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Advertising Budget – Key factors when deciding the Ad Budget

A comprehensive plan of expenditure for advertising actions is called the advertising budget. It establishes a threshold for advertising expenditures. It decides how the money will be allotted for expenditures.

It controls the spending over a certain period. It is an assessment of a company‘s promotional expenses over a certain period.

Advertising Budget – Features

1. The basis for Advertising Plan

  • Ahead of spending any money on advertising, the organization plans on how the money will be split up.
  • The money can be paid out for several functions like the selection of media, marketing research, media buying, and payment for advertising and additional promotional exercises.

2. Acts as a Planning and Controlling device

  • Information about the amount allotted for advertising activities at any particular period of time is given to the marketing department by it.
  • Therefore plans can be created about expending money on building the campaign, purchasing different medias’ for advertising, and further promotional exercises.

3. Set Limits to Advertising Expenditure

  • The limit as to how much money should be used in advertising is set by the advertising budget.
  • Being careful of the payment authorized for a particular duration, budgets are allotted for several activities.

4. Time Frame

When a fresh commodity is launched by the company the advertising budget is commonly made for a year.

Although in particular situations the campaign can go on for more time, and here the budget is created for a longer duration.

5. Brings Coordination with other Functions

  • An advertising budget can not be determined in seclusion.
  • Fund allocation for different promotional instruments like sales promotion, event sponsorship, incentives to salespeople, and public relations need to be considered while designing it.

Advertising Budget – Key Factors to be Considered

1. Corporate objectives

The advertising expenditure will vary according to the goals of the advertising campaign, which the firm wants to achieve.

The goals could be to improve sales, build brand awareness, cultivate brand loyalty, battle the competition, build an image, launch a new product, etc.

2. Nature of the product

  • An advertising budget is reliant on the category of the product.
  • Consumer product advertising uses mass media more than industrial products.
  • Products like fast-moving consumer goods (FMCG’s) and consumer durables will have a higher advertising budget.

3. The Product life cycle

  • Each commodity has a life cycle.
  • A lifecycle has different stages like introduction, growth, maturity and decline.
  • During the introduction stage, a sizeable amount of budget is used on advertising.
  • Competitive advertising is a necessity in the growth stage.
  • During the maturity stage, a fairly lesser amount is spent on advertising.

4. The Budget Period

  • Normally, an advertising budget is made for a year.
  • Sometimes, to accomplish their extended period marketing goals, businesses may create a long-term advertising budget.
  • That’s when an advertising campaign may be planned for more than a year.

5. Competitor’s Strategy

  • Advertising expenses will be huge if the market has strong competition.
  • Other companies are obliged to increase their advertising expense if any competitor boosts their advertising budget.

6. Size of the Market

  • The size of the market can be either global or national.
  • Depending on the market size (local or regional), the advertising budget will be high or low.
  • Multi-national companies, because of their international range, spend a lot of money on advertising.

7. Availability of Finances

  • Depending on the budget that is fixed by the advertisers, media mix, event sponsorship, sales promotion, advertising campaign, etc., are planned.
  • It’s vital to avoid overspending by being very mindful of the available budget.

8. Importance of Middlemen

  • In product marketing, a company heavily depends on its middlemen to nudge its product.
  • Thus, the middleman needs to be given more commission.
  • If it is such, then there will be a very low advertising budget.
  • Although, if the company depends very much on advertising, then the budget will be high.

9. Crisis Management

  • Sometimes, unprecedented shifts in the marketing environment can influence even the greatest modeled advertising plan.
  • In times of crisis, an advertiser will need contingency funds, which should be kept aside by him/her in the first place.

Example 1 – Budweiser Spends Big on Super Bowl

Example – Budweiser spends big on Super Bowl

Budweiser approximately paid $470 million to air 135 advertisement plugs in the 54 Super Bowls, becoming the only firm to have at least one commercial run in each Super Bowl. Following Budweiser, Pepsi was recorded as the second highest investor spending more than $320 million, and Coca-Cola the third spending around $200 million.

Budweiser’s Parent Company, Anheuser-Busch InBev reaches over 100 million U.S. TV viewers through Super Bowl Sundays every year and promotes vintage brands such as Budweiser and Bud Light. According to industry experts, Budweiser paid $42 million for a 4-minute ad in 2018.

Example 2 – BMW in James Bond’s Movie “GoldenEye”

GoldenEye

BMW spent $3 million for Z3 Roadster’s product placement and earned about $240 million in advance sales solely.

Example 3 – Nike

Nike

  • Nike spent $3.59 billion on advertising in 2020
  • Nike’s spending on advertisements has remained fairly constant over the years.
  • In the last five years, the company has spent a total of $17.54 billion on advertising.