What has been discussed here shows us the many ways that might be taken when one determines the marketing, advertising, and media budget size. As you’ve might found out, there is not any scientifically way to determine the budget size and no one can tell you if you do it in that way you will be successful and this is one of the beauties of disciplines which you can’t be sure always and the uncertainty is what you face always.
Although what has stated above, it’s advisable to determine the budget size by weighting number of factors and this factors are discussed briefly below. It’s worth mentioning that what has been discussed here are some approaches that many have been taken as a starting point. Such a starting point is showing the range of your final budget size and won’t determine the actual size of your budget so you have to consider some factors and weight them according to your own industry and market situation.
Due to Armani Media Agency proficiency in advertising and media world, you would see here some factors that you have to consider them as you’ve decided to determine you’re the expense of your future advertising campaign. Factors in determining the size of an advertising budget are listed here:
1. Assessing the task of advertising: This means you have to know the role which advertising is to play. It’s reasonable to know that advertising roles merely as a selling job or will be added to other marketing mix elements such as reduced prices or sales promotion. In this example, the former asks for a bigger budget size.
In addition, it’s important to know the power of advertising to sell a brand. Some brands aren’t sensitive to advertising and the reason might be lacking the unique sales proposition or the difficulty of being creative in presenting the main idea in printed or broadcast media.
2. Long- and short-term goals: The goals set for advertising will affect your budget size. In other words, the budget allocated to advertising has to be treated as an investment when the goals are defined as long-term goals. In this situation, your final goal might be somewhat improving your brand image and this will be met in a long-term advertising program. In contrast, short-term goals such as immediate sales ask for advertising as an expense and this kind of goals will be treated in a different way.
The relationship between goals and the advertising of the company will affect to some degree the amount of your budget. Many perceive this relationship in different ways, so no general principle can be extracted.
3. Profit margins: There is a consensus that when the profit margin is high so the advertising budget has to be high. This is telling you might want to expend more on your advertising but there is no more money to be spent. Nonetheless, there’s an ironic statement which is if you want to increase your profit margin so you have to increase the money going to your advertising programs. In conclusion, the profit margins and advertising budget size depend on each other and whatever you’re planning to do might not be available at the very time that you’re planning to do and these have to be done in a long-term program.
4. Degree of product usage: The products which are used nationwide require more money for advertising than those which usage is limited to a relatively small region. However, some might find it necessary to spend a lot to keep up with heavy competitive spending. Such a situation calls for evaluating the spending in term of advertising expenditure per thousand, not the total expenditure, to eliminate the effect of the market size.
5.Difficulty in reaching target markets: Some products have small and unique markets and in this case, you can’t reach your target by one medium and you have to purchase more media to reach your target consumers although the wasting of your message. Such products will face you with the coverage and composition trade-off and generally, you have to spend more money on your advertising in these cases.
6. Frequency of purchase: Most advertisers and planners believe that if a product has a high frequency of purchase, such as FMCGs, you have to spend more on your advertising campaigns. This is generally true but an exception is when the advertising goal of infrequently purchased brands calls for more spending and the reason is something other than frequency of purchase.
7.Effect of increased sale volume in production cost: Sometimes when your advertising power is high, your advertising will cause a demand that you can’t supply and overcome that demand you have to run new facilities which means more expense by your side. This situation needs a trade-off between cost and benefits which might show you to set a limit or reduce your advertising budget.
8.New product introductions: Almost all believe that the introduction of a new product takes a great deal of additional money to break into the market. How much more depends on the market size, competition degree and desirable quality of the new brand image.
As a rule of thumb, a new brand takes at least one and a half times as much as taken by an established brand. Another guideline is that the share of advertising expenditure for a new product has to be as twice as the anticipated share of the market.
9.Competitive activity: A market with a high competitive expenditure on advertising and sales promotion make it necessary to match or even exceed your main competitors’ expenditures and this is what that one once called it the “trap of advertising”.
Another strategic decision in such situations is to target a limited segment of prospects which is called a “niche market” and make your products or services according to the need of your new target market. The latter strategy might need the same advertising budget as you spend before but there is a change in your marketing strategy.
All said above doesn’t indicate the exact amount of spending on your advertising but serves as decision-making guidelines. Now that you know how you can determine your advertising budget size, it’s time to allocate the budget in a reasonable way which will be discussed in the near future.
Sissors, J. Z., & Barron, R. B. (2010). Setting and Allocation the Budget. In J. Z. Sissors, & R. B. Barron, Advertising Media Planning (pp. 394-412). McGraw-Hill.