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Chapter 11
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Objectives and Budget
Theoretical Background of Budget Setting
Budgeting Approaches
Allocation of the Budget
Stretching the Budget
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Objective setting is a very important step andmore importantly is influenced by thelimitations of the budget.
The advertising budget decision is not a one-time responsibility because every year thefirms have to formulate new objectiveskeeping pace with ever dynamic and
changing market situations
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How much would be the advertising input in
order to achieve agreed marketing objectives?
How much would be the amount of moneyone can afford to spend on advertising andstill achieve the agreed profit objective?
How much would be the apportionment ofthe total advertisement expenses on eachindividual product or product group?
How much would be the advertising budgetallocation on new products?
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Stages in the life cycle
Market share and consumer base
Competition and clutter
Advertising frequency
Product substitutability
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Concave-downwardResponse Curve
S-shaped ResponseCurve
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BudgetingApproaches
Top-Down Bottom Up
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The Promotion Budget Is Set to StayWithin the Spending Limit
Top Management Sets the Spending
Limit
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Affordable method Arbitrary Allocation Percentage of Salesmethod Percentage of Profits
method Unit of Sale Method Historical Method Competitive Parity
Method
Return on Investment(ROI)
Vidale and Wolfesmodel The compromise
model John Little model Total Group Budget Operational Modeling Composite Method Incremental ConceptApproach toAdvertisementBudgeting
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Marlboro cigarettes wereintroduced in the 1920s. Thebrand share was only one percent in the early 1950s. Thecompany invested heavily inbuilding brand image in 1954(cowboy country) and now thebrand share among youngsmokers is in excess of 60% inthe USA.
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When Glaxo introduced Zantac (Zinetac inIndia), the medication for gastric ulcer, it wasforecasted to gain no more than 10% shareagainst the well-entrenched Tagamet. Glaxo's
investmentdriven campaign helped Zantacachieve more than 50% share and became theleading brand.
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Total Budget
Is Approved
by Top
ManagementCost of
Activities areBudgeted
Activities to
Achieve
ObjectivesAre PlannedPromotionalObjectives
Are Set
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Finalize Communication objectives Determine tasks required Estimate aggregate expenditures Monitor Reevaluate objectives
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The major advantage of the objective andtask method is that the budget is developedfrom the bottom to up, which is a proper andrational managerial approach. The major difficulty that confronts planners isto determine which are those specific tasksrequired and the costs associated with each.
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Allocating to IMC Elements Client/Agency Policies Market Size Market Potential Market Share Goals
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Regional buys Ad discounts
Unutilized space
Classified ads Repeat ads
Co-operate
Barter