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Budgeting. Getting it Right Chapter 6. Decisions Decisions. Objectives Budget  Control tool, planning, accountability. Advertising Budget Media Selection Media Strategy Creative/Message. Advertising Budget. How much money to spend Budget distribution across Promotional tactics

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Budgeting

Budgeting

Getting it Right

Chapter 6


Decisions decisions
Decisions Decisions

  • Objectives

  • Budget  Control tool, planning, accountability

  • Advertising Budget

  • Media Selection

  • Media Strategy

  • Creative/Message


Advertising budget
Advertising Budget

  • How much money to spend

  • Budget distribution across Promotional tactics

  • Four Main Methods:

    • Percentage of Sales

    • Peckham’s Formula

    • Competitive Parity

    • Objective and Task


Percentage of sales a 2 f s 1
Percentage of SalesA2 = f(S1)

A2 = total advertising dollars for period 2

f = a percentage figure

S1 = sales for period 1 (previous period)

  • Using past sales to determine future promotion $$

  • Doesn’t allow for emergency adjustment

  • Used to compare spending ratios across companies

  • Doesn’t consider objectives

  • Limiting


Percentage of sales 2 a 2 f s 2
Percentage of Sales (2)A2 = f(S2)

A2 = total advertising dollars for period 2

f = a percentage figure

S1 = sales for period 2 (forecast)

  • Based on “affected” sales period

  • Still only based on sales

  • Good initial base allocation

  • Doesn’t consider objectives


Peckham s formula
Peckham’s Formula

  • Relationship between sales and advertising $$

  • Applicable in certain categories

    • Correlation between SOV and SOM

  • SOV = (1.5)SOMdn

  • Based on 18yrs of sales and advertising data

  • Only for new products

    • Results cannot be generalized


Competitive parity
Competitive Parity

  • Ad $$ as a proportion/share of product’s market share

  • Establish a share of the total ad $$ for all products of the category

    • SOV = SOM

  • Useful in planning and control

  • Provides a yardstick

    • Used in stable markets

  • Doesn’t apply to all products or categories

  • Established brands require less SOV


Objective task
Objective & Task

  • Used by majority of advertisers

  • Relates specific tasks to the dollars that will be spent

  • Doesn’t consider relationship between short-term and long-term effect of promotion

  • Requires clear objectives and reliable estimations of audience response


Other methods
Other “Methods”

  • Historical

    • Based on previous year

    • Adjust for inflation

    • Objectives are irrelevant

  • All you can afford

    • “whatever is left over”

    • Lack of value to promotion


Recent trends
Recent Trends

  • Shift in Budget allocations

    • Digital media

      • Declining in traditional media

      • Increasing in digital media

    • Cable and Spanish media on the rise

  • Increased ROI measurement of brand equity

  • Increased accountability

    • Measurable results and investment


Facebook growth projections
Facebook Growth Projections



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