ASP

UNIT-2

1.      Advertising Departments & advertising manager

The main functional departments of advertising agency:

1. Contact department,
2. Media department,
3. Copy department,
4. Art department,
5. production department
6. Research department,
7. Accounting and finance department,
8. Public relations department and
9. Office management.

Now let's discuss these important functional departments of an advertising agency along with specialized-functions assigned to them.

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:

1. Contact department supplies necessary information to the clients.
2. It tries to increase and retain the number of clients of agency.
3. It brings new clients to the agency which is crucial for increasing revenue, expansion and growth.
4. It acts as a liaison authority (connection) between the advertising agency and its clients.
5. It acts as a sales promotion department of the ad agency.
6. It finds out new clients and promotes the business of agency.

The contact department of ad agency comes under accounting services. Account Executive is the head of it.
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.

The functions of media department are as follows:

1. 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.
2. Prepare a media plan for clients.
3. Media scheduling.
4. Supervise the execution of the schedule.
5. Buy or book an advertising time and space in media for client.
6. Keep contact with various media.

Media department of ad agency comes under marketing services.

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:

1. Transform the ad-message into a self-communicating and mind-stimulating imagery.
2. Prepare visuals and layouts for press advertisement.
3. Make painted bulletins, posters, car cards, illustrations, slogans, etc.

Art Director heads this department of ad agency. He is assisted by an assistant-art director, artists, visualizers and layout men.
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:

1. Keep in contact with printing press, typographers, photo engravers, etc.
2. Assemble the typographic design patterns, engraved photos, illustrations, copy, etc. and prepare the final advertisement.
3. Show it to the client (advertiser) and get his approval for its release.
4. Send it (after approval) to print media like magazines, newspapers, etc. for advertising.

With advancements in technology, the use of print media is gradually slowly down. The digital media is now an emerging trend. As a result, some production houses have started adapting to this change. Now their work also includes activities like:

1. Keep in contact with digital artists, web designers, etc.
2. Assemble the work of digital art and prepare a final digital-ad.
3. Seek approval of it from an advertiser.
4. Send it (after approval) to digital media like the Internet, e-magazines, web videos, etc. mainly for online advertising.

This department is headed by a production manager.
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

The success of an advertising agency greatly depends on the success of the client's ad campaign. Today, achieving success is not an easier task. It is getting very difficult now-a-days because of rising market competition. With so many alternatives and choices at hand, already well-established goodwill and trust on older brands, it is now tougher to attract and convince consumers. However, against all odds hope still exists.
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:

1. Carry out research and obtain the necessary information.
2. Engage in a rigorous and critical analysis of the obtained information.
3. Use the findings (results) in different ways to achieving objectives.

Generally, this department collects information about:

• Market,
• Market competition,
• Market trends,
• Products and/or services,
• Competitors,
• Consumer behavior,
• Media trends,
• New trends in advertising, so on.

Agency makes use of above information for executing a good ad campaign.
The team of a typical research department usually comprises of:

• Investigators,
• Field workers,
• Analysts,
• Marketing assistants,
• Statisticians,
• Librarian and the staff of library, etc.

This team works under the guidance and direction a Research Director, who is the head of research department.
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:

1. Generate or raise invoices (bills) on clients (parties).
2. Send regular reminder to the client for collection of unpaid dues.
3. Book the expenses of vendor parties on a timely basis.
4. Issue payments to vendor parties within or on the due date.
5. Doing reconciliation (compare) of banks, vendors and customers' ledger accounts regularly.
6. Deposit government dues on a timely basis in authorized banks.

The main staff of this department usually comprises of:

1. Chief financial officer (CFO),
2. Accounts receivable manager,
3. Accounts payable manager,
4. Accounts supervisors and
5. Accounts executives.

This staff works under the guidance and supervision of vice-president of accounting services. He is the head of this department.

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:

1. Address the complaints of the customers.
2. Solve their complaints as soon as possible.
3. Be a link between ad-agency, clients, media and society.
4. Create goodwill and maintain the reputation of ad agency.

Public Relations Officer (PRO) is the head of this department, and his subordinates assist him regularly to maintain a cordial environment.
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:

1. Recruit office staff.
2. Training and development of new joined staff.
3. Promotion of an existing staff.
4. Transfer of a timely salary and perquisites (perks) to staff.
5. Providing welfare facilities to staff.
6. Correspondence to various internal and external parties.
7. Filing and record keeping of all the important documents.

Office-management of advertising agency operates under its management services

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

5. Criteria for Selection of an Advertising Agency

(a)The experience of an Agency; The longer an agency has been in business, the more stable it is expected to be; and stable agencies are more reliable.
(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.

Eleven main functions of ad agency are as follows:

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.

Related Reading: Bottom-Up Marketing Strategy

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

1. Percentage of Sales Budget
2. Competitive Parity Approach
3. Objective and Task Approach
4. All Organisation can Afford Approach
5. Market Share Approach
6. All Available Fund Approach
7. 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

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.