Chapter 11

Objectives and Budget Theoretical Background of Budget Setting Budgeting Approaches Allocation of the Budget Stretching the Budget

Objective setting is a very important step and more importantly is influenced by the limitations of the budget. The advertising budget decision is not a onetime responsibility because every year the firms have to formulate new objectives keeping pace with ever dynamic and changing market situations

How much would be the advertising input in order to achieve agreed marketing objectives? How much would be the amount of money one can afford to spend on advertising and still achieve the agreed profit objective?

How much would be the apportionment of the total advertisement expenses on each individual product or product group? How much would be the advertising budget allocation on new products?

Stages in the life cycle Market share and consumer base Competition and clutter Advertising frequency Product substitutability

Concave-downward Response Curve

S-shaped Response Curve

Budgeting Approaches
Top-Down Bottom Up

Top Management Sets the Spending Limit

The Promotion Budget Is Set to Stay Within the Spending Limit

Affordable method Arbitrary Allocation Percentage of Sales method Percentage of Profits method Unit of Sale Method Historical Method Competitive Parity Method

Return on Investment (ROI) Vidale and Wolfes model The compromise model John Little model Total Group Budget Operational Modeling Composite Method Incremental Concept Approach to Advertisement Budgeting

Marlboro cigarettes were introduced in the 1920s. The brand share was only one per cent in the early 1950s. The company invested heavily in building brand image in 1954 (cowboy country) and now the

brand share among young

smokers is in excess of 60% in the USA.

When Glaxo introduced Zantac (Zinetac in India), the medication for gastric ulcer, it was forecasted to gain no more than 10% share against the well-entrenched Tagamet. Glaxo's investmentdriven campaign helped Zantac achieve more than 50% share and became the leading brand.

Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned

Total Budget Is Approved by Top Management

Promotional Objectives Are Set

Finalize Communication objectives

Determine tasks required

Estimate aggregate expenditures Monitor

Reevaluate objectives

The major advantage of the objective and task method is that the budget is developed from the bottom to up, which is a proper and rational managerial approach.

The major difficulty that confronts planners is to determine which are those specific tasks required and the costs associated with each.

Allocating to IMC Elements Client/Agency Policies Market Size Market Potential

Market Share Goals

Regional buys Ad discounts Unutilized space Classified ads Repeat ads Co-operate Barter