Transcript Budgeting
Budgeting Getting it Right Chapter 6 Decisions Decisions • Objectives • • • • Advertising Budget Media Selection Media Strategy Creative/Message • Budget Control tool, planning, accountability Advertising Budget • How much money to spend • Budget distribution across Promotional tactics • Four Main Methods: – Percentage of Sales – Peckham’s Formula – Competitive Parity – Objective and Task Percentage of Sales A2 = f(S1) A2 = total advertising dollars for period 2 f = a percentage figure S1 = sales for period 1 (previous period) • • • • • Using past sales to determine future promotion $$ Doesn’t allow for emergency adjustment Used to compare spending ratios across companies Doesn’t consider objectives Limiting Percentage of Sales (2) A2 = f(S2) A2 = total advertising dollars for period 2 f = a percentage figure S1 = sales for period 2 (forecast) • • • • Based on “affected” sales period Still only based on sales Good initial base allocation Doesn’t consider objectives Peckham’s Formula • Relationship between sales and advertising $$ • Applicable in certain categories – Correlation between SOV and SOM • SOV = (1.5)SOMdn • Based on 18yrs of sales and advertising data • Only for new products – Results cannot be generalized Competitive Parity • Ad $$ as a proportion/share of product’s market share • Establish a share of the total ad $$ for all products of the category – SOV = SOM • Useful in planning and control • Provides a yardstick – Used in stable markets • Doesn’t apply to all products or categories • Established brands require less SOV Objective & Task • Used by majority of advertisers • Relates specific tasks to the dollars that will be spent • Doesn’t consider relationship between shortterm and long-term effect of promotion • Requires clear objectives and reliable estimations of audience response Other “Methods” • Historical – Based on previous year – Adjust for inflation – Objectives are irrelevant • All you can afford – “whatever is left over” – Lack of value to promotion Recent Trends • Shift in Budget allocations – Digital media • Declining in traditional media • Increasing in digital media – Cable and Spanish media on the rise • Increased ROI measurement of brand equity • Increased accountability – Measurable results and investment Facebook Growth Projections Q1 2012 vs. Q1 2011