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Presented By:
“I  know that half of my advertising budget is wasted, but I’m not
sure which half”
- Lord Leverhulme
Another function in Industry and business on which the
management based so much expenditure on such scanty
Knowledge about the returns. - Jay Forester
Advertising expenditure decisions are often arbitrary and at times
merely a guess. Advertising costs are a completely controllable
expense. Advertising budgets are the means of determining and
controlling this expense and dividing it wisely among departments,
lines or services.
 A “BUDGET” is a forward plan of any activity expressed in
terms of rupees within a time period and budgeting is the process
of this planning. Adv budget is a plan for the company’s future
 Advertising is a capital investment rather than a current

expenditure. It is a long term investment in the image of a brand.

 Since advertising is an investment, it should be Budgeted like

any other investment.

The advertising budget helps you set how much you have to

spend as well as how you are going to spend it

How much should you spend to achieve the desired result? How

should you allocate your advertising dollars?

Various Methods for
Adv Budget Decision
Per cent of sales method
Advertising task or objective method
Competitive Parity Method
Affordable Budget
Per Cent Of Sales Method
Percentage of Total Sales
The most widely used method of establishing an advertising budget
is to base it on a percentage of sales e.g 9% of sales figure of 200 cr.
Advertising is as much a business expense as, say, the cost of labor
and, thus, should be related to the quantity of goods sold.
Unit of Sales
The unit-of-sales method is particularly useful in fields where the
amount of product available is limited by outside factors, such as
the weather's effect on crops.
Fir fashion products, the market conditions do change fast and at
times are very uncertain, making this method undependable.
Per Cent Of Sales Method
 Past sales

 Estimated Future Sales

 Past and Estimated Future Sales

It may be helpful for us to use the percentage-of-sales method

because it is quick and easy. Not only is it a sound method for
stable markets, but it may also keep our advertising budget from
getting way out of proportion.
Advertising Objective
and Task Method
It relates the appropriation to the marketing task to be
accomplished. It relates the advertising appropriation under
usual conditions and in the long run to the volume of sales, so
that profits and reserves will not be drained. To establish your
budget using this method, you need a coordinated marketing
program with specific objectives based on a thorough survey of
your markets and their potential.

 To increase an awareness of a product and its promotion.

 To develop the long term selling theme – quality products,
newness, customer service.
 To acquaint the market with the brand
 To introduce a new product.
Competitive Parity
To spend on the Advertisement as much the competitors are
spending so that they are not in any disadvantage. Here
adverting is taken as a defensive device and not an offensive
tool to achieve marketing objectives.
This approach has widespread use when products are
well established with predictable sales patterns. It is based on
the assumption that there is an “industry average” spend that
works well for all major players in a market.
Affordable Method
When fund availability is a constraint, a limited fund is
only allocated after other unavoidable expenditures have
been met. This basically is suited for the small scale
businesses. Budget decisions are left to the whim of the
management and are not based on rational business
needs. Whims are mostly irrational and subjective rather
than based on an objective approach.
Any combination of these methods may be employed in the
formation and allocation of your advertising budget. Based on
your advertising needs, you may find that you need all or only
one of these methods to meet your advertising objectives.

The advertising budgets should be flexible enough to tackle the

critical changes in the market, necessitating an adjustment in
the advertising support. The necessary modifications should be
effected in the advertising budget.