ADVERTISING

BUDGET
 ADVERTISING BUDGET
• PURPOSE Factors Affecting Budget
Provide a
Decisions
forecast of • Stage in Product Life Cycle
revenues and
expenditures • Market Share And Consumer
Base
Enable the • Competition & Clutter
actual financial
operation of • Advertising Frequency
the business to • Product Substitutability
be measured
against the
forecast
• Advertising should be budgeted like any
other investment
• Budget generally determines how much
should be the Advertising expenditure.
• A BUDGET is a forward plan of
any activity expressed in terms of
rupees and budgeting is the
process of this planning.
By NADA ( National Automobile
Dealer’s Association)
 ADVERTISING BUDGET
• As the Advertising / promotional
MARGINAL efforts increase, sales and gross
margins also increase to a point
ANALYSIS
ASSUMPTIONS • Profits are the difference between
1. Sales are direct gross margin and promotional
result of Advertising expenditure.
and promotion and
this result can be • The optimal expenditure level is the
point where marginal cost equals
measured the marginal revenue they generate.
2. Advertising and
promotion are solely PROFIT = GROSS MARGIN – PROMOTIONAL EXPENDITURE
responsible for sales.
 ADVERTISING BUDGET
SALES • CONCAVE – Downward Function
• As the amount of Advertising
RESPONSE increases its incremental value
decreases.
MODEL
• Under this model the effect of
Advertising quickly diminish.
• Budgeting under this model suggest
that fewer advertising rupees may be
needed to create the optimal
influence on sales
 ADVERTISING BUDGET
SALES • S Shape Response Curve
• This advertising budget model
RESPONSE suggests that a small advertising
budget is likely to have no impact
MODEL beyond the sales that may have been
generated through other means.
 BUDGETING APPROACHES
• TOP-DOWN Top Down Budgeting
APPROACHES

• BOTTOM - UP • Top management sets the

APPROACHES spending limit.
• Promotion budget set to stay
within spending limit.
TOP DOWN METHODS
• Affordable Method
• Percentage of Sales
Method
• Competitive parity Method
• ROI
 BOTTOM –UP BUDGETING
• OBJECTIVE - And - TASK Method
– Advertising Objectives established
– Tasks to be accomplished to achieve the
objectives
– Determine the required budget