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Budgeting

Budgeting. Getting it Right Chapter 6. Decisions Decisions. Objectives Budget  Control tool, planning, accountability. Advertising Budget Media Selection Media Strategy Creative/Message. Advertising Budget. How much money to spend Budget distribution across Promotional tactics

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Budgeting

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  1. Budgeting Getting it Right Chapter 6

  2. Decisions Decisions • Objectives • Budget  Control tool, planning, accountability • Advertising Budget • Media Selection • Media Strategy • Creative/Message

  3. 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

  4. Percentage of SalesA2 = 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

  5. 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

  6. 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

  7. 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

  8. Objective & Task • Used by majority of advertisers • Relates specific tasks to the dollars that will be spent • Doesn’t consider relationship between short-term and long-term effect of promotion • Requires clear objectives and reliable estimations of audience response

  9. 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

  10. 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

  11. Facebook Growth Projections

  12. Q1 2012 vs. Q1 2011

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