Advertising
Budget
The advertising
budget is determined by a compay's marketing budget. The advertising
budget will be influenced by a series of factors:
Company
strategy. The
company strategy and the marketing strategy will guide us to create
an advertising budget. Some companies maintain a leading cost strategy,
they try to position themselves as the cheapest option for the consumers
worried about the price. Companies that try to sell things cheaply
can change to a low cost publicity strategy. The Zara chain spend
very little on publcity as they centre their attention on their
shops and shop windows.
The
company's objectives and marketing strategy.
For example, if the objective is to quickly grow in a competitive
market with a known brand, to achieve this objective a high advertising
budget may be necessary.
The
competitors and their publicity expenses.
The advertising effort can vary depending on the competitor's actions.
Depending on our market share and our consumer's.
The
product that we are selling.
Depending on our sector and the characteristics and benefits of
our product. Some very competitive sectors require a high advertising
budget if you want to develop the brand.
Where
are we in the life cycle of out product?
Are we talking about a product which has just been launched, is
growing, maturing or declining? The type of publicity and the amount
spent on publicity is different. For example, launching a product
usually requires a great advertising cost to ensure people are aware
of it.
Theoretically
the ideal advertising expense should be the amount which makes the
campaign cost effective. If we could find out the different levels
of publicity expenditure and the sales that correspond to them, we
could calculate the ideal publicity expense. However, in reality,
the calculation for the publicity expense which makes the campaign
cost effective is hindered by:
Delayed
effects. The consumer can see the car advert today and then
buy the car a year later. It is difficult to evaluate sales upon
advertising in the long term.
The
multiple variables that intervene. It is difficult to differentiate
the effect of the publicity from the rest of the variables which
influence sales. Once an advertising campaign has been carried out
it is complicated to differentiate the effect of the advert from
other variables like the behaviour of the sales force, the evolution
of the market, the competitor's actions and the performance of the
intermediaries.
The
difficulties in calculating costs. It is not always easy to
determine which sales correspond to each period. If for example,
the intermediaries accumulate product during promotional times,
and they sell more in other periods of time, it is complicated to
analyze the impact of the advertising liked to consumer sales.
Therefore,
it is very complicated to know what percentage of sales is due to
the advertising campaign or for other factors. To fix an advertising
budget we should bear in mind some principles:
Intensity.
A minimum expense is usually necessary. If we have discovered the
elixir of eternal youth an advert can be suficient, if people believe
us, In the majority of cases a certain number of repetitons is needed
so that people notice the advert.
Concentration.
Advertising usually requires a certain amount of time. You need
a minimum number of concentrated adverts in a period of time.
Co-ordination.
The advertising budget should be coherent and be co-ordinated with
the company's marketing budget. The different parties in the advertising
budget should be co-ordinated amongst themselves.
