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Part Four Objectives and Budgeting for Integrated Marketing
Communications Programs
Belch: Advertising and
Promotion, Sixth Edition
IV. Objectives and
Budgeting for Integrated
Marketing
Communications Programs
Figure 7-11 Factors influencing advertising budgets
7. Establishing Objectives
and Budgeting for the
Promotional Program
© The McGraw−Hill
Companies, 2003
Relationship of Relationship of
Factor Advertising/Sales Factor Advertising/Sales
Product Factors Customer Factors
Basis for differentiation + Industrial products users —
Hidden product qualities + Concentration of users +
Emotional buying motives + Strategy Factors
Durability — Regional markets —
Large dollar purchase — Early stage of brand life cycle +
Purchase frequency Curvilinear High margins in channels —
Market Factors Long channels of distribution +
Stage of product life cycle: High prices +
Introductory + High quality +
Growth + Cost Factors
Maturity — High profit margins +
Decline —
Inelastic demand +
Market share
Competition:
—
Active +
Concentrated +
Pioneer in market —
Note: + relationship means the factor leads to a positive effect of advertising on sales; — relationship indicates little or no effect of advertising on sales.
Figure 7-12 Factors considered
in budget setting
the percentage-of-sales method of budgeting has inherent weaknesses in that the
advertising and sales effects may be reversed. So we cannot be sure whether the situation
actually led to the advertising/sales relationship or vice versa. Thus, while these
factors should be considered in the budget appropriation decision, they should not be
the sole determinants of where and when to increase or decrease expenditures.
The Advertising Age Editorial Sounding Board consists of 92 executives of the top
200 advertising companies in the United States (representing the client side) and 130
executives of the 200 largest advertising agencies and 11 advertising consultants (representing
the agency side). A survey of the board yielded the factors shown in Figure
7-12 that are important in budget setting.
Overall, the responses of these two groups reflect in part their perceptions as to factors
of importance in how budgets are set. To understand the differences in the relative
importance of these factors, it is important to understand the approaches currently
employed in budget setting. The next section examines these approaches.
Changes in advertising strategy and/or creative approach 51%
Competitive activity and/or spending levels 47
Profit contribution goal or other financial target 43
Level of previous year’s spending, with adjustment 17
Senior management dollar allocation or set limit 11
Volume share projections 8
Projections/assumptions on media cost increases 25
Modifications in media strategy and/or buying techniques 17