This M deals with deciding on the Advertising Budget
The advertising budget can be allocated based on:
- Departments or product groups
- The calendar
- Media used
- Specific geographic market areas
There are five specific factors to be considered when setting the Advertising budget.
Stage in PLC:
New products typically receive large advertising budgets to build awareness and to gain consumer trial. Established brands are usually supported with lower advertising budgets as a ratio to sales.
Market Share and Consumer base:
High-market-share brands usually require less advertising expenditure as a percentage of sales to maintain their share. To build share by increasing market size requires larger advertising expenditures. Additionally, on a cost-per-impressions basis, it is less expensive to reach consumers of a widely used brand them to reach consumers of low-share brands.
Competition and clutter:
In a market with a large number of competitors and high advertising spending, a brand must advertise more heavily to be heard above the noise in the market. Even simple clutter from advertisements not directly competitive to the brand creates the need for heavier advertising.
Advertising frequency:
The number of repetitions needed to put across the brands message to consumers has an important impact on the advertising budget.
Product substitutability:
Brands in the commodity class (example cigarettes, beer, soft drinks) require heavy advertising to establish a different image. Advertising is also important when a brand can offer unique physical benefits or features.
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