This method involves giving the families selected in advance of diary or
individual diaries to the members of the family. The selected families and individual respondents
are asked to record the details about the programme they listen or view. The diaries are collected
periodically to determine the scores.
3. Mechanical devices: The mechanical devices used to measure the ad differences concurrently
are more common to broadcast media. These are: Audio meters, Psycho galvanometer,
Tachistoscope and Truck Electronic Unit.
4. Traffic counts: Traffic counts are of special applicability to outdoor advertising. One can get
good deal of information through traffic counts. This work is also undertaken by advertising
agencies. For instance, how many automobiles and other vehicles were exposed to a bulletin
board or a poster or a wall painting and how many times?
C.Post-testing methods:
1. Inquiry tests: It is controlled experiment conducted in the field. In inquiry test, the number of
consumer inquiries produced by an advertising copy or the medium is considered as to the
measure of its communication effectiveness. Therefore, the number of inquiries is the test of
effectiveness which can be produced only when the ad copy or the medium succeeds in attracting
and retaining reader or viewer attention. To encourage inquiries, the advertiser offers to send
something complimentary to the reader or the viewer, if he replies.
2. Split-run test: A split-run test is a technique that makes possible testing of two or more ads in
the same position, publication, issued with a guarantee of each ad reaching a comparable group
of readers. It is an improvement over the inquiry test in that the ad copy is split into elements like
appeal layout headline and so on. Here also, the readers are encouraged to reply the inquiries to
the keyed or the given address.
3. Recognition tests: Recognition is a matter of identifying something as having seen or heard
before. It is based on the memory of the respondent. It attempts to measure the ad effectiveness
by determining the number of respondents who have read or seen the ads before. To arrive at the
results, readership or listenership surveys are conducted.
4. Recall tests: Recalling is more demanding than recognizing as a test of memory. It involves
respondents to answer as to what they have read, seen or heard without allowing them to look at
or listen to the ad while they are answering. There are several variations of this test. One such test
is Triple Association Test which is designed to test copy themes or the slogans and reveals the
extent to which they have remembered.
5. Sales tests: Sales tests represent controlled experiment under which actual field conditions than
the simulated are faced. It attempts to establish a direct relationship between one or more
variables and sales of a product or service. It facilitates testing of one ad against another and one
medium against another.
 MEDIA PLANNING
Media planning is the series of decisions involved in delivering the promotional message to the
prospective consumers. It is the process of directing the advertising message to the target audience
by using the appropriate channel at the proper time and place. It ensures die optimum-utilisation of
resources spent on advertising. Media planning refers to an analytical method for making media
decisions, and describes the process of taking the message across to the target audience at the right
time and place, and using the right media vehicle. The series of decisions concerned in delivering
the promotional message to the prospective purchasers and/or users of the product or brand is called
as Media Planning. It is a process, of making a number of decisions each of which may be altered or
abandoned as the plan develops. The planning should concentrate on:
 Whom to reach, When and where to reach,
 The total target group,
 The frequency of exposure,
 The affordable cost involvement.
Wells Burnett defines “Media planning is a decision process regarding use of advertising time and
space to assist in the achievement of marketing objectives.”
S.W. Dunn “Media planning is the process of determining how to use time and space of media to
achieve advertising objectives.”
George EL Belch “Media-planning is the series of decisions involved in delivering promotional
message in the most effective manner to the largest number of potential customers at lowest cost.”
Media planning includes the answer to following 5 Ws:
1. Which – Which media is to be picked for communicating with our target audience?
2. When – When the ad is to be issued? i.e., deciding month, day, time of ad.
3. What – What type of message should be communicated? The message is informative in nature.
4. Whom: Whom does a marketer want to reach? Identifying target audience potential customers.
5. Where – Where are potential customers located? i.e., identifying geographical area.
Factors Affecting Media Planning
1. Nature of Product: Product to be advertised can be industrial or consumer product. Industrial
products can better be advertised in specific trade- journals/magazines. Consumer products can
be better advertised through mass media like television, newspaper, advertising etc. Similarly,
products for farmers like fertilizers, etc. can be advertised in T.V., radio, wall painting, etc.
2. Nature of Customers: An appropriate media plan must consider the type or number of
consumers. Different consumers differ in their age-group, sex, income, educational level, attitude
etc. On the basis of consumer traits, consumer groups can be- men, women, children, young, old,
professional, businessmen, high, middle, low income group, Literate, illiterate, etc.
3. Distribution of Product: If the product is to be distributed locally, then media with local
coverage & reach should be considered like local newspaper, cable etc. If product is distributed
on national level, then media with national coverage in newspaper, national-level T.V. channels
will be suitable. If the product is to be sold at international level, then media having reach
internet, magazines with circulation in foreign countries,
4. Advertising Objectives: The objective of advertising campaign is to get favourable response
from customer. If the objectives of advertising campaign are to get immediate result then fast
media like newspapers, banners, pamphlets will be considered. If the objective of advertising is
to build goodwill & brand-equity, then magazines, television, signboards will be considered.
5. Media Used by Competitors: While planning for media the advertiser must consider the media
used by competitors & leaders. If advertiser does not consider competitor’s move regarding
media, then it is possible that advertiser’s market share is taken by competition. If industry-leader
is using T.V. as media, then the advertiser too must consider the same media.
6. Media Frequency: Media frequency refers to average number of times, the audience is exposed
to media- vehicle in a specified period of time. Higher media-frequency is preferred. Greater the
frequency, more are the chances of advertisement message making deep impression on the minds
of consumers. In case of print media, frequency of newspaper is very less as the receiver is not
exposed to the same newspaper for a long period of time.
7. Media Image: Media- image enhances the communication value of advertisement. Good
reputation of editorial board and well established media enjoy better image among public, so
advertisements given in such media enhance the credibility & trust of advertisements. Media
image also affects the product image and advertiser’s image.
8. Media Discount: The advertisers consider these discount schemes while selecting media as it
reduces their media cost. Sometimes some advertisers use only one medium or one class of
media regularly so as to get media discount offered by media to their regular users.
9. Language: The advertiser selects that media which communicates in the language well known
to our target customers. Like if ad is given for less educated customers, then ad in English
newspaper will be of little use.
Importance of Media Planning
1. Optimum Utilisation of Resources: Advertising involves huge cost. Media planning, the
advertiser can use available resources in an optimum manner. In media planning, such
combination of media is selected and such time is selected, that helps the advertiser in
communicating the advertising message to largest number of target audience at lowest cost.
2. Achieving Advertising Objectives: Media planning is designed so as to achieve marketing and
advertising objectives of the organisation. Media planning includes all such decisions like
selecting appropriate media, appropriate media mix & deciding scheduling of advertisement. All
these decisions help the organization in achieving advertising objectives.
3. Selection of Appropriate Media: In media planning, different media are compared on the basis
of cost per reader, cost per viewer, media-image, media-coverage etc. While selecting media the
advertiser ensures that selected media matches with the features of target audience.
4. Selection of Optimum Media Mix: Media planning helps to select optimum media mix. Using
different media combination ensures wide & intensive coverage of target audience. A single
media may not ensure communication with all the target audience. A well planned media mix
ensures wide coverage of target audience at minimum cost.
5. Helps in Allocating Advertising Budget: Media planning helps to decide the amount to be
spent on different media. It helps the advertising manager in allocating the ad-budget among
different media types/vehicles. Media plan decides the optimum media mix; this helps the
advertising manager in allocating the total ad-budget on different media in a scientific manner.
6. Ensures Appropriate Timing of Advertising: Advertising can ensure best results only when
ads are shown at the right time. Media planning includes media scheduling i.e. it decides the time
and space of advertisement in media. It decides the month, day and time of advertisement. It
ensures that advertisement is shown more frequently in seasonal months and less frequently in
off-season months.
Steps involved in media planning,
1. Define your audience: The first step of media planning is defining your target audience. Your
target audience is the people to whom you want to sell your product. Your advertising campaign
will be ineffective if you don’t have a bright idea of the audience that you want to reach.
Therefore, it is crucial to define the age, gender, income, and preference of the media platform of
your audience. Depending on age and habits, you can determine the media preference of your
target audience.
2. Define your budget: Once you know your audience that you want to target, the next thing that
you must decide is your advertising budget. It is necessary to have a fixed budget. Having a fixed
budget will be helpful for you in eliminating media platforms with the least reach ability to your
target audience & your whole budget will be targeted through the right choice of media.
3. Define your goals: It is vital to define your goal before you invest in your media plan. Setting
your goal means what are you expecting from your media campaign. Whether you want to create
brand awareness or assuming a 5% conversion rate from the media to actual sales. A well-
defined goal might help the media planner to create your media mix as per your plan.
4. Do the required research: Don’t invest in advertising on any media platform without doing
proper research. Sometimes, it is effortless to select a platform where you can find your target
audience. Example, if you sell women fashion clothes, then the right choice for advertising is
social media platforms like Instagram & Facebook. You can target women aged between 16-40.
5. Use smart tools for media planning or take experts’ help: When you have defined your
audience and budget of advertising, the next step is to select the method to create your media
plan. For example, whether you want to hire an advertising agency or you want to create your
advertising campaign on your own with the help of some media planning tools.
6. Create the right media mix: The next step is to create the right media mix. The media mix is
the collection of different media platforms. Various online & offline media platforms can be used
to advertise your product. The online media are Internet websites, Facebook, Instagram,
YouTube, etc. The offline media are T.V, newspapers, magazines, pamphlets, hoardings, etc.
7. Execute your plan: Execute your plan once everything is decided. With the help of media
experts and tools, you can know the exact time when you want to run your ad or to send a
message to your target audience.
8. Evaluate your plan: The last step is to evaluate your planning. You can learn whether your plan
was successful or not and can learn lessons for future media campaigns only by assessing the
performance of your current media campaigns.
Media Strategy: Media strategy can be defined as the usage of an appropriate media mix in order
to achieve desired and optimum outcomes from the advertising campaign. It plays a key role in
advertising campaigns. The objective of Media Strategy is not just about procuring customers for
their product or services but also focuses on placing a right message towards the right people at the
right time and ensuring that the message is relevant and persuasive. Media Strategy is designed to
achieve the above mentioned target but the budget is always kept in mind.
There are three “W”s to be decided. They are:-
1. Where to advertise: The question is where the advertisement should be displayed to actual &
prospective customers. The options are - TV, radio, newspapers, hoardings, ads during breaks
etc. It can be done at international/national/state/city as per the requirement of the brand.
2. When to advertise: The timing of advertisement is very critical especially with respect to the
seasonal products. There is no point in airing advertisement for room heaters in summer season.
It should be aired right at the end of monsoon and beginning of winter season.
3. Which type of media to use: It is very important to use a correct media type for delivering the
message. There are two basic media approaches which can be adopted –
 Media Concentration approach – In this approach, firms concentrate their campaigns only on
a few media types (generally two or three) in order to reach their target consumers instead of
using a wide variety of media types.
 Media Dispersion Approach- In media dispersion approach a wide variety of different media
categories is employed to reach the target customers. It is employed when the entire target
market can’t be reached by a few media types.
Different Types of Media
Print Media: This type of news media used to be the only way of delivering information to the
public. For the generations of the 80s and 90s, print media was the only media of entertain. People
relied on newspapers and magazines to learn everything, from recipes and entertainment news to
important information about the country or the world. Print media includes:
Newspapers – printed and distributed on a daily or weekly basis. They include news related to
sports, politics, technology, science, local news, national news, international news, birth notices, as
well as entertainment news related to fashion, celebrities, and movies. Today’s parents grew up
with this type of printed media.
Magazines – printed on a weekly, monthly, quarterly, or annual basis. It contains information about
finance, food, lifestyle, fashion, sports, etc.
Books – focused on a particular topic or subject, giving the reader a chance to spread their
knowledge about their favorite topic.
Banners – used to advertise a company’s services and products, hung on easily-noticed sights to
attract people’s attention.
Billboards – huge advertisements created with the help of computers. Their goal is to attract people
passing by.
Brochures – a type of booklet that includes everything about one company – its products, services,
terms and conditions, contact details, address, etc. They are either distributed with the newspapers
or hand over to people.
Broadcasting Media: Broadcasting media includes videos, audios, or written content that provides
important or entertaining information shared by different methods:
Television – in the past, there were a few channels sharing various types of content, whereas now
we have hundreds of TV channels to choose from. Each channel delivers a different type of content,
so you have a separate channel for news, drama, movies, sports, animation, nature, travel, politics,
cartoon, and religion. It’s the number one broadcasting media due to its reach to the audience.
Radio – uses radio waves to transmit entertaining, informative, and educative content to the public.
Due to its high reach to the audience, radio is widely used for advertising products and services.
Radio is one of the oldest means of entertainment, and today people often hear it to find out the
weather and traffic while commuting.
Movies – film, motion picture, screenplay, moving picture, or movie has world-wide reachability.
It’s the best type of mass media to promote cultures and spread social awareness. Movies have
always played a huge part in the entertainment world.
Internet Media: Nowadays, we are relying on the Internet to get the news a lot more often than
traditional news sources. Websites provide information in the form of video, text, and audio. We
can even choose the way we want to receive the news. Types of Internet media include:
Social networks or websites – including Facebook, Instagram, Twitter, YouTube, Tumblr,
LinkedIn, Snapchat, Quora, Reddit, Pinterest, etc. They are user-friendly and widely used by people
around the world. Although we can find any news here, they may be misleading because of the lack
of regulations on the content shared.
Online forums - an online place where we can comment, message, or discuss a particular topic.
Forums allow us to share knowledge with other people with the same interest. That’s why it’s
regarded as the best platform to seek support and assistance.
Podcast – a series of audios focused on a particular topic or theme. We can listen to them on a
computer or a mobile phone. It’s a platform that allows anyone to share their knowledge and
communicate with the world.