ADVERTISING BUDGET

CHAPTER-1ADVERTISING BUDGET

1.1 Introduction:The ultimate objective of most advertising is to sell products or services. When a company or an institution engages in communication with its various publics, it may have some different immediate goal, such as clarifying information about the use of a product, attracting potential investors by sharing corporate goals, or using public relations communication to solidify the companys public image. It is important to recognize, however, that ultimately a companys success is a function of its growth in sales and prots, and most of that growth will be fueled by advertising and marketing communications. Companies cannot base their budgeting decisions on recent successes and assume that continued investment in advertising is not necessary. An example of this is the decision Pepsi had to make in 2008 to increase overall demand in the carbonated soft-drink market and to solidify its brands market share. The successful campaign by BBDO that had made Pepsi the choice of a new generation was not enough to stop the overall sales declines for carbonated soft-drinks in 2008; the loss of 3% to 4% of the market was affecting the Pepsi brand and the company believed it was necessary to stem that decline while at the same time, fortifying their brands. For that reason, in a bold move, Pepsi decided to invest $1.2 billion over three years in a complete packaging, merchandising, and marketing overhaul of its soft drinks. Determining an advertising budget is an old challenge. But, as media choices have become more numerous and the noise in the marketplace has increased, the budgeting decision has grown increasingly difcult. This chapter explores some traditionally popular advertising budgeting techniques as well as the new challenges facing advertising managers when dealing with the allocation of budgets for advertising efforts. The relationship between advertising objectives and budget decisions is a vital one. The size of the advertising budget, the selection of media, and the media strategy to be used as well as the creative content of the advertising message are all determined by the objectives that the company is pursuing. This paper will consider long-term and short-term advertising objectives as major criteria for budget decisions. The effectiveness of advertising expenditures will also be examined, as budgeting should be considered a control tool as well as a planning ingredient. In fact, one of the most important changes facing advertising agencies and professionals is the increasing demand of accountability for advertising and promotional expenditures by their clients the advertisers. Approvals to spend money in advertising are a function of how well an agency can demonstrate an economic return. Whether that return is translated into additional sales, or in an increase in the number of potential customers visiting an advertisers Web site, it is clear that agencies must be able to provide their clients with much more precise tools to measure the effectiveness of their advertising dollars.

1.2 Meaning of Advertising Budget:Budget is quantitative expression of future plan of activities. It is a future plan of activities expressed in terms of rupees. lt is prepared for a xed period of time. Advertising budget is a nancial document that shows the total amount to be spent on advertising and lists the way this amount is to be allocated. lt is a translation of advertising plan into money to be spent on advertising. It is an estimation of total amount to be spent on advertising during a given period of time for achieving marketing objectives. It involves allocation of a portion of total marketing resources to advertising functions of a firm. An advertising budget shows how much amount is to be spent on promotional efforts and how this amount will be allocated among different media, sales territories, and selling-activities etc. It states the proposed advertising expenditure and serves as a decision making tool for the management while allocating available funds to the various advertising functions and related activities of the company.Advertising budgets differ from company to company. Some companies spend large amount on advertising, while there are companies who spend very less amount. Generally companies dealing in consumer goods and having large market size spend heavily on advertising. While companies dealing in industrial goods generally invest a larger amount on personal selling than on advertising companies with large market-size allocate more amount for ad-budget, while companies with small market-size have small ad-budget. Spending on ads by competitive firms also affect the ad-budget. If competitive firms are spending a large amount then company has to spend large amount on advertising so as to save its market share. Finance available with advertiser also affects the ad-budget size. If more funds are available with company then it can afford large ad-budget. Various methods are used to determine the size of ad-budget viz. percentage of sales-method, competitive parity method, objective and task method, affordable method return on investment method etc.Advertising budget affects the selection of various components of media-mix. The selection of media depends on the amount of advertising budget. If size of advertising-budget is large, then costly media like T.V., can be selected and if size of ad-budget is small, then local and cheaper media like cable network. regional newspaper can be selected.

1.3 Definitions:The advertising budget of a business is typically a subset of the larger sales budget and, within that, the marketing budget. Advertising is a part of the sales and marketing effort. Money spent on advertising can also be seen as an investment in building up the business.An estimation of a company's promotional expenditures over a period of time. An advertising budget is the money a company is willing to set aside to accomplish its marketing objectives. When creating the advertising budget, a company must weigh the trade-offs between spending one additional advertising dollar with the amount of revenue that dollar will bring in as revenue.Companies can determine what level to set their advertising budget several different ways, each of which has its positives and negatives. A business can set its budget as a percentage of sales, at the same level as its competitors, as the amount required to meet a certain objective, as the entirety of its profits or as a function of the units of product it wants to sell among others.In order to keep the advertising budget in line with promotional and marketing goals, a business owner should start by answering several important questions:Who is the target consumer? Who is interested in purchasing the product or service, and what are the specific demographics of this consumer (age, employment, sex, attitudes, etc.)? Often it is useful to compose a consumer profile to give the abstract idea of a "target consumer" a face and a personality that can then be used to shape the advertising message.What media type will be most useful in reaching the target consumer?What is required to get the target consumer to purchase the product? Does the product lend itself to rational or emotional appeals? Which appeals are most likely to persuade the target consumer?What is the relationship between advertising expenditures and the impact of advertising campaigns on product or service purchases? In other words, how much profit is likely to be earned for each dollar spent on advertising?Answering these questions will help to define the market conditions that are anticipated and identify specific goals the company wishes to reach with an advertising campaign. Once this analysis of the market situation is complete, a business must decide how best to budget for the task and how best to allocate budgeted funds.

CHAPTER-2FACTORS AFFECTING ADVERTISING BUDGET

Before finalizing the advertising budget of an organization or a company, one has to take a look on the favorable and unfavorable market conditions which will have an impact on the advertising budget. The market conditions to watch out for are as follows: Frequency of the advertisement Competition and Clutter Market Share of the Product Product Life Cycle Stage Funds Media Savings Costs Tasks Aternative Media

2.1 Frequency of the AdvertisementThis means the number of times advertise has been shown with the description of the product or service, in the granted time slots. So here, if any company needs more advertising frequency for its product, then the company will have to increase its advertising budget.

2.2 Competition and ClutterThe companies may have many competitors for its product. And also there are plenty of advertisements shown which is called clutter. The company has to then increase their advertising budget.

2.3 Market ShareTo get a good market share in comparison to their competitors, the company should have a better product in terms of quality, uniqueness, demand and catchy advertisements with resultant response of the customers. All this is possible if the advertisement budget is high.

2.4 Product Life Cycle StageIf the company is a newcomer or if the product is on its introduction stage, then the company has to keep the budget high to make place in the market with the existing players and to have frequent advertisements. As the time goes on and product becomes older, the advertising budget can come down as then the product doesnt need frequent advertising.

2.5 FundsThe amount of money available directly affects your advertising budget. Small businesses typically set aside between 2 and 5 percent of annual revenue for advertising, according to the National Federation of Independent Businesses. A company with annual sales of $300,000 would therefore spend $6,000 to $15,000 on advertising.

2.6 CostsThe cost of buying space or time in the right media also affects your budget. To minimize waste, review the circulation figures and readership information supplied by media owners to find the publication or station that reaches the largest number of your target audience at the lowest cost. If you have appointed an advertising agency, ask its representatives to justify their media recommendations so you get the best value for your money. You will incur charges from your advertising agency for creating and producing advertisements. The more complex the advertisement the higher the cost, so ensure that your agency is not spending money on unnecessary production elements.

2.7 Media saving You may be able to reduce your advertising costs by taking advantage of media discounts. Placing the advertisements at different times or in different positions can save you money. If you are advertising on local radio, for example, compare peak time rates with other rates. Newspapers charge more for premium positions, such as ads on a front page or ads appearing next to a popular editorial. You can also reduce costs by booking a series of ads rather than booking each ad individually. That way you qualify for a series discount.

2.8 Tasks Your advertising tasks affect the size of your budget. If your competitors are spending heavily on advertising, for example, you may have to increase your budget to counter their influence and protect your existing business. If you are introducing new products or entering new market sectors, you may spend more on advertising to ensure a successful launch.

2.9 Aternative media You can make your advertising budget go further by using alternative lower-cost media, such as email or social media, to communicate with customers and prospects. By using those media effectively, you can save money and even cut your budget by reducing your level of advertising.

CHAPTER-3PROCESS OF ADVERTISING BUDGETING

Advertising budget is prepared by advertising manager in consultation with marketing-manager of the company. The advertising budget process involves the following main steps: 1. Setting Advertising Objectives: Before deciding on advertising budget, the advertising manager must be clear about advertising objectives. These objectives should be clearly dened in quantitative terms so that amount of advertising budget can be decided to achieving these objectives. Main advertising objectives can be to achieve the desired level sales, to enhance market share by specic percentage, to increase awareness regarding product and its uses, to develop preference for our product and to convince the customers to buy our product. These objectives will help the advertising manager to determine and to allocate the ad budget.2. Determining Tasks to be performed to Achieve Advertising Objectives: After identifying advertising-objectives, the next step is to determine tasks, activities, strategies, functions to be performed to achieve the advertising objectives. These tasks may include: selection of media, selection of advertising-agency, designing of advertisement copy, deciding frequency of advertisement, timing of advertisement, quantum of space to be taken in print media etc. This requires a good knowledge of various activities of an effective advertising campaign.While determining the activities to be performed the advertiser keeps in mind the activities done last year and activities of competitive concerns.

3. Preparing Advertising Budget: After identifying various activities to be done to achieve advertising objectives, the next step is to find the cost of all such activities. Total cost of all such activities is theamount required for advertising-budget. To keep the budget flexible, certain amount in the form ofprovision for contingencies is added to the total cost. Advertising budget is prepared by advertising manager or marketing manager.4. Approval: After preparing advertising budget, it is sent to top-management through marketing-manager for necessary approval, in large organizations, this proposed ad-budget is evaluated, reviewed and scrutinized by high-powered-budget committee before submitting it to the top-management for the nal approval. Budget committee will ensure that proposed budget will be effective enough to achieve advertising objectives, it will also ensure that all the required activities to achieve advertising objectives have been covered and the rates/cost of various activities are competitive. After approval by budget committee, it is presented before top-management.Top-management will see if the budget is affordable, need based and justified. Top-management can impose ceiling on proposed budget and send it back to budget-committee for necessary review. If it nds the budget justified and within affordable limit, then it will pass the budget.5. Allocation of Advertising Budget: After the budget is approved by the top management, the next step is to allocate it. Allocation means dividing the advertisement budget on different products andactivities. Advertising budget is allocated on various product-lines, product items, media, sales-territories, etc. It involves determining which market, product, promotional element will receive how much of the amount of funds appropriated. Advertising allocation depends upon company's policies, competitors strategies, nature of tasks required to achieve advertising objectives, stage of product life-cycle, market size, company's promotional plans, charges of advertising agency etc. While allocating the advertising budget to different activities, territories, products, the budget should have exibility to accommodate sudden changes in the market, competitors strategies and change in other components of marketing environment. Budget allocation should not be very rigid. Advertising manager should be authorized to make necessary modifications in allocation of advertising-budget.6. Monitor and Control: After allocation of advertising budget, it is essential to have an adequate monitoring and control over it. In controlling, actual expenditure is compared with planned expenditure. In case actual expenditure is more than planned expenditure, then corrective-actions are taken and responsibilities are xed to ensure cost control over advertising-budget. Monitoring and control of ad-budget is necessary to make maximum utilization of funds, to reduce wastage in ad-expenses.

CHAPTER-4BUDGETING METHODS

There are several allocation methods used in developing a budget. The most common are listed below: Percentage of Sales method Objective and Task method Competitive Parity method Increase over Last Years Budget Affordable method Judgment ApproachIt is important to notice that most of these methods are often combined in any number of ways, depending on the situation. Because of this, these methods should not be seen as rigid but as building blocks that can be combined, modified, or discarded as necessary. Remember, a business must be flexibleready to change course, goals, and philosophy when the market and the consumer demand such a change.

4.1 Percentage of Sales MethodDue to its simplicity, the percentage of sales method is the most commonly used by small businesses. When using this method an advertiser takes a percentage of either past or anticipated sales and allocates that percentage of the overall budget to advertising. But critics of this method charge that using past sales for figuring the advertising budget is too conservative, that it can stunt growth. However, it might be safer for a small business to use this method if the ownership feels that future returns cannot be safely anticipated. On the other hand, an established business, with well-established profit trends, will tend to use anticipated sales when figuring advertising expenditures. This method can be especially effective if the business compares its sales with those of the competition (if available) when figuring its budget.There are two ways of establishing an advertising budget according to the percent-of-sales method. The first is to calculate advertising allocations as a fixed percent of past sales. This calculation is done by applying a specific percentage number to the previous year's total sales revenue for a product, a line of products or a whole company. The formula for this calculation is:A2 =f*(S1), where: A2 is the total advertising budget for next year (or period 2) f is percentage figure S1 is sales for period 1 (or last year's sales)Advertising-to-sales ratios are computed by each industry every year by professional advertising organizations.The reason for this practice is to provide a general overview of whether expenditures change over time by industry in response to conditions. Year-to-year comparisons are also reported to provide another measure of relative growth for specific industries.The first budgeting model of advertising-to-sales ratio has some shortcomings. First, the use of past sales to determine future advertising allocations does not seem logical. Advertising is assumed to influence a firm's sales performance, yet the use of past sales to determine future advertising allocations will not take that interdependence into consideration. In addition, such a method the advertising manager to adjust the budget to meet in the marketplace because the only criterion used is the past performance of the firm.The second advertising-to-sales method attempts to eliminate these drawbacks. Instead of basing advertising expenditures on past sales, a forecast future sales is made, and the advertising budget is calculated of that amount. The formula for this model is:A2 = f*(S2), where: A2 is the total advertising budget for next year (or period 2) f is a fixed percentage S2 is the total sales forecasted for next year (or period 2)This second model is an improvement over the previous one because it based its budget calculation on the sales period that will theoretically be affected by the advertising expenditures to be budgeted. However, the model still reflects only one of the possible effects of advertising, its relationship to sales. It ignores all other possible variables that may be influenced by advertising, mainly some of its long-term effects.The advertising to sales ratio is as good a method of budgeting advertising expenditures as a firm makes it. If used to develop a base allocation, which can be modified as the market or firm objectives change, then it is a very good yardstick for budget considerations.Advantages: This is simplest method, as it requires littledecisionmaking. Many companies in India use this method to arrive at a tentative budget appropriation.Disadvantages: This method suffers from a basic drawback in that it does not take into account any specific need of the market situation. Moreover, when past sales are used to arrive at the current years budget, the figure may have more historical value rather than current utility. Advertising leads to sales and the amount of advertising expenditure depends upon the salestarget and therefore, when the percentage of future sales is used the estimates are more realistic.

4.2 Objective and Task MethodThe objective-and-task method of setting advertising budgets is used by the majority of advertisers in the United States. According to this method, a firm will first set objectives for its advertising task. These objectives may include reaching a certain percentage of the population or of prospective consumers, creating awareness of the product among a percentage of the specific market or geographical area, and so on. After these objectives have been set, the firm calculates which media to purchase and at what cost. That cost may be arrived at by deciding what percentage of the total reached by the advertisement and how many times each individual in the population should be exposed to the advertising message. The cost of obtaining this advertising reach and frequency will then be translated into an advertising budget.This approach is more logical than the previous two approaches because it relates specific tasks of advertising to the amount of money being spent to accomplish those tasks. It also relates the theory of advertising effect to the budget decision. For example, if the main goal of advertising is to develop awareness among the public, then fewer exposures per person will be needed than if the objective is to achieve customer preference for the product.The major problem with this approach is that it doesn't fully consider the relationship between short-term and long-term effects of advertising or translate them immediately into a budgeting decision. In addition, although a certain number of exposures may produce a specific effect on the audience, the relationship is not always constant or measurable. Nevertheless, the method is an improvement over the percentage of sales and competitive-parity methods. This method has been refined using different problematical models. Large advertising firms have developed models that they use to formulate budgets in specific product and service categories. This practice illustrates the belief that the memorability and efficiency of advertising will differ by product categories or by geographic or demographic factors.Because of the importance of objectives in business, the task and objective method is considered by many to make the most sense and is therefore used by most large businesses. The benefit of this method is that it allows the advertiser to correlate advertising expenditures with overall marketing objectives. This correlation is important because it keeps spending focused on primary business goals.With this method, a business needs to first establish concrete marketing objectives, often articulated in the "selling proposal," and then develop complementary advertising objectives articulated in the "positioning statement." After these objectives have been established, the advertiser determines how much it will cost to meet them. Of course, fiscal realities need to be figured into this methodology as well. Some objectives (expansion of area market share by 15 percent within a year, for instance) may only be reachable through advertising expenditures beyond the capacity of a small business. In such cases, small business owners must scale down their objectives so that they reflect the financial situation under which they are operating.

Advantages: The objective task approach directs the efforts of manufactures to think through the objective while setting the budget.Disadvantages: There is one problem involved in the use of this method of setting the appropriation and that is: how does one determine just how much advertising and what type of advertising will achieve the stated objectives. Thepresent methods ofresearch do not give a direct link between advertisingexpenditures and achievement of the objectives. Until more sophisticated methods are developedmanagers will have to face this problem of uncertainty while deciding the optimum budget.

4.3 Competitive Parity MethodAnother popular method for setting advertising budgets is the competitive-parity method. This method establishes an advertising budget as a proportion or share of the product or service's market share. The expenditure on advertising for the product is expressed as a share of the total advertising for all products in that category. As an example, if the total advertising expenditure for athletic shoes is $100 million, and the expenditure for Nike is $30 million, Nike would have a 30 percent share of advertising, or 30 percent share of voice.The formula for the calculation of the "share of voice" for a specific product/service is as follows:Asv = Ac + AF, where: Asv is the firm's share of voice AF is the firm's advertising expenditures for the period in question Ac is all competitors' advertising expenditures for the period in questionThe reason for using share of voice as a method for setting advertising budgets is the belief that, in a stable market, a firm's share of voice should be the same its share of market. If a firm were attempting to gain competition, its share of voice should be greater than its share of market, would commonly be the case for new products entering place.The competitive-parity method also focuses on only one of the many variables affecting advertising. The fact that competitors' actions should be one considered when establishing advertising expenditures is undeniable. However, this method ignores other important factors that may affect the advertising allocation. Changes in consumer habits, economic conditions, and the strategic objectives of a firm are some of the forces that should be taken into account.This method does have some advantages. It provides a yardstick for comparing results whenever a product faces a very stable market and enjoys a mature competitive position. As such, it is a useful planning and control tool.An example of the use of competitive-parity spending can be seen in the recent move of some automobile companies. In an article appearing in October 28, 1992, Ford Motor Company and the Chrysler Corporation stated that they planned to increase their advertising spending to reclaim market shares lost to Japanese competitors. Japanese auto advertised very heavily in 1991, and domestic manufacturers believed that in order to recapture their market share they would have to fight back with an increased budget. The advertising expenditures of General Motors, for example, appeared to be very different for the first six months of 1991. General Motors had spent 6 percent less than the previous year, while Toyota spent 11 percent more. Sources from the companies felt Toyota's increased advertising expenditure was responsible for the relative market share of the two companies. In this specific example, competitive-parity method appears to have been the main motivation behind the domestic manufacturers' reaction to competitive spending.The competitive-parity method also takes into consideration the long-term effects of advertising. To establish a stable market share, the competitive-parity method suggests that a firm should maintain a share of voice over a certain period of time. Many leaders in industry believe likewise. Edwin Artzt of Procter & Gamble stated that "advertising is a longer-term investment, and it shouldn't be intruded upon by short-term needs." This statement supports continued expenditures in advertising in spite changes in profits and sales. The expenditures should continue to reflect a position as opposed to a concentration on immediate results.While keeping one's own objectives in mind, it is often useful for a business to compare its advertising spending with that of its competitors. The theory here is that if a business is aware of how much its competitors are spending to advertise their products and services, the business may wish to budget a similar amount on its own advertising by way of staying competitive. Doing as one's competitor does is not, of course, always the wisest course. And matching another's advertising budget dollar for dollar does not necessarily buy one the same marketing outcome. Much depends on how that money is spent. However, gauging one's advertising budget on other participants' in the same market is a reasonable starting point.Advantages: This method could be useful in deciding individual brand ad expenditures. It has the advantage of recognizing the importance ofcompetitorsand ensuresthat the competitorsdo not increase their ad expenditure to a level that affects the advertisers sales.Disadvantages: Firstly,yourobjectivemay be differentfrom that of your competitors. And secondly it assumes that yourcompetitors arespending optimally. It also maintains thepresentmarket position rather than bringing any positive change for the company. If you want to overtake your competitors you may have to spend more than them and spend this money more efficiently.

4.4 Increase over Last Years BudgetThis method involves an increase in preceding years expenditure by a certain percentage to enable afirm to consider increase in advertising cost and to provide for planned growth in sales. Increase in price level of advertising inputs leads to increase in advertising cost. Company may also expect increase in sales and for increased sales, more advertising expenditure will be required. So the company should increase its advertising budget over past years budget. This is a very simple method. But it has certain limitations. 1. Ignores Change in Marketing Environment and Objectives of Advertising: It simply ignores the needs and objectives of advertising. There may be change in marketingenvironmentin comparison to last year like entry of new competitors, change in government .So changed environment may necessitate preparation of entirely new budget. 2. Repetition of Last Years Mistakes: This method simply adds a certain percentage. Hence the errors, mistakes and weaknesses of last years budget are carried forward.

4.4 Affordable MethodWith this method, advertisers base their budgets on what they can afford. Of course, arriving at a conclusion about what a small business can afford in the realm of advertising is often a difficult task, one that needs to incorporate overall objectives and goals, competition, presence in the market, unit sales, sales trends, operating costs, and other factors.Advantages: Conservative managementusesthismethodasitissafeand ensuresthat there is no overspending. New entrepreneurs haveno otheroptionbut to followthis method when they are short of funds.Disadvantages: This method lacks consideration for the objectives of the advertising and how those objectives can best be met. The advertiser may spend less than necessary to achieve a sales target or fail to provide the necessary support to a new or declining brand.4.5 Judgement ApproachIn this method, advertising budget is decided by the experienced managers of the company on the basis of their judgement. Here advertising budget is based on arbitrary thinking of some experiencedmanagers and not based on scientific lines. Overthe years, some managers gain experience and this enablesthem to arrive at appropriate figure for advertising budget by using their judgement. They decide theadvertising budget at a lump sum figure considering all relevant factors like objectives of advertising, reactions of competitors, nature of customers, level of sales, availability of funds, cost of various media,stage in product life cycle etc. This method involves no clerical or statistical work. It is based on theexperience and judgement of experienced managers. So it is also named as Arbitrary method.Advantages: Simple: This method is simple as it involves no clerical or statistical work. Here, advertisingbudget is decided on the basis of judgement of person making the ad-budget. Based on all Factors: In this method, judgement of advertisers is based on all the factors affecting advertising budget. Factors like objectives of advertising, actions and reactions of competitors,reactions of customers, level of sales, availability of funds, cost of media, last years advertising budget etc.are considered in framing ad-budget.Disadvantages: Subjective Method: In this method, ad budget is based on judgement of advertising managers.If advertising managers are not well-experienced then their judgement may go wrong. Biased: This method gives more emphasis on the judgement of a particular person whiledeciding advertising budget. That person may be biased in his thinking and he may sanction very small orvery large amount for advertising which may result in erroneous budget.This method gives very good results if person making budget is unbiased and experienced. Thismethod is very often used by small organizations.

4.6 Marginal-Revenue/Incremental Approach MethodIn this approach advertising budget is decided on the basis of marginal cost and marginal revenue advertising. Marginal cost here means increment in advertising spending. Marginal revenue means incremental revenue because of increase in advertising spending. According to this approach, the firm should increase advertising spending if marginal revenue is more than marginal cost. The marginal cost and marginal revenue should be equal in determining the optimum level of advertising. Any further spending after the level at which incremental costs equal the incremental revenue will be unprofitable. According to profit maximization viewpoint, advertisers may increase the advertising budget to the extent where last rupee spent on advertising is equal to the marginal revenue generated by that last rupee the initial levels spending on advertising does not allow the company to generate enough sales to cover advertising costs. This amount is known as minimum level of advertising. An organization can decide its advertising budget at optimum level of advertising.

CHAPTER-5MEDIA SCHEDULING

Once a business decides how much money it can allocate for advertising, it must then decide where it should spend that money. Certainly the options are many, including print media (newspapers, magazines, direct mail), radio, television (ranging from 30-second ads to 30-minute infomercials), and the Internet. The mix of media that is eventually chosen to carry the business's message is really the heart of the advertising strategy.

5.1 Selecting MediaThe target consumer, the product or service being advertised, and cost are the three main factors that dictate what media vehicles are selected. Additional factors may include overall business objectives, desired geographic coverage, and availability (or lack thereof) of media options.Three general rules to follow when trying to select a media vehicle for advertising are:Rule number 1: eliminate waste. The key to selecting the right media source is to choose the source "that reaches the largest percentage of your particular target audience with the least amount of waste." Paying to reach a larger number of people may not serve well if the audience reached has only a small percentage of likely customers of your product. It may be preferable to advertise in a paper or magazine with a smaller distribution if the readers of that paper or magazine are more likely to be in the market for your product or service.Rule number 2: follow your customer. Here again, the objective is to go to the sources used most by your target market, especially a source that that audience looks to for information about your type of product or service. Gordon explains that advertising "in search corridorssuch as the Yellow Pages and other directoriesis often a cost-efficient solutions. They're the media customers turn to when they've made a decision to buy something."Rule number 3: buy enough frequency. We are constantly bombarded with advertisements and images and in order to penetrate the consciousness it is important to be seen with some frequency. Gordon emphasizes that it is "essential to advertise consistently over a protracted period of time to achieve enough frequency to drive your message home."

5.2 Scheduling CriteriaThe timing of advertisements and the duration of an advertising campaign are two crucial factors in designing a successful campaign. There are three methods generally used by advertisers in scheduling advertising. Each is listed below with a brief explanation: ContinuityThis type of scheduling spreads advertising at a steady level over the entire planning period (often month or year, rarely week), and is most often used when demand for a product is relatively even. FlightingThis type of scheduling is used when there are peaks and valleys in product demand. To match this uneven demand a stop-and-go advertising pace is used. Notice that, unlike "massed" scheduling, "flighting" continues to advertise over the entire planning period, but at different levels. Another kind of flighting is the pulse method, which is essentially tied to the pulse or quick spurts experienced in otherwise consistent purchasing trends. MassedThis type of scheduling places advertising only during specific periods, and is most often used when demand is seasonal, such as at Christmas or Halloween.

CHAPTER-6ADVERTISING NEGOTIATIONS AND DISCOUNTS

No matter what allocation method, media, and campaign strategy that advertisers choose, there are still ways small businesses can make their advertising as cost effective as possible. Writing inThe Entrepreneur and Small Business Problem Solver, author William Cohen put together a list of "special negotiation possibilities and discounts" that can be helpful to small businesses in maximizing their advertising dollar: Mail order discounts - Many magazines will offer significant discounts to businesses that use mail order advertising. Per Inquiry deals - Television, radio, and magazines sometimes only charge advertisers for advertisements that actually lead to a response or sale. Frequency discounts - Some media may offer lower rates to businesses that commit to a certain amount of advertising with them. Stand-by rates - Some businesses will buy the right to wait for an opening in a vehicle's broadcasting schedule; this is an option that carries considerable uncertainty, for one never knows when a cancellation or other event will provide them with an opening, but this option often allows advertisers to save between 40 and 50 percent on usual rates. Help if necessary - Under this agreement, a mail order outfit will run an advertiser's ad until that advertiser breaks even. Remnants and regional editions - Regional advertising space in magazines is often unsold and can, therefore, be purchased at a reduced rate. Barter - Some businesses may be able to offer products and services in return for reduced advertising rates. Seasonal discounts - Many media reduce the cost of advertising with them during certain parts of the year. Spread discounts - Some magazines or newspapers may be willing to offer lower rates to advertisers who regularly purchase space for large (two to three page) advertisements. An in-house agency - If a business has the expertise, it can develop its own advertising agency and enjoy the discounts that other agencies receive. Cost discounts - Some media, especially smaller outfits, are willing to offer discounts to those businesses that pay for their advertising in cash.Of course, small business owners must resist the temptation to choose an advertising medium only because it is cost effective. In addition to providing a good value, the medium must be able to deliver the advertiser's message to present and potential customers.

CONCLUSION

On the basis of this report, we can conclude that the ultimate objective of most advertising is to sell products or services. It have some different immediate goal, such as clarifying information about the use of a product, attracting potential investors by sharing corporate goals, or using public relations communication to solidify the companys public image. Also, it is important to recognize, that ultimately a companys success is a function of its growth in sales and prots, and most of that growth is fueled by advertising and marketing communications. So, it is crucial to determine advertising budget to get maximum marketing done at the minimum cost, at the right time and to the sufficient extent. As the relationship between advertising objectives and budget decisions is a vital one., the size of the advertising budget, the selection of media, and the media strategy to be used as well as the creative content of the advertising message are all determined by the objectives that the company is pursuing. Before deciding or developing the advertising budget, all the factors affecting the Advertising Budget must recognized critically, as doing so, would help in choosing the right method for developing the Advertising Budget. It is advisable to crucially monitor process of Advertising Budgeting to achieve the effectiveness of the budget i.e. goals and objectives should be clearly specified, tasks to be performed should be well stated, etc.Selecting the suitable Budgeting methods, keeping in mind all the factors affecting advertising budget, proves the ultimate effectiveness of the budget and hence, extreme care should be taken while selecting it. Media scheduling can be done only after clear understanding of the developed Budget. Advertising Costs can be reduced to some extents by opting various Advertising Negotiations and Discounts tactics as described in the chapter 6.

SUMMARY

This report has provided an insight into Advertising Budget introduction and definition, factor affecting Advertising Budget, Budgeting Methods, Media Scheduling, and Advertising Negotiations and Discounts. The key issues that were discussed are as follows: The ultimate objective of most advertising is to sell products or services. The size of the advertising budget, the selection of media, and the media strategy to be used as well as the creative content of the advertising message are all determined by the objectives that the company is pursuing. An estimation of a company's promotional expenditures over a period of time. An advertising budget is the money a company is willing to set aside to accomplish its marketing objectives. When creating the advertising budget, a company must weigh the trade-offs between spending one additional advertising dollar with the amount of revenue that dollar will bring in as revenue. The factors affecting Advertising budget are: Frequency of the advertisement, Competition and Clutter, Market Share of the Product, Product Life Cycle Stage, Funds, Media Savings, Costs, Tasks, and Aternative Media. The steps involved in Budgeting process are: Setting Advertising Objectives, Determining Tasks to be performed to Achieve Advertising Objectives, Preparing Advertising Budget, Approval, Allocation of Advertising Budget, and Monitor and Control. The most common methods used in developing a budget are: Percentage of Sales method, Objective and Task method, Competitive Parity method, Increase over Last Years Budget, Affordable method, and Judgment Approach. The target consumer, the product or service being advertised, and cost are the three main factors that dictate what media vehicles are selected. Additional factors may include overall business objectives, desired geographic coverage, and availability (or lack thereof) of media options. Three general rules to follow when trying to select a media vehicle for advertising are: Eliminate waste, Follow your customer, and Buy enough frequency. There are three methods generally used by advertisers in scheduling advertising: Continuity, Flighting, and Massed. Special negotiation possibilities and discounts that can be helpful to small businesses in maximizing their advertising dollar are: mail order discounts, per inquiry deals, frequency discounts, standby rates, help if necessary, remnants and regional editions, Barter, seasonal discounts, spread discounts, an in house agency, and cost discounts.

REFERENCES

http://web.utk.edu/~rhovland/budgethandout.html http://www.tandfonline.com/toc/ujoa20/current#.UjFO1ZLQmUk Advertising and Integrated Brand Promotion By Thomas C. O'Guinn, Chris T. Allen, Richard J. Semenik

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