Explain the factors that are considered in determining the Advertising Budget

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.

5)  Affordability:

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.