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Setting and Allocating the Budget

Setting and Allocating the Budget. Setting the Budget. How much is enough? We don’t know for sure How much is need to achieve goals? Depends on goals Can you justify an budget increase? Credit or gains, no blame for losses. Market Factors.

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Setting and Allocating the Budget

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  1. Setting and Allocating the Budget

  2. Setting the Budget • How much is enough? • We don’t know for sure • How much is need to achieve goals? • Depends on goals • Can you justify an budget increase? • Credit or gains, no blame for losses

  3. Market Factors • Understanding what competition is doing is part of the issue • Must anticipate what they will do • Other market factors must be considered as well • Pricing, sales promotion, personal selling, packaging, etc.

  4. Finding the Balance Point • Spend too little; best campaign can fail • Spend too much; waste tremendous amount of resources and money • Budget size is function of marketing and selling objectives • Modest budgets and ambitious goals are irreconcilable

  5. Key Questions • In what market will you compete? • Expanding the market is pricey • Broad markets require large budgets • What is your current market position? • Must decide on competition • How do you evaluate the competition? • Brand leader can spend less and still compete • Where will the brand be advertised?

  6. Traditional Methods • Percent of Sales - Projected sales revenue by a percentage • Key is the “Multiplier” • Can be adjusted for special circumstance • Somewhat illogical, since advertising budgets are based on sales when advertising may be driving the sales

  7. Traditional Methods • Competitive Spending • Objective and Task • Expenditures per Unit • Subjective Budgeting In contrast with Experimental Methods

  8. Setting the Size of the Budget • Assess the Task of Advertising • Long- and short-term goals • Profit Margins and Budget Size • Degree of Product Use • Difficulty of Reaching Target • Frequency of Purchase • Sales Exceed Production • New Product Introductions • Competitive Activity

  9. Allocating the Budget • GRP Distribution • Proportional to GRP goals • Geographic Allocation • Proportional to amount of sales • Seasonal Allocation • Proportional to Sales - Skewed

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