Chapter 12. The Economics of Advertising. The Economics of Advertising. 12.1 Advertising and the Economy 12.2 Financial Planning for Advertising 12.3 Factors Affecting the Advertising Budget. 12.1 Advertising and the Economy. Goals Identify economic factors that affect advertising.
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Chapter 12 The Economicsof Advertising
CHAPTER 12 The Economics of Advertising 12.1 Advertising and the Economy 12.2 Financial Planning for Advertising 12.3 Factors Affecting the Advertising Budget
CHAPTER 12 12.1 Advertising and the Economy • Goals • Identify economic factors that affect advertising. • Describe how advertising stimulates the economy. • Terms • purchasing power • cost of living • discretionary income • inflation • recession • gross domestic product (GDP) • value
CHAPTER 12 The Economic Environment • Consumers’ incomes • Purchasing power • Inflation • Recession
CHAPTER 12 Advertising Stimulates the Economy • Helps grow the gross domestic product • Increases competition • Adds value to products and services • Plays a role in the recovery from a recession • Generates jobs that have a positive effect on economic growth • Funds a diverse, media landscape • Plays an essential role in funding sporting events
CHAPTER 12 12.2 Financial Planning for Advertising • Goals • Explain strategies used for setting the advertising budget. • Describe the financial reports a business can use for planning and operating the company. • Terms • percentage-of-sales method • competition-matching method • share of voice • objective-and-task method • market response model • income statement • balance sheet
CHAPTER 12 Setting the Budget • Percentage of sales • Competition matching (market share) • Objective and task • Response model
CHAPTER 12 The Accounting of It All • Income Statement Revenue − Expenses Profit or Loss • Balance Sheet Assets Liabilities + Owner’s Equity
CHAPTER 12 Income Statement
CHAPTER 12 Balance Sheet
CHAPTER 12 12.3 Factors Affecting theAdvertising Budget • Goals • Describe factors that affect the advertising budget. • Determine whether advertising spending generates brand awareness. • Terms • commission system • fee system • incentive-based system
CHAPTER 12 Budgeting Considerations • Target market • Media • Geography • Product life cycle • Advertising agency compensation
CHAPTER 12 The Advertising Costs ofBrand Awareness • The sales method • The trial-and-error method • The awareness/preference method • Show-of-interest method • The readership/viewership method • The anecdotal method