The document provides an overview of advertising budgeting, detailing the significance of an advertising budget as an estimate of promotional expenditures and its relationship with marketing objectives. It discusses various methods for budgeting, including the percentage of sales, objective and task, and competitive parity methods, along with their merits and demerits. Additionally, it covers different budgeting approaches and types, highlighting factors that influence budget size.

1. ADVERTISEMENT
BUDGETING

2. INTRODUCTION
• An advertising budget is an estimate of a company's promotional
expenditures over a certain time period.
• More importantly, it is the money a company is willing to set aside to
accomplish its marketing objectives.
• Thus, Advertisement budget is a statement of future estimated
expenditures for ad efforts.
• It is converting the advertising plan into monetary value.

3. INTRODUCTION
When creating an advertising budget, a company must weigh the value of spending an
advertising rupee against the value of that rupee as recognized revenue. Before deciding
on a specific amount, companies should make certain determinations to ensure that the
advertising budget is in line with their promotional and marketing goals:
• The target consumer — Knowing the consumer and having their demographic
profile can help guide advertising spend.
• Best media type for the target consumer — Mobile or internet advertising, via
social media, may be the answer, although traditional media, such as print, television,
and radio may be best for a given product, market, or target consumer.
• Right approach for the target consumer — Depending on the product or service,
consider if appealing to the consumer's emotions or intelligence is a suitable strategy.
• Expected profit from each rupee of advertising spending — This may be the
most important question to answer, as well as the most difficult.

4. APPROPRIATION VS BUDGET
• An advertising appropriation is the total amount granted or
earmarked by the top management for advertising.
• On the other hand, advertising budget is one that is divided
into amounts set aside for specific activities

5. ADVERTISING EXPENSES
• Ad construction cost
• Media cost
• Ad agency cost
• Ad department cost
• Ad research cost

6. BUDGETING STEPS
Budget
preparation
Budget
presentation
Budget
implementation
Budget control

7. METHODS OF BUDGETING

8. PERCENTAGE OF SALES METHOD
Under this method, the advertising budget is set as a percentage of either the past sale or
expected future sales. Small businesses usually use this method.
B2B companies generally spend between 2%-5% of their revenues on advertising. On the other
hand, B2C companies generally spend between 5%-10% of their revenues on advertising.
Merits
• It is simple.
• It works on affordability
• It is consistent
Demerits
• Wrong stressing
• It is static in approach
• It ignores long range planning

9. OBJECTIVES AND TASK METHOD
The objective and task method is commonly used by large corporations. This
method is based on the advertising objectives. Once the objectives are
decided, the cost is estimated to complete those objectives, and accordingly, a
marketing budget is set.
Merits
• It is objective based
• It is review based
• It is individualistic
Demerits
• It is irrelevant
• Objectives cannot be translated into tasks
• It is unscientific

10. COMPETITIVE PARITY METHOD
The strategy involves using competitor advertising spending as a benchmark for a
company’s own spending.
However, budgeting the same amount of money does not guarantee the same outcome for a
company. Therefore, the competitive party method comes with limitations.
Merits
It respects the superiors
It kills competitive wars
It is simple
Demerits
It is not logical
It is a misfit
It is difficult to get competitors' information

11. AFFORDABILITY METHOD
With this method, advertisers base their budgets on what they can afford. Of course,
arriving at a conclusion about what a small business can afford in the realm of
advertising is often a difficult task, one that needs to incorporate overall objectives
and goals, competition, presence in the market, unit sales, sales trends, operating
costs, and other factors.
Merits
• It is practical
• It is simple
• It is flexible
Demerits
• It overlooks opportunities
• It is short-sighted
• It ignores the ability of advertising

12. ALL AVAILABLE FUNDS
This is a very aggressive method under which all available profits are allocated
towards advertising activities. This method can be used by start-up businesses that
need advertisements to attract customers.
UNIT SALES METHOD
Under this method, the advertisement cost per article is calculated and based on
the total number of articles, it is set.

13. BUDGETING APPROACHES
Because budgeting is a process of preparing detailed projects of
future amounts, we can create a budget in many ways, including:
• Top-down
• Bottom-up
• Incremental
• Zero-based
• Rolling
• Activity-based

14. TOP-DOWN
Points to consider about imposed/top-bottom
budgeting style:
• It’s time-efficient because decisions are made by a
limited number of senior managers.
• Junior managers might not have the skills to fully
participate in the budgeting decision-making
process.
• Senior managers have a better view of strategic
objectives and the resources available.
• Senior managers are closer to the strategic objectives
and have a long-term view of the organisation.
• Junior managers could build slack into the budget to
make it easier to achieve.

15. BOTTOM-UP
Points to consider about
participative/bottom-up budgeting
style:
• Management’s morale is
improved.
• Managers are more likely to
achieve the plans in the budget.
• Lower-level managers are closer
to the business and have better
knowledge of unique
issues/challenges and
opportunities.

16. INCREMENTAL BUDGETING
Businesses often build on past budgets. The incremental budgeting
process starts with the previous budget and adds (or subtracts) an
incremental amount to cover inflation and other known changes.
Advantages
• It’s quick and easy to maintain.
• It suits stable organisations with acceptable historic figures.
Disadvantages
• It embeds earlier issues and inefficiencies.
• Economically inefficient activities can continue.
• It encourages artificial behaviour (i.e. spending the whole budget so
the same amount is included in the following year).

17. ZERO-BASED BUDGETING
Zero-based budgeting requires all costs to be justified by the expected benefits. It’s an
alternative to incremental budgeting – the budget is based on the previous period’s budget
or actual results, plus extra for inflation and other known changes.
Advantages
• Inefficient and obsolete operations can be discontinued.
• There’s an increase in staff involvement because it requires a lot more information and
engagement.
• It responds to changes in the business environment.
• There is efficient and effective resource allocation.
Disadvantages
• It focuses on short-term benefits to the detriment of long-term advantages.
• The rigid budget process leads to lost opportunities.
• Management skills might be lacking.
• Staff might be demotivated by the need for significant time and effort.

18. ROLLING BUDGETING
A rolling budget is continuously updated by adding an accounting period when the
earliest accounting period expires.
Advantages
• Planning and control are based on an accurate budget.
• It reduces uncertainty.
• The budget extends into the future.
• It encourages managers to reassess the budget regularly and more frequently.
Disadvantages
• It’s costly and time-consuming.
• Staff might be demotivated by the time spent on budgeting.
• It can lead to less controlled results due to the effort required.
• Version control can be an issue because numbers are always changing.

19. ACTIVITY-BASED BUDGETING (ABB)
This budget is based on activities. Cost-driver data is used to set budgets and
variance analysis.
Advantages
• This system draws attention to overhead costs, which make up a large
proportion of total operating costs.
• It recognises the activities that drive costs.
• It provides useful information for Total Quality Management (TQM).
Disadvantages
• It takes time to identify activities.
• It’s difficult to identify responsibility for individual activities.

20. TYPES OF BUDGETS
• Master budget - The master budget is a compilation of all the budgets. It’s
similar to published financial accounts. It consolidates all subsidiary budgets
and usually comprises the budgeted profit and loss account, balance sheet, and
cash-flow statement.
• Cash budget - A cash budget is a detailed estimate of the organisation’s cash
inflows and outflows.
• Capital budget - A capital budget facilitates decision-making on specific
investment project choices. It provides guidance on the total amount of capital
expenditure to commit.
• Operating budget - An operating budget captures the revenues and income,
and the expenses expected in the forthcoming period.

21. FACTORS AFFECTING BUDGET SIZE
• Financial condition
• Objectives of advertising
• Nature of Product
• Nature of customer
• Stage of product life cycle
• Advertising strategies
• Top management philosophy
• Competitors' budget size

22. THANK YOU