Advertising Budget – BMS Notes

An advertising budget is an estimate of the amount that a business will spend on promotions over a certain time frame. What matters more is the amount of money a business is prepared to invest in order to meet its marketing goals. A business must balance the cost of an advertising dollar against its worth as recognised revenue when developing an advertising budget.

Budgets for advertising are often seen as enormous outlays with hazy returns. Businesses assess the amount of money spent, but they don’t always take the efficacy of that money into account. Managers believe that advertising costs reduce their bottom line. However, advertising budgets should be seen as investments rather than expenses because, when done well, they may provide very positive returns.

Marketing professionals use advertising as a vital tool, and many businesses rely on it to generate revenue and close deals. Numerous Indian businesses invest millions on advertising. But then, the budget is set arbitrarily due to disagreements about how important it is. The goals of advertising are sometimes neglected when budgets are decided upon.

But it’s important to understand that having a strong brand image and boosting sales both depend on having a sufficient quantity of advertising input. Many times, businesses or marketers lament that they must spend money on advertisements because their rivals do. Since then, the significance of advertising has been covered. We shall acquaint the reader with the many planning and operational facets of advertising in this essay.

Setting objectives is a crucial first stage that is, more significantly, impacted by financial constraints. Budget considerations are crucial regardless of the size of the business, since the amount spent on advertising may make the difference between success and failure. Therefore, rather than reducing spending on advertising and other promotional activities when a firm is struggling, it would be wiser to consider alternative, more sensible and doable solutions.

The choice on the advertising budget is not a one-time task since the companies must develop new goals each year to stay up with the constantly shifting and dynamic market conditions. Thus, a new budget has to be created annually, each time a new product is released, or whenever adjustments are required due to external or internal circumstances in order to stay competitive. We shall go more into this topic in this chapter. We’ll look at how to optimise this and how to make the right decisions to repair the budget.

While preparing the advertising In our budget, we look for responses to the following queries:

• To what extent would advertising be necessary to meet predetermined marketing goals?
• What would be the maximum amount of money that could be allocated to advertising while still meeting the predetermined profit target?
• How much would the entire cost of advertising be allocated to each individual product or group of products?
• What would be the amount allotted to new product promotion in the budget?
• Selecting the advertising budget

There are five distinct aspects to take into account while determining the advertising budget.

Life cycle stages

As seen here, various phases of the product life cycle have distinct needs for advertisements.

(a) The introduction stage: To increase awareness among early adopters and the trade, new items usually get substantial advertising expenditures.

(b) Growth stage: The general public’s increased knowledge of consumers encourages consumer trial and boosts sales.

(c) Maturity stage: Using various viewpoints, such as advantages, applications, pricing, etc., ads at this point must differentiate the brand positioning. As a percentage of revenue, established businesses often get smaller advertising expenditures.

(d) Decline stage: Only the amount required to keep devoted clients will be kept in the budget at this point.

Market share and customer demographic

Products with a large market share often need to spend less as a proportion of sales in order to keep their share. On a cost per impression basis, expanding the market size is a necessary step towards gaining market share. Reaching customers of a popular brand is less costly than reaching customers of a low share brand.

rivalry and clutter

Brands need to spend more on advertising in order to stand out in a crowded market with plenty of rivals.

Regularity of advertising

The amount of money allocated to advertising is significantly influenced by the quantity of times that customers must hear the brand’s message.

Product interchangeability

To create a unique image, brands in a commodity class like booze, soft drinks, and cigarettes need to run a lot of advertising. Advertising is particularly significant when a company provides distinctive physical attributes or advantages