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Budget Decisions
Establishing
the budget
Budgeting approaches
Allocating the budget
Analysis
Sales response models
Additional factors in budget setting
Advertising Sales/Response
Functions
B. S-Shaped
Response
Function
Sales
High Spending
Little Effect
Middle Level
High Effect
Advertising Expenditures
Initial Spending
Little Effect
Sales
A. ConcaveDownward
Response Curve
Advertising Expenditures
Budgeting Approaches
Top-down
budgeting
Bottom-up budgeting
Top-Down Budgeting
Top Management Sets the
Spending Limit
Top-Down Budgeting
Arbitrary
allocation
The affordable method
Historical Method
Percentage of Sales
Competitive parity
Return on investment (ROI)
Affordable
Affordable
Method
Method
Return
Return on
on
Investment
Investment
Top
Top
Management
Management
Competitive
Competitive
Parity
Parity
Arbitrary
Arbitrary
Allocation
Allocation
Percentage
Percentage
of
of Sales
Sales
Historical Method
Historical
Percentage-of-Sales Method
It
Percentage-of-Sales Method
Based
2008
Advertising budget
$1,000,000
$100,000
$100,000
2008
2008
$4
$1
$100,000
Percentage-of-Sales Method
Pros
Financially safe
Reasonable limits
Stable
Percentage-of-Sales Method
Cons
Competitive-Parity Method
Competitors Advertising
Outlays Do Not Always Hurt
Competitive-Parity Method
Pros
Cons
Bottom Up
Objective and task
method
Pay out Planning
Isolate
Isolate objectives
objectives
Determine
Determine tasks
tasks required
required
Estimate
Estimate required
required expenditures
expenditures
Monitor
Monitor
Reevaluate
Reevaluate objectives
objectives
Payout Planning
Quantitative Models
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
Organizational Characteristics