This document outlines 9 different methods for setting advertising budgets: objective task method, historical method, percentage past sales method, percentage of future sales method, competitor parity method, market share method, affordability method, marginal method, and unit method. It provides a brief description of each method, including examples for some. The document concludes by asking which methods might be used by large multinational companies versus local small companies.

1. METHODS FOR SETTING
ADVERTISING BUDGET
CHAPTER 7

2. THE METHODS
• Objective task method
• Historical method
• Percentage past sales method
• Percentage of future sales
method
• Competitor parity method
• The market share method
• Affordability method
• Marginal method
• The unit method

3. OBJECTIVE TASK METHOD
1. Set advertising/promotion
objectives
2. Decide what techniques
to use
3. Set up budget

4. HISTORICAL METHOD
• Based on previous year
advertising/promotion
budget
• Maybe add for extra
activities or inflation

5. PERCENTAGE PAST SALES METHOD
• Look at past year sales
turnover
• decide budget for
following based on certain
percentage of last year
sales figures
• Example: sales 2008 rp 50
billion, adv budget 2009
10% X rp 50 billion= rp. 5
billion

6. PERCENTAGE OF FUTURE SALES
• Look at sales target of the
following year
• Establish advertising
budget percentage of
sales target
• Example : sales target of
2009 rp. 60billion. Adv
budget 10X rp. 60
billion=rp.6billion

7. COMPATITOR PARITY METHOD
• Find out direct competitor
advertising budget
• Set budget to compete
with direct competitor
method
• Danger: if competitor has
bigger market share

8. MARKET SHARE METHOD
• Find out direct
competitor’s budget
• Establish advertising
budget by considering
both the competitor’s
budget as well as yours
and their market share

9. AFFORDIBILITY METHOD
• Based on what the
company can afford after
calculation of all marketing
costs such as production
and distribution have been
calculated, and also
based on projected sales

10. MARGINAL METHOD
• Advertising and promotion
budget is calculated
based on what sales
turnover will happen with
promotion efforts
• Example with promotion,
sales will increase rp. 2
billion, therefore part of
that rp.2 billion will be for
promotion

11. THE UNIT METHOD
• All cost to market a brand
is calculated (production,
distribution, promotion)
• Advertising/promotion
budget is incorporated in
the price
• Example price of a bottle
of soft drink is rp.2000.
advertising cost is already
incorporated within the
price.

12. DISCUSSION
• Which methods do you
think would be used by
big. Competitive multi
national companies? Why
• Which methods do you
think would be used by
local, family owned and
small companies? Why?