Advertising Ad Agency, New Media

Dr. Parveen Kaur Nagpal
Advertising Fundamentals
and Media

Advertising
The term, ‘advertising’ has been derived from the Latin word
‘Adverter’ which means to drive the attention towards something.
Advertising involves the preparation of written or oral messages
and their dissemination through paid media for the purpose of
making people aware of and inclined towards the use of a
particular product of that firm or company.
It is an important promotional tool, particularly for companies
whose products and services are targeted to mass consumer
markets such as automobile manufacturers, FMCG companies,
drug companies etc.

Definitions of Advertising
1. According to American Marketing Association, “Advertising is
defined as any paid form of non-personal presentation and
promotion of goods, services and ideas by an identified
sponsor”
2. According to Philip Kotler – “Advertising is any paid form of
non-personal presentation and promotion of goods, services,
or ideas by an identified sponsor”.
3. According to Frank Presbrey – “Advertising is a printed,
written, oral and illustrated art of selling. Its objective is to
encourage sales of the advertiser’s products and to create in
the mind of people, individually or collectively, an impression
in favour of the advertiser’s interest.”

Features of Advertising
Non–Personal
Provides Information
Paid Form
Identified Sponsor
Publicizes Goods, Services, Ideas and Events
Persuasion
Art, Science and Profession

Significance/ Benefits of Advertising

Classification of Advertising

Integrated Marketing Communication (IMC)
Integrated marketing communication (IMC) was developed as an
attempt to achieve consistency across marketing communication
disciplines and media.
IMC strategies include determining the target audience, establishing
objectives and budgets, analyzing social, competitive, cultural and
technological issues, and finally evaluation and feedback regarding the
effectiveness of promotional strategies adopted.
The promotional mix is the combination of different promotional
channels that are used to communicate a promotional message. This
will involve an appropriate selection from the range of tools that are
available for use as part of the promotional mix. This is known as
Integrated Marketing Communications

Definitions of IMC
1. IMC is a management concept that is designed to make all aspects
of marketing communication such as advertising, sales promotion,
public relations, and direct marketing work together as a unified
force, rather than permitting each to work in isolation.
2. The American Marketing Association defines Integrated Marketing
Communications (IMC) as “a planning process designed to assure
that all brand contacts received by a customer or prospect for a
product, service, or organization are relevant to that person and
consistent over time.”

Elements of IMC

Case-let: Dominos
When two employees in Conover, North Carolina, posted a YouTube
video showing themselves preparing sandwiches while putting cheese
up their noses and violating other health-code standards, Domino’s
learned an important lesson about PR and brand communications in a
modern era. Once it found the employees—who claimed the video was
just a gag and the sandwiches were never delivered—the company
fired them. In just a few days, however, there had been more than a
million downloads of the video and a wave of negative publicity.
When research showed that perception of quality for the brand had
turned from positive to negative in that short time, the firm
aggressively took action through social media such as Twitter, YouTube,
and others.

Case Study: Revitalising Barbie
In 2006, 46 year old Barbie – the largest and the most popular doll
in the world is struggling through a mid-life crisis. The Barbie
brand accounts for almost one-third of Mattel's $5.2 billion
annual revenue.
The Barbie doll has dominated the global toy market for more
than 40 years. But in recent years, its status as queen of the toy
cupboard is under threat. Mattel's financial results highlighted her
plight with the gross worldwide sales of Barbie falling by 13 % in
the second quarter of 2006. Little girls no longer view her as cool
and trendy.

Case Study: Revitalising Barbie
Mattel decided to reinvigorate the Barbie brand, focusing on core
markets, aligning more effectively with growing retail customers
by entering into closer partnerships with them, investing in
developing markets, and growing alternative sales channels.
Mattel has decided to concentrate on three aspects –
product, brand building and distribution channel.
It has extended Barbie to animation movies, launched interactive
web sites, and developed new products to appeal to teens and
pre-teens. The case discusses the challenges faced by Barbie; it
traces the initiatives taken by Mattel over the years to extend
Barbie's product life cycle; and debates over Mattel's current
strategy for Barbie.

New Realities of Marketing

◎ Network Information Technology
◎ Globalization, Deregulation and Privatization
◎ Heightened Competition
◎ Mobile Marketing
◎ Retail Transformation
◎ Disintermediation (E.g. Amazon.com)
◎ Consumer Information, Participation and Resistance

◎ Industry Convergence
◎ Consumer Buying Power
◎ Social Media Marketing

Case Study: The Missing I in the TOI

Case Study: The Missing I in the TOI
Letter 'I' was seen missing in the 'The Times of India' on October
21. In one of the most creative, sensible and also weird possible
ways, Awareness about Iodine Deficiency was carried out by Tata
Salt.
World Iodine Deficiency Day is celebrated on October 21 every
year. Globally, 1.9 billion individuals have inadequate iodine
nutrition. Like other countries, Iodine is not naturally present in
our soil and water. The advertisement read, 'Is I missing from your
body as well?
The ad conveyed an important message. However, TOI was
criticised for taking up such ads that disturbed the news pattern.
Some also found it difficult to understand the news with the
missing letter 'I'.

Behavioural Model (E. K. Strong AIDA)
AIDA model of marketing communication shows the impact of
advertising on consumers.
The AIDA formula was established in 1925 by E. K. Strong, and is
used as a basic model, according to which advertising is
developed.
The AIDA model consists of four stages, that form a linear
hierarchy:
1. Attention
2. Interest
3. Desire
4. Action

Advantages/ Benefits of the AIDA Model:
◎ AIDA Model is simple, easy to understand and interpret.
◎ It can be used to market individual products.
Limitations of the AIDA Model:
◎ The AIDA model is inappropriate for impulse purchasing.
◎ It cannot be used to promote a line of products.
◎ It overlooks the competitive element involved in choosing
between products.
◎ This model may not be appropriate for all the products

DAGMAR Model (Russell Colley)
In 1961, Russell H. Colley prepared a report for the Association of
National Advertisers titled “Defining Advertising Goals for
Measured Advertising Results (DAGMAR)”. In it, Colley developed
a model for setting advertising objectives and measuring the
results of an ad campaign.
The DAGMAR approach defines an advertising goal/ objective as a
specific communication task to be accomplished among a defined
audience, in a given period of time.
According to DAGMAR Model the ultimate objective of advertising
involves a communication task, intended to create awareness,
impart information, develop attitude and induce action.

The model suggests that there are a series of steps through which a
brand must pass in order to gain acceptance:

Advantages of the DAGMAR Model:
◎ DAGMAR Model is easy to understand and interpret.
◎ It defines advertising goals and measures their results.
◎ It makes it easier to construct successful advertisement.
Limitations of the DAGMAR Model:
◎ The DAGMAR approach emphasizes on the intervening variables like
awareness, comprehension etc. which will ultimately lead to sales.
Instead sales can be measured directly.
◎ Moreover the intervening variables are difficult to measure as
compared to sales.
◎ It assumes that all customers react in the same way to advertising

Heirarchy of Effects (Lavidge and Steiners)
Hierarchy of Effects Model is one of the best known and pre-
dominant models, developed by Robert Lavidge and Gary Steiner
in 1961, as a paradigm for setting and measuring advertising
objectives.
The model shows the process by which advertising works, it
assumes a consumer passes through a series of sequential steps.

Advantages/ Benefits of Hierarchy of Effects Model:
◎ It is a comprehensive model.
◎ This model is predominant and shows clear steps of how advertising
works.
◎ This model tells the advertiser about the problem, the phase where
it arises and thus makes identifying the problem easier.
Limitations of Hierarchy of Effects Model:
◎ There does not appear to be an accepted means of distinguishing
between cognition and affective stage

Comparison of the 3 Models

AD Agency
An advertising agency is an independent organization set up to
render specialized services in advertising in particular and in
marketing in general.
Advertising agencies started as space brokers for the handling of
the advertisements placed in newspapers.
Over the years, the function of the agencies has changed. Their
main job today is not to aid media but to serve advertisers.
According to Philip Kotler, “Advertising Agency is a marketing
service firm that assists its clients in planning, preparing,
implementing and evaluating various activities of advertising
campaign.”

Functional Departments of AD Agency

Types of AD Agencies

AD Agency
1. In-House Agencies
Some companies, in an effort to reduce costs and maintain
greater control over agency activities, have set up their
advertising agencies internally.
An in-house agency is an ad agency set up, owned and operated
by the advertiser. Many companies use in-house agencies
exclusively; some others may combine in-house efforts with those
of outside agencies.
An in-house ad agency can also provide related work such as sales
presentations and sales force material, package design, and public
relations at a lower cost than the outside agencies.

AD Agency
Advantages of In-House Agencies
◎ Cost-effective
◎ Greater control and flexibility on the advertising activities
◎ Greater coordination between the advertiser and agency
people
Limitations of In-House Agencies
◎ In-house agencies may not have specialized and best talent
◎ There may be a lot of interference from management which
may hinder creativity
◎ It lacks experience that can be gained by handling other major
clients

AD Agency
2. Full Service Agency
These are medium sized or large agencies that are capable of
undertaking a complete advertising campaign – that includes a full
range of services in the area of marketing, communications and
promotions.
These include planning, creating and producing the
advertisement, media selection, research and so on.
A full service agency may also take non-advertising services such
as strategic marketing planning, sales training, package design,
sales promotion, event management, trade shows, publicity and
public relations.

AD Agency
3. Specialized/ Limited Service Agencies
Some agencies develop a reputation for working only in certain
areas and therefore they are called specialists.
They either specialize in certain functions (creative or media
buying), audiences (minority, youth), industries healthcare,
computers, agriculture, or business-to business communication)
and so on.
There are specialized agencies in all marketing communication
areas, such as direct marketing, sales promotion, PR, events and
sports marketing etc. The specialized agencies do not provide
entire range of advertising services and cater to firms who do not
want to avail of complete range of services.

AD Agency
4. Creative Boutiques
Creative boutique is an agency that provides only creative
services.
These specialized companies have developed in response to some
client’s desires to use only the creative talent of an outside
provider while maintaining the other functions internally.
The client may seek outside creative talent for two reasons:
• He wants an extra creative effort.
• His employees of the in-house agency or the agency that he
has appointed do not have sufficient skills in this regard

AD Agency
Sometimes the full-service agencies may also sub-contract work
to the creative boutiques when they are very busy or want to
avoid adding full time employees to their pay roll.
These boutiques generally perform creative function on a fee
basis.
Example: The ad “Thanda Thanda Cool Cool” was a creative
campaign that made Dermicool an instant hit over the existing
leader Nycil. Its ad agency ‘Mudra’ had created this ad considering
the fact that the consumers value cooling sensation to overcome
the burning sensation caused by prickly heat in summer.

AD Agency
5. Media Buying Agencies
Independent companies that specialize in the buying of media,
particularly radio and television at heavy discounts.
The task of purchasing advertising media has grown more
complex, so media buying services have found a niche by
specializing in the analysis and purchase of the advertising time
and space. Agencies and clients generally develop their own
media plans and then hire the buying services to execute them.
Media buying agencies purchase large amount of time and space,
they receive huge discounts and can save the small agency’s or
client’s money on media buying.
They are paid a fee or commission for their work.

AD Agency
6. Virtual Agencies
A recent phenomenon, it operates like a group of freelancers,
abandoning conventional office space.
In a virtual agency, staff members do not have fixed offices; they
work at home, in their cars, or at their clients’ offices.
7. Healthcare Communications Agencies
Agencies that specialize in marketing and communications for the
Healthcare and Life science industries.
Follow the guidelines mandated by the Food and Drug
Administration (FDA) and PHARMA. They indulge in promotional
education (promotion of a product or therapy) or continuing
medical education (for physicians and medical professionals).

AD Agency
8. Search Engine Agencies
Recently, Pay Per Click (PPC) and Search Engine Optimization
(SEO) firms have been classified as ad agencies.
This is because they create media and implement media
purchases of text or image based ads.
An SEO service provider utilizes the practice of search engine
optimization to increase the amount of visitors to a Web site by
obtaining high-ranking placements in the search results page of
the search engines.

AD Agency
9. Social Media Agencies
Social media agencies offer creation and building of innovative
ways for a business to crack into social media channels.
They list out the type of content and the publishing frequency fit
for the business.
These agencies specialize in the promotion of various brands
through the popular social media platforms like social networking
sites, blogs etc.

Measures for Gaining Clients in AD Agency
◎ Referrals
◎ Solicitations
◎ Presentations
◎ Public Relations
◎ Brand Image and Reputation
◎ Deliver Timely Results
◎ Share Previous Work
◎ Transparency
◎ Regular Feedback
◎ Respect the Clients

Reasons for Loosing Clients
◎ Poor Performance or Service
◎ Poor Communication
◎ Unrealistic Demand by the Client
◎ Personnel Changes
◎ Financial Instability
◎ Changes in Size of the Client or Agency
◎ Conflicts of Interest
◎ Changes in the Client’s Marketing Strategy
◎ Declining Sales
◎ Conflicting Compensation Philosophies

Evaluation Criteria for Selecting AD Agency
◎ Range of Services Offered
◎ Product/ Service Features
◎ Strategic Thinking
◎ Location
◎ Compatibility
◎ Expertise
◎ Creativity
◎ Budget
◎ Technologically Advanced
◎ Previous Accounts Handled
◎ Flexible

Media
The term media is plural form of medium.
In advertising terms, media are the collective communication
outlets or tools used to store and deliver information or data.
It is either associated with communication media, or the
specialized mass media communication businesses such as print
media and the press, photography, advertising, cinema,
broadcasting (radio and television).
Media is thus a vehicle by which advertisers convey their
messages to a large group of prospects and help to close the gap
between the producer on one end and consumer on the other.

New Media
New media is the media that are interactive and integrate
computers with multimedia. Examples: websites, mobile apps,
virtual worlds, multimedia, computer games, human-computer
interface, computer animation etc.
They are often characterized as highly interactive digital
technology.
New media is very easily processed, stored, transformed,
retrieved, hyper-linked and, easily searched for and accessed.
The rise of new media has increased communication between
people all over the world and the Internet. It has allowed people
to express themselves through blogs, websites, videos, pictures
and so on.

New Media Options
1. Blogs: A blog (short for Web log) is a regularly updated
website or a web page, that is created by an individual or
small group and written in an informal or conversational style.
It is like a diary that is publicly accessible.
2. Microblogging: Microblogging is the practice of posting small
pieces of digital content, which could be text, pictures, links,
short videos, or other media on the Internet.
3. Social Media: Social media focuses on creating, sharing and
exchanging information, ideas and content in online networks
and communities. Highly interactive, social media is a form of
new media that relies heavily on the participation of users to
provide value.

New Media Options
4. Risk Free TV: Risk Free TV helps produce a response driven
television commercial and then advertises the firms product
or service on various TV stations at no cost. Marketers then
pay on a pre-agreed cost per lead generated. This is a form of
low-risk, performance based advertising.
5. Myst Media: Digital Signage is a high growth advertising
category with screens appearing within increasing point of
sale and other populated locations. Myst Media, commonly
used in foreign countries, offers marketers the opportunity to
reach huge consumers. Screens are placed in high traffic areas
such as next to the ATM, shop entrances, airports etc. to
advertise.

New Media Options
6. Contagious Network: Word of mouth is a proven marketing
method which can now be driven through various social
media platforms. With word of mouth, brands can effectively
change consumer attitudes and behaviour and influence their
purchase decisions.
7. Napkin Ad: Ambient advertising is about placing ads on
unusual items or in unusual place where one normally doesn’t
see an ad. Napkin Ad is one such example where they print
and distribute branded luncheon napkins throughout a
growing network of food outlets within major food court and
shopping centre locations.

New Media Options
8. Airborne Advertising/ Aerial Media: It is aimed at creating
maximum ‘sky-high’ brand impact through flying banners and
aerial advertising. Flying banners can be targeted directly to
key events or locations while skywriting displays can be visible
from a long distance.
9. Online Newspapers: Online newspapers blend multiple types
of media and are easily accessed and searched. Users can also
interact with some online newspapers via a comment feature.
Online newspapers — along with social media and other
forms of new media — are a major part of why traditional
newspapers are shifting to digital form.

New Media Options
10. Virtual Reality: Virtual reality technologies simulate an
environment along with the user’s physical presence and
sensory experience. Commonly, the user experiences virtual
reality through a special headset or on a computer screen. In
virtual reality, users can cycle through the Himalayas, consider
purchasing real estate that hasn’t been built yet, see a 360-
degree film or train as a sniper. All virtual reality delivers a
highly interactive, immersive experience that places the user
in a lifelike or fictional environment.
11. Digital Games: Digital games are noteworthy for how they
build interaction and community. More than half of the most
frequent gamers play with others, and around half feel that
video games help them connect with friends.

New Media Options
12. JetMax Media: This helps to reach the targeted business and
leisure airline passengers through a range of in-flight
advertising options including aircraft wraps, locker ads, in-
flight TV and digital itinerary media. JetMax Media works with
international airlines and allows marketers to geographically
target their advertising reach.
13. Digital Media: Digital media is digitized content (text, audio,
video, and graphics) that can be transmitted over the internet
or computer networks. Digital media can be created, viewed,
distributed, modified and preserved on digital electronics
devices.

Forms of Digital Media
◎ Rich Media: Form of digital content that deviates from normal
text and static images to offer end users a more enhanced and
engaging experience.
◎ Paid Media: Type of media that people think of when they
think of advertising. E.g. Coupons people get in mailbox,
commercials they watch on TV, ads they hear on FM stations,
banners they see on their Facebook feeds etc.
◎ Earned Media: Also referred to as “online word of mouth”
Earned media is User Generated Content. It could be an
endorsement, a review, a shared blog post, a comment on a
social networking site, or a word of mouth interaction about a
brand’s content.

◎ Owned Media: A website, blog, Facebook page, Twitter
account, Instagram stream set up by a company. It differs from
paid media because the brand controls every aspect of the
marketing process.
◎ Electronic Billboard: A digital/ electronic billboard is a billboard
that displays digital images that are changed by a computer
every few seconds.
◎ Advertorial Ad: The word advertorial is a blend of the words
“advertisement” and “editorial.” Advertorials are
advertisements that would earlier appear in the media like
magazines and newspapers.

◎ Affiliate Marketing: A type of performance-based marketing in
which a business rewards one or more affiliates for each visitor
or customer brought by the affiliate’s own marketing efforts. It
is basically an online marketing channel where an advertiser
pays a blogger to promote the advertiser’s products or services
on the blogger’s site.
◎ Mobile Media: This includes digital advertisements through
mobile phones such as making a direct call to the customers or
passing on information through SMS.

Media Objectives
Reach
Frequency
Continuity
Cost
Weight (total amount of ad required

Criteria for Selecting Suitable Media
◎ Objectives of Firm
◎ Nature of Product
◎ Cost of Media
◎ Reach or Number of People Exposed to the Message
◎ Company’s Advertising Policy and Approach
◎ Type of Buyers
◎ Condition under which Customers are Influenced
◎ Circulation/ Coverage
◎ Repetition or Frequency
◎ Credibility and Image of Media

Criteria for Selecting Suitable Media
◎ Past Experience
◎ Experience of other Companies
◎ Expert Opinion
◎ Type of Advertising Message

Methods of Setting Ad Budget
An advertising budget is the estimate of a company’s promotional
expenditure over a certain period of time.
It is basically the amount that the company is willing to allocate to
accomplish its marketing objectives over a period of time.
There are several methods that are used for setting advertising
budget.
Depending upon internal situations of the company, the suitable
method is followed.
Every method has its merits, demerits, and applicability.

1. Percentage of Sales Method
It is a commonly used method to set advertising budget.
In this method, the amount for advertising is decided on the basis
of sales.
Advertising budget is specific percent of sales. The sales may be
current, or anticipated. Sometimes, the past sales are also used as
the base for deciding on ad budget.
For example, the last year sales were Rs. 3 crore and the company
spent Rs. 300000 for advertising. It is clear that the company has
spent 1% of sales in the last year.

Merits of Percentage of Sales Method
• It is simple and easy to administer method
• It is based on sales volume. Therefore, cost of advertising can
be offset against profits earned from the sales. It satisfies
financial management
• It encourages marketing manager to think in terms of
relationship between promotional costs, selling price, and
profits per unit
• It maintains competitive parity. All firms in the industry spend
approximately the same percentage of sales for advertising.
• It keeps the company in constant touch with the sales target to
be achieved.

Limitations of Percentage of Sales Method
• In absence of specific guidelines, it is not possible to decide the
appropriate percent of sales. It lacks a scientific base.
• Long-term planning is not possible because a long-term sales
forecasting seems difficult.
• It neglects other objectives of advertising. Only sales are given
priority. It doesn’t consider the need of advertising.
• Stage of product life cycle is not considered.
• It is, to some extent, inflexible.
• It is assumed that only advertising affect sales. It is erroneous

2. Objectives and Task Method
This is the most appropriate ad budget method for any company.
It is a scientific method to set advertising budget.
The method considers company’s own environment and
requirement.
Objectives and task method guides the manager to develop his
promotional budget by:
• Defining specific objectives
• Determining the task that must be performed to achieve them,
• Estimating the costs of performing the task.

Merits of Objectives and Tasks Method
• It is an accurate method.
• Funds are used for tasks to be accomplished.
• It brings proper returns so advertising becomes an investment
and not an expense.
Limitations of Objectives and Task Method
• It requires help of experts.
• It can cost a huge expense to the company if the campaign
fails.

3. Competitive Parity Method
Competition is one of the powerful factors affecting marketing
performance. This method considers the competitors’ advertising
activities and costs for setting advertising budget. The advertising
budget is fixed on the basis of advertising strategy adopted by the
competitors.
Thus, competitive factor is given more importance in deciding
advertising budget. For example, if the close competitors spend
3% of net sales, the company will spend, more or less, the same
per cent for advertising. Here it is assumed that “competitors or
leaders are always right.”

Merits of Competitive Parity Method
• Competition is regarded as important determinant of
advertising budget.
• It enables the company to monitor the advertising and
marketing strategies of the competitors.
• There are less chances of promotional wars

Limitations of Competitive Parity Method
• In case of a new product, the method fails to guide for deciding
on advertising budget.
• It is difficult to know in which stage of life cycle the product of
close competitor is passing through.
• Company differs in terms of sales, profits, challenges, finance
etc. To follow competitors directly may not be correct.
• Advertising is not the sole factor that affect the sales.
• In case, when there are many competitors, it is difficult to
decide as to whom the company should follow.
• It is not applicable to a market leader

4. Affordable or Fund Available Method
This is, in real sense, not a method to set advertising budget. The
method is based on the company’s capacity to spend. It is based
on the notion that a company should spend on advertising as per
its capacity. Company with a sound financial position spends more
on advertising and vice versa.
Under this method, budgetary allocation is made only after
meeting all the expenses. Advertising budget is treated as the
residual decision. If fund is available, the company spends;
otherwise the company has to manage without advertising. Thus,
a company’s capacity to afford is the main criterion.

Merits of Affordable or Fund Available Method
• It is simple and objective method
Limitations of Affordable or Fund Available Method
• The method completely ignores the role or need of advertising
in the competitive market environment.
• In the long run, it leads to uncertain planning as there is no
guarantee that the company will spend for advertising.
• Except company's financial position, other factors like
company’s need for advertising, consumer base, competition,
and so forth are ignored.

5. Percentage of Profit Method
Companies set their ad budget on the basis of profits. They
calculate certain percentage of their current or forecasted profits.
Advantages:
• It is easy and simple to calculate
• It is an objective method
Limitations:
• Forecasted profit may not be the actual one.
• Any change in factors of business environment may affect the
profitability of the company

6. Expert Opinion Method
Many marketing firms follow this method. Both internal and
external experts are asked to estimate the amount to be spent for
advertisement for a given period.
Experts, on the basis of the rich experience on the area, can
determine objectively the amount for advertising. Experts supply
their estimate individually or jointly.
Along with the estimates, they also underline certain
assumptions.
Internal experts involve company’s executives, such as general
manager, marketing manager, advertising manager, sales
manager, distribution manager, etc.

Whereas external experts involve marketing consultants, dealers,
suppliers, distributors, trade associations, advertising agencies,
and other professionals related to the field.
Marketing consultants and advertising agencies provide such
services on professional basis.

Advantages of Expert Opinion Method
• The estimates tend to be more balanced as various executives
and experts are involved.
• The budget is more accurate and realistic because the internal
executives are well aware of company’s strengths and
weaknesses.
• It is the only option when a company is new, having no past
experience.
• External experts tend to be more neutral as they are external
to organization.

Limitations of Expert Opinion Method
• It is not a scientific method. Personal value, experience, and
attitudes play vital role.
• It is difficult to fix responsibility of the final estimates as many
experts contribute to budget estimates.
• External experts are not fully aware of the company’s
marketing situations.
• When more internal experts are involved, it may deteriorate
relation due to possible conflicts or lack of consensus.
• There is possibility of prejudice or bias
• All opinions, right or wrong, are given equal importance

7. Arbitrary Allocation
The arbitrary allocation method is completely dependent on the
management’s discretion and hence has no theoretical basis.
So ultimately the decision depends on the psychological and
economical build-up of the people in the management and not on
the market requirements.
It is thus understood that that under this method, the manager
believes some money must be spent on advertising and
promotion and that is why he picks up an amount, which has no
logical explanation.

Advantages of Arbitrary Allocation
• This method does not have any obvious advantages as such but
it is a method that is easy and quick.
• Can be used by managers who have no experience of setting
budget.
Limitations of Arbitrary Allocation
• There is no systematic thinking
• There are no objectives set
• The basic concept and purpose of advertising and promotion is
ignored.

8. Unit of Sale Method
Consumer durable firms make use of this method as a variant on
sales percentage.
While it mostly works out same as a sales percentage, here the
firm puts an amount of advertising expenses on the unit as add
on.
This method may also be referred to as the fixed-sum-per-unit-of
product method.
It is based on the premise that a specific amount of advertising is
required for marketing each unit.

Advantages of Unit of Sale Method
• It is simple method.
• This method is very useful specially in case of advertising of
specialty goods with higher prices.
Limitations
• This method might not prove efficient for consumer goods of
lower price.
• It is an unreliable method in case of fashion products as the
market is more dynamic.

9. Return on Investment (ROI)
In the ROI budgeting method, advertising and promotions are
considered investments.
In other words, investments in advertisements lead to certain
returns. Like other aspects of the firm’s efforts, advertising and
promotion are expected to earn a certain return.
The ROI method may be considered as an ideal method of setting
advertisement budget. But in realty it is rarely possible to assess
the returns provided by the promotional effort - at least as long as
sales continue to be the basis for evaluation.

10. Historical Method
In this method the previous year’s advertising budget is adopted
for the year with an assumption that no change has taken place in
the market.

References
1. Advertising and Promotion, George E Belch, Keyoor Purani, Michael
A Belch, Tata McGraw-Hill Education
2. Marketing Management: The Millennium Edition, Kotler. P, Prentice
Hall
3. Sharma, Nagpal, Advertisement and Sales Management, M.Com
Series. Vipul Prakashan
4. Nagpal, Sharma, Advertising, BMS Series, Sheth Publication
5. Nagpal, Sharma, Integrated Marketing Communication, BMS Series,
Sheth Publication
6. https://www.trinityp3.com/2012/06/12-innovative-media-options-
you-may-not-see-proposed-by-your-media-agency/

THANK YOU
www.linkedin.com/in/dr-parveen-kaur-nagpal-82965b15

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