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Bottom-Up Budgeting
Objective
Payout Planning
Share of Advertising/Sales
Relationship
Share of Advertising/Sales
Relationship
Payout Planning
The
Payout Planning
To determine how much to spend,
marketers develop a payout plan that
determines the investment value of the
advertising and promotion appropriation
Example of a three-year payout plan ($ millions)
Product sales
Profit contribution
(@$.50 per case)
Advertising/promotions
Profit (loss)
Cumulative profit (loss)
Year 1
15.0
Year 2
35.50
Year 3
60.75
7.5
15.0
(7.5)
(7.5)
17.75
10.50
7.25
(0.25)
30.38
8.50
21.88
21.63
Quantitative Models
For the most part, these methods employ
computer simulation models involving
statistical techniques such as multiple
regression analysis to determine the relative
contribution of the advertising budget to sales.
Attempts to apply quantitative models to
budgeting have met with limited success.
Such methods do have merit but may need
more refinement before achieving widespread
success.
to IMC elements
Client/agency policies
Market size
Market potential
Market share goals
Economics of scale in advertising
Organizational characteristics
High
Low
Competitors
Share of Voice
Increase
Increase to
to defend
defend
Attack
Attack with
with large
large
SOV
SOV premium
premium
Maintain
Maintain modest
modest
spending
spending premium
premium
Low
High
Your Share of Market