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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
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