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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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The Economics of Advertising


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    Presentation Transcript
    1. Chapter 12 The Economicsof Advertising

    2. 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

    3. 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

    4. CHAPTER 12 The Economic Environment • Consumers’ incomes • Purchasing power • Inflation • Recession

    5. 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

    6. 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

    7. CHAPTER 12 Setting the Budget • Percentage of sales • Competition matching (market share) • Objective and task • Response model

    8. CHAPTER 12 The Accounting of It All • Income Statement Revenue − Expenses  Profit or Loss • Balance Sheet Assets  Liabilities + Owner’s Equity

    9. CHAPTER 12 Income Statement

    10. CHAPTER 12 Balance Sheet

    11. 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

    12. CHAPTER 12 Budgeting Considerations • Target market • Media • Geography • Product life cycle • Advertising agency compensation

    13. 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