FOLLOWING ARE THE FACTORS THAT ARE CONSIDERED IN DETERMINING THE ADVERTISING BUDGET.
1) Corporate objectives:
Using the objective task method, linkage between advertising expenditure and corporate objective will be established. The advertising expenditure varies depending upon corporate philosophy and priorities. For example in India, we find that public sector corporations such as BEST or the Mahanagar Telephone Nigam Ltd spend less on advertising than private sector companies such as Reliance Industries or Tata Industries.
2) The product Life Cycle:
This has a very important influence on the ad budget and companies use the brand history method for deciding how to spend on the product.
3) The budgeting period:
Usually companies have a yearly budget but some may prepare long term budget that match the long-term objectives.
4) The competitors strategies:
Product categories, which have stiff competition, witness a greater expenditure on advertising. For example, in India television manufacturers spend more than the manufacturer of ear buds.(manufactured mainly by Johnson & Johnson ). When competitors increase their advertising expenditure others are forced to follow them.
While the affordability level depends upon the advertisers priorities ceilings on how much to spend is fixed by the advertisers in order to avoid overspending.
6) Crisis management:
Even the best-laid plans can be affected by the changes in the marketplace. Advertisers have to keep aside contingency funds that can be used to tackle unexpected market challenges.
7) The type of product:
Consumer products need more advertising than industrial products. Among consumer products shopping items such as toothpaste, shampoo and soaps need to be advertised consistently in order to maintain their brand position. Such products will have a higher budget appropriation.
8) Importance of middlemen:
In product categories where middlemen or retailers have to push the product, manufacturers may prefer to spend more on dealer commission than advertising. For example Sumeet washing machines and kitchen mixers and food processors are not advertised heavily. This is because the brand name Sumeet is familiar to consumers who have accepted the product image of quality and after sales service. The company prefers to use retailers to push the brand. In most common durables such as televisions, VCRs, microwave ovens and so on, the influence of retailers is very strong. Unlike impulse purchase products such as chewing gums, chocolate and ice cream, which therefore use more of advertising.
9) Scope of the market:
If the advertiser wants to approach the national market his budget has to be much more than that required for local or regional market.
10) The quality of the campaign:
When the advertising campaign is striking and is unusually creative, it is immediately noticed by consumers. In this case the advertisers need not spend on buying media, time and space. To compensate on poor quality campaign an advertiser may have to spend more on media, in order to enjoy the same degree of visibility. For example the Cherry Blossom ad, which used a Charlie Chaplin look alike, was a striking television commercial that immediately gained attention.
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