UNIT-2
1. Advertising Departments & advertising manager
The main functional departments of advertising agency:
- Contact department,
- Media department,
- Copy department,
- Art department,
- production department
- Research department,
- Accounting and finance department,
- Public relations department and
- Office management.
1. Contact department
Contact department of advertising agency keeps contact with their prospective clients, who are mostly advertisers.
The functions of contact department are as follows:
- Contact department supplies necessary information to the clients.
- It tries to increase and retain the number of clients of agency.
- It brings new clients to the agency which is crucial for increasing revenue, expansion and growth.
- It acts as a liaison authority (connection) between the advertising agency and its clients.
- It acts as a sales promotion department of the ad agency.
- It finds out new clients and promotes the business of agency.
Efficient working of this department results in quick growth of ad agency.
2. Media department
Media department of advertising agency selects the best-media for advertising the products of the clients.
While selecting a media for advertising it must consider the following:
- Nature of the product,
- Competition in the market,
- Advertising budget of the client,
- Media trends, etc.
- Select and use the best media possible to communicate the ad message to the consumers. This is very important function because a wrong selection will result in the failure of product.
- Prepare a media plan for clients.
- Media scheduling.
- Supervise the execution of the schedule.
- Buy or book an advertising time and space in media for client.
- Keep contact with various media.
3. Copy department
The main function of a copy department of advertising agency is to prepare an attractive copy-of-ad.
The copy of advertisement is very crucial. It is called the Heart of the AD. It is so, since it directly communicates the ad-message to the consumers.
The staff of this department includes copywriters, copy-supervisors, and others. They use their talent of imagination, skill of putting flair and fluent language while preparing a copy.
The advertising will be a failure if the copy is not appealing to consumers. The copy-staff works in close co-operation with the staff of the art and visualization branch.
The head of copy department is a Copy Chief. He directs the functioning of it.
The copy branch is perhaps the largest department of ad agency. It comprises of a hard-working team of qualified professionals and experienced staff.
Some agencies have a creative branch instead of it that does the entire work of preparing an advertisement. Here, preparing an ad copy, artwork and actual production of ad are all linked together and executed completely by this department alone.
4. Art department
Art department of advertising agency uses the power of creativity and to make ad more appealing and agreeable. Its activity is not a mechanical one. It uses the principles of real art (that works) as a guideline or base to present a product to the targeted audience.
Generally, the art department carries out following work:
- Transform the ad-message into a self-communicating and mind-stimulating imagery.
- Prepare visuals and layouts for press advertisement.
- Make painted bulletins, posters, car cards, illustrations, slogans, etc.
The artists of art department work together with copywriters to make the final copy of advertisement more attractive.
Both departments of art and copy operates under the overall guidance and supervision of vice-president of creative services.
Not all ad agencies have a separate art department. Some prefer to outsource their art-related work to freelance artists.
5. Production department
The copy of advertisement is finalized by artists and copywriters. It is then sent to the production department of an advertising agency for its further processing.
As the copy reaches this department, its proper mechanical production begins.
The main role of a production department is to process & produce a final ad.
This department's traditional work activities usually are as follows:
- Keep in contact with printing press, typographers, photo engravers, etc.
- Assemble the typographic design patterns, engraved photos, illustrations, copy, etc. and prepare the final advertisement.
- Show it to the client (advertiser) and get his approval for its release.
- Send it (after approval) to print media like magazines, newspapers, etc. for advertising.
- Keep in contact with digital artists, web designers, etc.
- Assemble the work of digital art and prepare a final digital-ad.
- Seek approval of it from an advertiser.
- Send it (after approval) to digital media like the Internet, e-magazines, web videos, etc. mainly for online advertising.
Production department of ad agency comes under creative services.
Not all ad agencies have a separate production department. Some prefer to outsource their production-related work to others.
6. Research department
To stand out from the plethora of availability and make the client's products and/or services attractive, needs not only huge amount of tedious work but also some good amount of research to begin with.
One must remember that without knowing, What to do? How to do? When to do? And where to do? Nothing can be achieved. However, with right direction and approach, everything can be made possible.
Therefore, the importance of research department in advertising is rising.
The main function of research department of advertising agency is to:
- Carry out research and obtain the necessary information.
- Engage in a rigorous and critical analysis of the obtained information.
- Use the findings (results) in different ways to achieving objectives.
- Market,
- Market competition,
- Market trends,
- Products and/or services,
- Competitors,
- Consumer behavior,
- Media trends,
- New trends in advertising, so on.
The team of a typical research department usually comprises of:
- Investigators,
- Field workers,
- Analysts,
- Marketing assistants,
- Statisticians,
- Librarian and the staff of library, etc.
Research department comes under marketing services of ad agency.
Although research activities are highly beneficial, they do consume an ample amount of time, money and resources. Generally, small ad agencies can't afford such resource-intense activities and therefore, prefer not to keep a separate research-branch. They either do research on a smaller scale or use the data obtained by others. On its contrary, large-agencies prefer to maintain their own research-subsidiaries and don't take the risk compromising with the quality and genuineness of the obtained data.
7. Accounting and finance department
The main duty of accounting and finance department of advertising agency is to look after its financial and accounting matters.
The work activity of this department is usually as follows:
- Generate or raise invoices (bills) on clients (parties).
- Send regular reminder to the client for collection of unpaid dues.
- Book the expenses of vendor parties on a timely basis.
- Issue payments to vendor parties within or on the due date.
- Doing reconciliation (compare) of banks, vendors and customers' ledger accounts regularly.
- Deposit government dues on a timely basis in authorized banks.
- Chief financial officer (CFO),
- Accounts receivable manager,
- Accounts payable manager,
- Accounts supervisors and
- Accounts executives.
8. Public relations department
The main responsibility of a public relations (PR) department is to maintain cordial relationship between advertising agency, clients and media.
Generally, the PR department carries out following work:
- Address the complaints of the customers.
- Solve their complaints as soon as possible.
- Be a link between ad-agency, clients, media and society.
- Create goodwill and maintain the reputation of ad agency.
The PR department functions under the authority of management.
9. Office Management
The definition of office management according to Mills and Standingford,
“The art of guiding the personnel of the office in the
use of materials, methods, machines and equipment appropriate to their
environment in order to achieve its specified purpose.”
Generally, office management involves following important activities:- Recruit office staff.
- Training and development of new joined staff.
- Promotion of an existing staff.
- Transfer of a timely salary and perquisites (perks) to staff.
- Providing welfare facilities to staff.
- Correspondence to various internal and external parties.
- Filing and record keeping of all the important documents.
2) What are the function of an
Advertising Manager?
Advertising managers oversee the
marketing of products to consumers.
Advertising
managers are in charge of promoting, marketing and advertising a company's
products. They maintain close working relationships with all departments within
a company as well as working intimately with the marketing department. A
successful and professional advertising manager will have years of experience
and in-the-trenches know-how. The job requires a college education in
communications, marketing or journalism and many companies require a graduate
degree in a similar field.
a.
Budget Responsibilities
Budgets
are a major factor for the advertising manager as he is responsible for
supplying the company with an advertising budget and outline the personnel
required to market the company's goods or services. His budget will allocate
costs for advertising space in publications, radio and media outlets such as
cable television stations or local broadcast networks and the emerging field of
Internet advertising. He may be responsible or oversee the development of the
company's website as well. Part of his budget will include research into the
market area and demographics of the company's consumers. For example, a company
that makes toy trains will want to market to children, but a company that
manufacturers locomotives will want to market to railroad companies.
b.
Target
Audience
The
advertising manager will work closely with the marketing department to
determine what target audience best fits the company's product. This audience
will be identified through market research and polls conducted by the marketing
department. The advertising manager develops and plans an advertising campaign
that appeals to the target audience. An example of a planned advertising
campaign includes when to run the company's commercials on broadcast
television. If the target audience is children, then the commercials run during
the hours that children watch television. If the target audience is adults,
then it is best to run the company's commercial during prime-time television or
on channels adults watch such as cable stations.
c.
Advertising
Campaign
Once
the target audience is identified, the advertising manager is responsible for
coordinating an advertising campaign that will appeal to the targeted audience.
This will include publications and media outlets. As part of this advertising
campaign, the manager will oversee the development of all the advertising
material such as artwork, mail displays or postcards, commercial development
and approve the material before the company utilizes it. If a company decides
to use an outside advertising agency, the advertising manager is responsible
for reviewing all the agency's ideas, marketing strategies and help create the
advertising campaign. After the advertising agency has created a suitable
campaign, the advertising manager will approve the advertising campaign.
3. Meaning and definition of
advertising agency
An advertising
agency or ad agency is
a service business dedicated to creating, planning and
handling advertising (and sometimes other forms of promotion)
for its clients.An Advertising Agency or ad agency is a service provider that
works for clients to create an effective and goal oriented advertising campaign
aimed at representing the Company positively in the eyes of its target
customers.
• According to American Association
of Advertising “An advertising agency is an
independent organization of creative people and business people who specialize
in developing and preparing market plans, advertisements, and other promotional
tools”.
• According
to George E.Belch, ''Advertising
agency is a service organization that specializes in planning and executing
advertising programmes for its clients.”
4.
Concept of ad-agency skills and Services
Professionals
at advertising agencies and other advertising organizations offer a number of
functions including:
a. Account Management
– Within an advertising agency the account manager or account executive is
tasked with handling all major decisions related to a specific client. These
responsibilities include locating and negotiating to acquire clients. Once the
client has agreed to work with the agency, the account manager works closely
with the client to develop an advertising strategy. For very large clients,
such as large consumer products companies, an advertising agency may assign an account
manager to work full-time with only one client and, possibly, with only one of
the client’s product lines. For smaller accounts an account manager may
simultaneously manage several different, though non-competing, accounts.
b. Creative services
–The principle role of account managers is to manage the overall advertising
campaign for a client, which often includes delegating selective tasks to
specialists. For large accounts one task account managers routinely delegate
involves generating ideas, designing concepts and creating the final
advertisement, which generally becomes the responsibility of the agency’s
creative team. An agency’s creative team consists of specialists in graphic
design, film and audio production, copywriting, computer programming, and much
more.
c. Researchers
– Full-service advertising agencies employ market researchers who assess a
client’s market situation, including understanding customers and competitors,
and also are used to test creative ideas. For instance, in the early stages of
an advertising campaign researchers may run focus group sessions with selected
members of the client’s target market in order to get their reaction to several
advertising concepts. Researchers are also used following the completion of an
advertising campaign to measure whether the campaign reached its objectives.
d. Media Services
– Once an advertisement is created, it must be placed through an appropriate
advertising media. Each advertising media, of which there are thousands, has
its own unique methods for accepting advertisements, such as different
advertising cost structures (i.e., what it costs marketers to place an ad),
different requirements for accepting ad designs (e.g., size of ad), different
ways placements can be purchased (e.g., direct contact with media or through
third-party seller), and different time schedules (i.e., when ad will be run).
Understanding the nuances of different media is the role of a media planner,
who looks for the best media match for a client and also negotiates the best
deals
e.
Admin services A benefits plan structure
in which the employer funds the plan
and assumes financial
responsibility
for all of the claims and liabilities
made against it. In most cases, the
employer hires a third party
to administer
the plan and process claims and payments. ASO arrangements
are common in large corporations
that can achieve greater efficiencies
through self-funding
of benefits
f.
Support services Activity or function required for
successful completion
of a process, program, or project. It is the part of a
company's customer relationship management (CRM) department that interacts with
a customer for their immediate benefit, including components such as the
contact center, the help desk, and the call management system.
5.Types
of Advertising agency
There are basically 5 types of
advertising agencies.
A.Full service
agencies:-These
agencies are involved in planning, creating, producing advertisements,
performing research and selecting media. Some full service agencies also provide
non-advertising related services including strategic market planning, direct
market promotion programs, interactive marketing and web site design, and
public relations. The importance of the various functions provided by a full
service agency will depend upon the client.
Some very
large full service agencies run their own marketing research departments. There
are also many professional services with local and national networks which work
closely with the agencies, do commissioned research in specific geographic
areas, income levels, consumption patterns, product groups, etc.
A full
service agency is one that provides a direct relation to the Copyright,
Artwork, Ad production, Media planning etc.
b. Creative agencies/ Boutiques:- Creative agencies specialize in "creative"
or design-based business models and are also known as a "creative
boutique". Their basic interest is in the creation of the advertisement or
branding. Other ("full-service") agencies offer design in conjunction
with media
buying. Media agencies concentrate on media buying. (In
the 1990s, media and creative were often unbundled in the interests of economies
of scale in buying media.
The
client who chooses to use a design only based advertising agency must assume
some of the advertising purchasing. These are activities that are routinely
handled by an agency with a media buying option.
c. Specialized agencies:-
These agencies specialized in a particular activity of the whole
communication process. They may specialize in certain functions (copy, art,
media), audiences (minority youth) or industries (health, computers) or in a
marketing communication area (direct marketing, sales promotion, public
relation). These type of agencies may serve one client only.
d. In-house advertising
agencies:- An In-House agency is a team within a company that
focuses on selling the company's product; they will handle all aspects of the brand
·
As good as the full service
agencies.
·
Big organization prefers these type
of agencies which are in built and work only for them.
·
These agencies work as per the
requirements of the organizations.
e. Media Buying Agencies
- Buys place for advertise and sells it to the advertisers.
- Sells time in which advertisement will be placed.
- Schedules slots at different television channels and radio stations.
- Finally supervises or checks whether the ad has been telecasted at opted time and place or not
(b)Agency size and location: Large-budget advertisers want to go to large agencies because these agencies have better staff and more facilities. Large budget advertisers do not like to select small agencies as these are not profitable. Similarly small advertisers do not select large agencies for fear of insufficient attention.
(c)Product conflicts: If an agency has already another account with the same or similar product, then it is not adviseable to select that particular agency because of conflict of interest involved.
(d)Financial position of an agency: If the agency is in a week financial position, then it will spend more time in solving its own problems than working on the advertisers campaign. Financial difficulties also indicate the poor planning of the agency and lack of its stability.
(e) Special skills of an agency: Some agencies specialize in certain areas such as industrial advertising, legal advertising or medical advertising. It would be useful to know if the agency specializes in a particular product or it has specialists who are familiar in the promotion of this particular product. If the agency has special skills for the promotion of this product, it will run a successful advertising campaign.
(f) Current clients: Most advertisers are very careful in selecting an agency They usually see the list of the clients of an agency. An agency with a solid list of clients would be more desirable. It will also be useful to know how many new accounts were acquired in the last two or three years and how many accounts were lost. The reasons for the lost accounts may highlight some of the weaknesses of the agency.
(g) The process of payment: It should be seen that what the process of payment in an agency is. The advertiser will have to pay in advance or after the advertising. The client should have a detailed analysis of the method adopted so that there is no misunderstanding afterwards.
In addition to these specific areas, consideration must be given to the support services and additional facilities that the agency might have. These include market research, dealer support, public relations etc.
Client Turnover: When an advertiser leaves an advertising agency and goes to another, it is known as client turnover. There may be various reasons for the client turnover. Some are as under:
1. The advertising is not profitable.
2. The advertiser is interested in a new medium with which the present agency is not familiar.
3. The client and the agency intend to launch a campaign in a different manner.
4. Lack of coordination between the chief executives of the client firm and the agency.
5. Changes in the staff also lead to client turnover.
6. Loss of confidence in each other results in client tunover.
7. Some times the client doesn’t like the ad programme conceived by the agency.
8. Political involvement and nepotism result in client turnover
6.
Functions of advertising agency
Advertising agency is an independent service-rendering organization. It
delivers various services and performs many functions for its clients, who are
advertisers. It is mainly involved in activities like planning, preparing and placing of ads in media. It also performs
non-advertising functions for them. It offers them advisory and creative
services. It does so to make a profit.
Following image depicts the major
functions of advertising agency.
1.
Attracting clients advertising agency needs clients
(advertisers). Without them, it cannot survive.
Ad agency always tries to attract
clients usually by giving ads in trade journals. It also seeks their attention
by offering them various services. It offers expert, cheap and quick services.
It maintains good relations with them. It tries to give them full satisfaction.
It strives harder to attain their goodwill and customer-loyalty.
2.
Research function
Advertising agency gathers
information related to the client's product.
It collects following information
about a product under its research function:
- Features, quality, advantages and limitations of a product,
- Present and future market possibilities,
- Competition in the market,
- Situation in the market,
- Distribution methods,
- Buyers' preferences, so on.
Ad agency analyses (studies) all this
collected information properly and draws conclusions for its research. It helps
in planning an advertising campaign, selecting proper media and creation
function.
3.
Advetising planning
Advertising agency plas the entire
ad campaign of its client.
Advertising planning is a primary
function of an ad agency. It is done when its research function is completed.
That is, after analyzing the client's product, its competitors, market
conditions, etc. It is done by experts who use their professional experience to
make a result-oriented advertising-plan.
After making the advertising plan,
it is shown to the client. If the client likes and approves it, then the plan
is executed (put into action).
4.
Creative function
Advertising agency put the
advertising-plan into action under its creative function.
Creation of ads is the most
important function of an ad agency. Generally, it involves activities like:
- Copy writing,
- Drawing photographs,
- Making illustrations, layouts, an effective ad message, etc.
These jobs are done by experts like
copy writers, artists, designers, etc. These people are highly skilled and
creative. They make an advertisement more appealing. Attractive ads help to
increase the sales of the product.
The ad agency must always use fresh
ideas for creating ads. It must neither use old tactics nor copy the
ad-campaign of other products.
5.
Media selection
Advertising agency helps an
advertiser to select a proper media (ad platform) to promote his advertisement
effectively.
Media selection is a highly specialized
function of an ad agency. It must select the most suitable media for its
client's ad. It must choose media, which has a potential to give best results
for the lowest cost. It must select more than one media for the ad. For
example, an advertisement can be put on television, the Internet, newspapers,
magazines, etc.
After selecting the media, the ad
agency must maintain goods contacts with the media.
6.
Advertising budget
Advertising agency heps an
advertiser to prepare his ad budget. It helps him to use his budget
economically and make the best use of it.
Without a proper advertising budget,
there is a risk of client's funds getting wasted or lost. If an advertiser
suffers a loss, he may not bring new projects. As a result, there is a
possibility of losing a potential client that can bring more business to an ad
agency.
7.
Coordination
Advertising agency brings a good
coordination between the advertiser, itself, media and distributors. This is a
very important function. If coordination is proper, it will increase the sales
of the product.
8.
Sales promotion
Advertising agency performs sales
promotion. It helps an advertiser to introduce sales promotion measures for the
dealers and consumers. This helps to increase the sales of the product.
9. Marketing research
Advertising agency helps its clients
to solve their marketing problems. It does so by conducting a marketing
research for them.
10.
Non-advertising functions
Advertising
agency also performs many non-advertising functions:
- It fixes the prices of the product,
- It determines the discounts,
- It designs the product,
- It also designs its package, trade marks, labels, etc.
These non-advertising services help
an advertiser to increase its sales.
11. Public relations
Advertising agency does the public relations
(PR) work for its clients. It increases the goodwill between its clients and
other parties like consumers, employees, middlemen, shareholders, etc. It also
maintains good relations between the client and media owner.
7. Role of ad agency
UNIT-3
1.
ADVERTISING
BUDGET
Top -
Down Approach
|
Management
decides
how much
to spend
Affordability
approach
Ignores
market reality
Bottom
Up Approach
|
Activity
based &
objective
oriented
approach
by managers
Top down and Bottom up Budgeting
Definitions
A top down budget is a budget that is set without allowing the ultimate budget holder to have the opportunity to participate in the budgeting process.
A bottom up budget is a system of budgeting in which budget holders have the opportunity to participate in setting their own budgets. Also called participative budgeting
Top-Down & Bottom-Up
Top-down and bottom-up approaches to
budgeting describe whether directives for budget creation come from upper
management or allow for input from lower-level, program-implementing employees.
In developing a promotional budget, consider the specific needs of the
promotion and the anticipated return on investment. Each approach has its
merits and drawbacks, although in a business environment in which colleagues
work closely with one another, a bottom-up approach is likely to encourage
greater levels of collaboration.
Top-Down
Advantages
Anytime management takes complete
control over budget allocations, it streamlines the business accounting process
and ensures a company stays on firm financial track. Budget maintenance is
important to companies for which even small cost overruns can be financially
damaging. In the top-down approach to promotional budgeting, upper management
determines an appropriate financial allowance for the promotion, and
lower-level employees are expected to work with the budget to the best of their
ability.
Top-Down
Disadvantages
Lower-level employees may see the
top-down promotional budgeting approach as akin to an unfunded mandate. The
employees must develop and implement an effective promotion for the company
without any input about the resources needed to do the job. This can cause
frustration and animosity or a feeling that management doesn’t understand what
a successful campaign requires. Employees charged with developing the promotion
then are forced to tailor approaches to meet the budget allocation, even if
those approaches are less than ideal.
Bottom-Up
Advantages
When management asks for input from
lower-level employees about the financial resources they need to develop an
effective promotion, it creates a sense of teamwork and cohesiveness, a vital
element of business success. The budgeting process becomes a collaborate effort
rather than an us-versus-them approach. Bottom-up promotional budgeting
involves lower-level employees outlining their ideas for the wisest uses of
funds, explaining their reasoning and having a discussion with management about
available resources and expectations. Following this system, employees are
likely to feel their concerns are heard and respected. Even if they don’t
ultimately end up with an ideal budget, all parties understand each other's
outlook and expectations and can work together to make the most of the budget
they have.
Bottom-Up
Disadvantages
Management can feel a loss of
financial control by following a bottom-up approach to promotional budgeting.
Supervisors may fear that lower-level employees will pad their budgets, incur
unnecessary expenses or fail to utilize money wisely if they have more input
over and access to financial resources. Management also may surmise that cost
overruns will be greater with the bottom-up approach. Alternatively, the
approach can mean increased performance pressure on lower-level employees.
Management may argue that departments had their input on budgetary needs and,
therefore, that all promotions should be successful, which ultimately may not
be the cas
2.
What is Advertising Budget? Discuss approaches and procedure
for determining the size of advertising budget.
Introduction
In this advertising world, everyday
we see many advertisement of different products or brands. Organisations
invests heavily in advertising to make their product popular and to increase
sales. But, here the question is - how the organisations decide - how much to
advertise? How much to invest in advertisement? What should be the size of
advertising budget?
Definition of
Advertising Budget
"Advertising budget is an estimated amount an organisation decides
to invest in its promotional expenditures over a period of time. An advertising
budget is the money a company set aside to accomplish its marketing objectives."
It is difficult to measure the
effect of advertising on business sales. Advertising is just one of the
variables that affects sales in a period of time. As a percentage of sales,
advertising expenditure varies from business to business. Because of such complications
it is very difficult for business organisations to decide the size of
advertising budget. There are various approaches that can be used to set
advertising budget.
Approaches to Develop Advertising
Budget
- Percentage of Sales Budget
- Competitive Parity Approach
- Objective and Task Approach
- All Organisation can Afford Approach
- Market Share Approach
- All Available Fund Approach
- Managerial Judgement Approach
Percentage of Sales Budget
According to this approach the business organisation have to set their advertising spending at a fixed percentage of either past or anticipated sales. This Approach can be followed by organisations operating in markets with stable and predictable sales pattern. As it is simple in application, it is most commonly used by small business organisations.
This approach has some disadvantages, as sales is not directly related to advertising, it get affected by different variables too.
Competitive Parity Approach
This approach is followed by organisations whose product is well established and operating in market with predictable sales pattern. Organisations following this approach compare their advertising spending with that of its competitors. As the organisation is aware of how much its competitors are spending in advertising, it can logically decide its advertising budget either equal, more, or less to that of the competitors.
Here considering competitors advertising budget organisation should consider its objectives too, as the competitors objectives may not be similar or comparable.
Objectives and Task Approach
This approach is followed by big organisations having well defined marketing objectives, and business goals. Following this approach advertiser can correlate its advertising spending to marketing objectives. In long term this correlation is important to keep organisational spending focused on business goals.
All organisation can afford approach
It is difficult for small business organisations to invest heavily in advertising. Small business organisation's advertising spending depends more on their affordability. According to this approach advertisers base their advertising budget on what they can afford.
Market Share Approach
Similar to competitive parity approach, the market share approach bases its advertising spending on external market trends. With this method a business equates its market share with its advertising expenditures.
All Available Fund Approach
According to this approach all available profit is used in advertising spending. It can be too risky for any size of organisation as the all available fund is used in advertising and no fund is allocated to help business grow in other ways like- technology up-gradation, or work force development. This approach is useful for new business organisations trying to develop its brand.
Managerial Judgement Approach
In long run managers gain expertise in their field of operation. Similarly, some of the marketing managers working over the years develops a feel for the market that permits them to arrive at appropriate decisions. According to this approach the organisations advertising spending depends on the judgement of experienced managers
According to this approach the business organisation have to set their advertising spending at a fixed percentage of either past or anticipated sales. This Approach can be followed by organisations operating in markets with stable and predictable sales pattern. As it is simple in application, it is most commonly used by small business organisations.
This approach has some disadvantages, as sales is not directly related to advertising, it get affected by different variables too.
Competitive Parity Approach
This approach is followed by organisations whose product is well established and operating in market with predictable sales pattern. Organisations following this approach compare their advertising spending with that of its competitors. As the organisation is aware of how much its competitors are spending in advertising, it can logically decide its advertising budget either equal, more, or less to that of the competitors.
Here considering competitors advertising budget organisation should consider its objectives too, as the competitors objectives may not be similar or comparable.
Objectives and Task Approach
This approach is followed by big organisations having well defined marketing objectives, and business goals. Following this approach advertiser can correlate its advertising spending to marketing objectives. In long term this correlation is important to keep organisational spending focused on business goals.
All organisation can afford approach
It is difficult for small business organisations to invest heavily in advertising. Small business organisation's advertising spending depends more on their affordability. According to this approach advertisers base their advertising budget on what they can afford.
Market Share Approach
Similar to competitive parity approach, the market share approach bases its advertising spending on external market trends. With this method a business equates its market share with its advertising expenditures.
All Available Fund Approach
According to this approach all available profit is used in advertising spending. It can be too risky for any size of organisation as the all available fund is used in advertising and no fund is allocated to help business grow in other ways like- technology up-gradation, or work force development. This approach is useful for new business organisations trying to develop its brand.
Managerial Judgement Approach
In long run managers gain expertise in their field of operation. Similarly, some of the marketing managers working over the years develops a feel for the market that permits them to arrive at appropriate decisions. According to this approach the organisations advertising spending depends on the judgement of experienced managers
3. Advertising Budget Process
One critical component of effective marketing for your business is setting an advertising budget. Overspending can adversely impact profit. Under spending can make it difficult to achieve your marketing objectives. Understand the advertising budget process so that you can efficiently and effectively manage and control expenditures.1. Marketing Plan Review
o
Your marketing plan is one key driver for
determining your budget. For example, your company’s plans to penetrate a new
market may require more advertising than required in markets where your company
is already established. A market plan also determines how advertising dollars
are allocated. For example, the plan includes a description of what media will
be used to advertise to target markets. Media costs may influence how
advertising dollars are allocated. In industries where cooperative advertising
is offered, outside funding for some of a company’s advertising should be
factored into the advertising budget. Cooperative advertising is an arrangement
with a company, usually a manufacturer, and party, such as a wholesaler,
distributor or retailer where one company offers to pay part of the advertising
of another company. The dollars provided are dependent on a number of factors,
such as company sales and the content of an advertising message.
2. Budget Calculation Methods
o
The method of calculating dollars allocated to
advertising varies. One method involves examining the standard percent of sales
allocated to advertising within a company’s industry. Another method is by
determining dollars that should be allocated to specific marketing projects.
3. Preparation and Review
o
The advertising budget is usually prepared by a
company’s marketing department. The budget is broken down into calendar
segments, often quarterly, so that during the year, budget versus actual
expenditures can be tracked. Budget dollars are supported by contracts signed
with media outlets, such as magazines. After marketing prepares the ad budget,
it is reviewed and approved by other departments in the company, such as sales
and finance. If required, adjustments are made and a final budget is prepared.
The advertising budget should be broken down into such levels as territory,
region and product so that it is easier to track sales performance against
advertising expenditures.
4. Warning
o
Understand that preparing an advertising budget
is an estimation process and should be revised as market conditions and sales
levels change. To allow flexibility in the advertising budget, a percent of the
budget should be unallocated to make funds available if unforeseen
circumstances occur.
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