Professional Documents
Culture Documents
Size of Budget varies from a few thousand to a billion How much to spend ?? Perception that communication budget as an expense rather than an investment.
Marginal Analysis
Budgeting Approaches
Top- Down Approach- Affordable method, arbitrary allocation, percentage of sales method, competitive parity method, ROI Budgeting method Build-Up Approach
Top-Down Budgeting
Top management sets the spending limit
Affordable Method
Determine amount to spend in various areas Allocate the left over amount for advertising & promotion. Mostly used by small firms
Arbitrary Allocation
Determined by the Management. Theoretical basis is not considered. Considered as a weaker method in comparison to Affordable method
Contd..
Advantages Financially safe & keeps ad spending within reasonable limit. It is simple, straightforward and easy to implement Disadvantage Cause & Effect Relationship Restriction on Budget Difficult to employ for new product introductions
Competitive Parity
Subscription to competitive media reporting Budget is established by matching the competitions percentage of sales. Minimizes unusual expenditures
ROI Method
Advertising & Promotions are considered as investments & expected to yield returns. Difficult to assess the returns provided by the promotional effort
Build- Up Approch
Promotion Objectives are set
Disadvantages
Determine which tasks will be required & costs associated with each Difficult for new product introductions