5/28/2019 Advertising Budget and Factors Affecting it

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Advertising Budget and Factors Affecting it

“Money does matter a lot.”

Advertising Budget is the amount of money which can be or has to be spent on advertising of the product to
promote it, reach the target consumers and make the sales chart go on the upper side and give reasonable
pro ts to the company.

Before nalizing the advertising budget of an organization or a company, one has to take a look on the favorable and
unfavorable market conditions which will have an impact on the advertising budget. The market conditions to watch
out for are as follows:

Frequency of the advertisement

Competition and Clutter
Market Share of the Product
Product Life Cycle Stage

1. Frequency of the Advertisement

This means the number of times advertise has been shown with the description of the product or service, in
the granted time slots. So here, if any company needs more advertising frequency for its product, then the
company will have to increase its advertising budget.

2. Competition and Clutter

The companies may have many competitors for its product. And also there are plenty of advertisements
shown which is called clutter. The company has to then increase their advertising budget.

3. Market Share
To get a good market share in comparison to their competitors, the company should have a better product in
terms of quality, uniqueness, demand and catchy advertisements with resultant response of the customers. All
this is possible if the advertisement budget is high.

4. Product Life Cycle Stage

If the company is a newcomer or if the product is on its introduction stage, then the company has to keep the
budget high to make place in the market with the existing players and to have frequent advertisements. As the
time goes on and product becomes older, the advertising budget can come down as then the product doesn’t
need frequent advertising.

When the market conditions are studied thoroughly, then the company has to set up its advertising budget
accordingly. For setting advertising budget, there are four methods:

They are as follows.

Percentage Of Sales: In this method, the budget is decided on the basis of the sales of the product
from previous year records or from the predicted future sales. This is a pure prediction based method
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5/28/2019 Advertising Budget and Factors Affecting it
p y p p p
and best applicable to the companies which have xed annual sales. But if in case there is a
MSG requirement for more promotional activities then this method has a disadvantage because there will be
decrease in advertisements as the budget is xed.
A ordability: this method is generally used by the small companies. Only the companies which have
funds and can a ord advertising opt for this method. The companies can go for advertising at any time
in whole year whenever they have money to spend. The amount spent also varies from time to time as
per the advertisements takes place.
Best guess: This method is basically for newcomers who have just entered the market and they have no
knowledge or say they are not aware of how the market is and how much to spend on advertising. Thus,
this method is applied by the higher level executives of the company as they are the only experienced
people.

Thus, doing the homework and then moving forward, i.e. searching for best market conditions and setting the best
advertising budget will have a great impact on improvement and development of the company.

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 Advertising Management - Introduction (advertising-management.htm)

 Classi cation of Advertising (classi cation-of-advertising.htm)
 Print Advertising (print-advertising.htm)
 Broadcast Advertising (broadcast-advertising.htm)
 Outdoor Advertising (outdoor-advertising.htm)
 Covert & Public Serving Advertising (covert-and-public-service-advertising.htm)
 Objectives & Importance of Advertising (objectives-importance-of-advertising.htm)
 Marketing Communications (marketing-communications.htm)
 Consumer Communication (consumer-communication-and-persuasion.htm)
 Consumer Behaviour (consumer-behaviour.htm)
 Media Strategy in Advertising (media-strategy-in-advertising.htm)
 Advertising Agencies (advertising-agencies.htm)
 Social & Economic Aspects of Advertising (social-economic-aspects-advertising.htm)
 Steps in Advertising Process (advertising-process.htm)
 Advertising Techniques (advertising-techniques.htm)

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