2. Why Ad’mt Budget ?
Many companies are spending a lot of money
on sales promotion than on media advertising.
The budget allocation depends on number of
factors including
• the campaign,
• the market
• competitive situation, and
• the brand’s stage in its life cycle.
3. BUDGET
A budget is generally a list of all planned
expenses and revenues. It is a plan for saving
and spending. In other terms, a budget is an
organizational plan stated in monetary terms.
4. The purpose of budgeting is to:
• Provide a forecast of revenues and
expenditures
• Enable the actual financial operation of the
business to be measured against the forecast.
5. Establishing the Budget
The size of firms advertising and promotions
budget can vary from a few thousand dollars
to more than a billion.
6. • When the companies like Ford, Procter &
Gamble and General motors spend over 2
billion dollars per year to promote their
product, they expect to accomplish their
objective
7. • . One of the most crucial decision facing the
marketing manager is how much to spend on
the promotional effort.
8. Theoretical issues in budget
setting
1. Marginal analysis
2. Sales promotion model
a. The concave-downward function.
b. The S-shaped response function.
9. Marginal analysis
As the as advertising/promotional efforts
increase, sales and gross margins also
increases to a point
Profits are the difference between gross
margin and promotional expenditure. The
optimal expenditure level is the point where
marginal cost equals the marginal revenue
they generate.
Profit = gross margin – promotional expenditure
11. Assumptions
• Sales are direct result of the advertising and
promotional expenditures and this effect can
be measured.
• Advertising and promotion are solely
responsible for sale.
12. Sales Response models
Concave –downward function:-
• It states that as the amount of advertising
increases, its incremental value decreases.
According to this model the effect of
advertising quickly diminish.
Budgeting under this model suggest that fewer
advertising dollars may be needed to create
the optimal influence on sales.
13. S-shape response curve
This advertising model suggest a small
advertising budget is likely to have no impact
beyond the sales that may have been
generated through other means.
15. Top down budgeting
• Top management sets the spending limit.
• Promotion budget set to stay with in spending
limit
16. Top-down methods
• Affordable method
• Arbitrary allocation
• Percentage of sales
• Competitive parity
• ROI
17. Bottom- up budgeting
• Promotion objectives are set
• Activities needed to achieve objectives are
planned
• Costs of promotion activities are budgeted
• Total promotion budget is approved by top
management
18. Bottom – up methods
• Quantitative models
• Objectives and task method
19. Factor affecting the budget allocation
• The extent to which risk taking is tolerated
• Managerial judgment
• Use of quantitative tools
• Brand differentiation stratergy
• Brand equity
20. THE END …
is not good change the budget
When times get tough, the advertising and
promotional budget is the first to be cut, even
though there is strong evidence that exactly
the opposite should occur. A new budget is
formulated every year, each time a new
product is introduced, or when either internal
or external factors necessitate a change to
maintain competitiveness.
21. “Budget Means planning
the future expense .
so plan(Budget) your future
and live frugally(if it gives good to
you)”
Editor's Notes
the concept of marginal analysis ., as advertising/promotional efforts increase, sales and gross margins will also increase to a point and then level off. MC=MR The assumption that sales are a direct measure of advertising and promotions efforts, and the assumption that sales are determined solely by advertising and promotions
CPM (Cost Per Mille) or CPT (Cost Per Thousand Impressions) is when advertisers pay for exposure of their message to a specific audience. " Per mille " means per thousand impressions, or loads of an advertisement. However, some impressions may not be counted, such as a reload or internal user action. CPV (Cost Per Visitor) is when advertisers pay for the delivery of a Targeted Visitor to the advertisers website. CPV (Cost Per View) is when advertisers pay for each unique user view of an advertisement or website (usually used with pop-ups, pop-unders and interstitial ads). CPC (Cost Per Click) or PPC ( Pay per click ) is when advertisers pay each time a user clicks on their listing and is redirected to their website. They do not actually pay for the listing, but only when the listing is clicked on. This system allows advertising specialists to refine searches and gain information about their market. Under the Pay per click pricing system, advertisers pay for the right to be listed under a series of target rich words that direct relevant traffic to their website, and pay only when someone clicks on their listing which links directly to their website. CPC differs from CPV in that each click is paid for regardless of whether the user makes it to the target site. CPA (Cost Per Action or Cost Per Acquisition) or PPF (Pay Per Performance) [3] advertising is performance based and is common in the affiliate marketing sector of the business. In this payment scheme, the publisher takes all the risk of running the ad, and the advertiser pays only for the amount of users who complete a transaction, such as a purchase or sign-up. This model ignores any inefficiency in the seller's web site conversion funnel . The following are common variants of CPA: CPL (Cost Per Lead) advertising is identical to CPA advertising and is based on the user completing a form, registering for a newsletter or some other action that the merchant feels will lead to a sale. CPS (Cost Per Sale) , PPS ( Pay Per Sale ) , or CPO (Cost Per Order) advertising is based on each time a sale is made. [4] ECPM: Effective CPM or ECPM calculated through other conversion events such as Cost per Clicks, Cost per Downloads, Cost per Leads etc. for example when an advertiser getting $2 per download and for 100,000 impressions you received 10 downloads worth $20, in this case your effective CPM or ECPM will be 2*20*1000/100,000= $0.4 [5] Fixed Cost: Advertiser paying fixed cost for delivery frame by campaign flight dates without any relevance to performance [6] Cost per conversion Describes the cost of acquiring a customer, typically calculated by dividing the total cost of an ad campaign by the number of conversions. The definition of "Conversion" varies depending on the situation: it is sometimes considered to be a lead, a sale, or a purchase. [ edit ] Privacy
Brand equity is a phrase used in the marketing industry to try to describe the value of having a well-known brand name , based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products with a less well known name, as consumers believe that a product with a well-known name is better than products with less well known names. [1] [2] [3] [4] Another word for "brand equity" is "brand value".
