The Economics of Advertising
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Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
The Economicsof Advertising
Chapter 12
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
2
The Economics of Advertising
12.1 Advertising and the Economy12.2 Financial Planning for Advertising12.3 Factors Affecting the Advertising Budget
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
3
12.1 Advertising and the EconomyGoals
Identify economic factors that affect advertising.Describe how advertising stimulates the economy.
Termspurchasing powercost of livingdiscretionary incomeinflationrecessiongross domestic product (GDP)value
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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The Economic Environment
Consumers’ incomesPurchasing powerInflationRecession
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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Advertising Stimulates the Economy
Helps grow the gross domestic productIncreases competitionAdds value to products and servicesPlays a role in the recovery from a recessionGenerates jobs that have a positive effect on
economic growthFunds a diverse, media landscapePlays an essential role in funding sporting events
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
6
12.2 Financial Planning for Advertising
GoalsExplain strategies used for setting the advertising budget.Describe the financial reports a business can use for planning and
operating the company.Terms
percentage-of-sales methodcompetition-matching methodshare of voiceobjective-and-task methodmarket response modelincome statementbalance sheet
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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Setting the Budget
Percentage of salesCompetition matching (market share)Objective and taskResponse model
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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The Accounting of It All
Income StatementRevenue − Expenses Profit or Loss
Balance SheetAssets Liabilities + Owner’s Equity
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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Income Statement
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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Balance Sheet
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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12.3 Factors Affecting theAdvertising Budget
GoalsDescribe factors that affect the advertising
budget.Determine whether advertising spending
generates brand awareness.Terms
commission systemfee systemincentive-based system
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
12
Budgeting Considerations
Target marketMediaGeographyProduct life cycleAdvertising agency compensation
Advertising and Sales Promotion
©2013 Cengage Learning. All Rights Reserved.
CHAPTER 12
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The Advertising Costs ofBrand Awareness
The sales methodThe trial-and-error methodThe awareness/preference methodShow-of-interest methodThe readership/viewership methodThe anecdotal method
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