This article throws light upon the top nine factors influencing the advertising budget allocation. The factors are: 1. Marketing Mix of the Company 2. The Sales Forecast 3. Affordability 4. The Product Life Cycle 5. Quality of the Campaign 6. Level of Competition 7. The Budgeting Cycle 8. Contingency Planning 9. Type of the Product.
Factor # 1. Marketing Mix of the Company:
The important factor influencing the amount to allocate to advertising is the general marketing mix of the company for marketing the product (s) involved.
Factor # 2. The Sales Forecast:
While making the final budget, it is important to correlate the amount needed to sales forecast. It is needed to know what may be expected to happen in the light of past experience, present conditions and any changes in factors that were influential in the past.
This forecast is developed to provide the following data:
(a) Sales in Units Rather than Rupee Volume:
Used whenever possible in order to be more specific in allocating the budget to various items.
(b) Sales by Customer Classes:
To the data for ascertaining the advertising cost in reaching various customer groups.
(c) Sales by Product Lines:
In order to determine how much advertising will be needed to attain the volume projected.
(d) Sales by Territories:
Helpful in deciding what advertising expenditures should be made in each area.
Factor # 3. Affordability:
The most important and the foremost factor while deciding the budget is how much funds are available to the company.
Factor # 4. The Product Life Cycle:
When the product is introduced, high level of advertising is required because the product is new and the market is to be informed and persuaded to purchase the product. When the product reaches to the maturity stage, more advertising expenditure is required to reduce the dropping of sales and to maintain the status quo.
Factor # 5. Quality of the Campaign:
If the advertising message is of high quality and a USP widely recognized and established, even a small budget can be effective.
Factor # 6. Level of Competition:
If the competitors advertising budget is immense and is advertising heavily, the higher budget would be required to counter attack.
Factor # 7. The Budgeting Cycle:
Budget appropriation would also depend upon the time period for which the budget is allocated. If the budget is made for six months lesser money is required than the budget for one year.
Factor # 8. Contingency Planning:
There are many external uncontrollable restraints that must be taken into consideration while planning the budget.
Factor # 9. Type of the Product:
If the product (s) is one for which a strong consumer demand can be stimulated, so that the pull strategy of marketing can be used effectively, the budget for advertising might constitute virtually the entire marketing budget, as is true for some home remedy type medicinal products that have a high margin of selling price over the production costs on the other hand, for a standardised basic industrial product, the use of advertising may play a negligible part of the marketing strategy, and it might be advisable to use other promotional means, such as direct sales efforts.