advertising budget meaning methods 1.Advantages 2. Disadvantages

1. ADVERTISING BUDGET

2. ADVERTISING BUDGET
Budget:
It is a short of commitment, target which the management seeks to attain.
Methods/approaches/techniques of advertising Budget:
➢ Percentage of sales method
➢ Objectives and task method
➢ All you can affered method
➢ Competitive parity method
Percentage of sales method:
It is a commonly used method by large and medium companies. In this method budget
allocation depends upon the total sales figure.
High Sales= High budget
Low Sales= Low budget

3.  The basis of budget allocation is the total sales of product. It may be
 • The fixed percentage of previous year sales.
 • The fixed percentage on projected sales.
 • The fixed account of the unit.

4. ADVANTAGES
 1. It is simple to draw and easy to implement.
 2. Expenditures are directly related to funds available.3. It is easy to forecast
incase of taking previous year’s sales.

5. DISADVANTAGES
 1. It ignores the less advertising ma decline sales or potential of advertising in
rising sales.
 2. It can lead to over or under spending.
 3. It is difficult to predict sales for new product.
 4. Increase in sales leads to decrease in advertising budget which may be
needed.
 5. It is not suitable for small concern and new companies.

6. OBJECTIVES AND TASK METHODS
 ❖ This method is scientific and appropriate advertising budget method. It considers
 company’s own environment and requirements.
 ❖ In this method the selling objectives and budget decision are linked and
 considered simultaneously. It involes,
 • Define and determinded specific objectives.
 • Determine the tasks necessary to achieve objectives.
 • Estimate the cost of performing task.
 • Make costs to determine the advertisement budget.
 • Deciding specific stratergies and tasks necessary to achieve them.

7. ADVANTAGES
 1. It develops budget from a proper managerial approach.
 2. It does not depend on past sales or future sales forecast.
 3. It considers all factors under advertiser’s control.
 4. It is suitable to the company much, as budget is based on current objectives.
 5. It can be easily follow by new and small companies.
 6. It is easy to operate.
 7. It tries to avoid unnecessary expenditures.

8. DISADVANTAGES
 1. It is difficult to implement during some occusions.
 2. It required managerial inverstments and high skills.
 3. It does not earn the results of other valuables such as awareness, attitude
formation
 etc.
 4. It is difficult to estimate all cost and determine all tasks necessary to achieve the
set
 objectives.
 5. The scope of this budget is limited.

9. ALL YOU CAN AFFORD METHOD
 ❖ This method is based on the company’s capacity to spend.
 ❖ It is based on the notion that a company should spend are advertising as per
its
 capacity.
 ❖ Budget allocation is made only after meeting all the expenses.
 ❖ It is treated as residual decision.

10. ADVANTAGES
 1. It is a simple method.
 2. It is less risky.
 3. It is suitable for small firms and new products.

11. DISADVANTAGES
1. It does not considered goals or objectives o advertising.
2. It may provide high chances of over or under spending.

12. COMPETITIVE PARITY METHOD
 • In this method advertise decides his budget matching with the competitor.
 • Here, information on competitor’s budget is available in trade journals,
magazines
 and reports.
 • For example: If a close competitor spends 3% of net sales, the company with
 spend more or less, the same percentage for its advertising.

13. ADVANTAGES
 1. It is easy to calculate.
 2. It leads to competitive stability.
 3. It minimizes the changes of promotional wars among advertisers.

14. DISADVANTAGES
 1. It is an expensive method.
 2. It is difficult to collect information and decide incase of man numbers of
 competitions.
 3. It ignores the contribution of media and creative executions.
 4. Companies cannot considered their profits, sales, financial affordability,
challenges

15. INCREMENTAL CONCEPT
 Incremental concept approach/Incremental advertising budget:• This budget is
prepared by using a previous periodical budget or actual
 performance i.e. take actual as a basis with increased amount added for the new
 budget period.
 • In this method allocation of resources are based upon allocation of previous
 budget.

16. ADVANTAGES
1. This budget is stable and simple to offer.
2. Co-ordination between budget is easier to achieve.
3. The impact of change can be seen quickly.
4. This budget is flexible.

17. DISADVANTAGES
1. This budget may become outdated.
2. There is no incentive for developing new ideas.
3. Assumptions may lead to negative results.
4. This method does not consider affordability of the company.

18. THANK YOU