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    MC Budgeting Factors Affecting MC Budgeting, Budgeting Methods

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    malik omer
    The document discusses factors that affect marketing communication budgets and different approaches to budgeting. It outlines 9 key factors such as market size, competition level, and product differentiation that influence budget needs. It then describes 6 common budgeting types including percentage of sales, objective-based, and affordability methods. Finally, it discusses top-down versus bottom-up budgeting approaches and typical budget allocations across advertising, promotions, and other tools.

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    MC Budgeting Factors Affecting MC Budgeting, Budgeting Methods

    Uploaded by

    malik omer
    33 views21 pages
    The document discusses factors that affect marketing communication budgets and different approaches to budgeting. It outlines 9 key factors such as market size, competition level, and product differentiation that influence budget needs. It then describes 6 common budgeting types including percentage of sales, objective-based, and affordability methods. Finally, it discusses top-down versus bottom-up budgeting approaches and typical budget allocations across advertising, promotions, and other tools.

    Original Title

    BUDGETING

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    The document discusses factors that affect marketing communication budgets and different approaches to budgeting. It outlines 9 key factors such as market size, competition level, and product differentiation that influence budget needs. It then describes 6 common budgeting types including percentage of sales, objective-based, and affordability methods. Finally, it discusses top-down versus bottom-up budgeting approaches and typical budget allocations across advertising, promotions, and other tools.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    33 views21 pages

    MC Budgeting Factors Affecting MC Budgeting, Budgeting Methods

    Uploaded by

    malik omer
    The document discusses factors that affect marketing communication budgets and different approaches to budgeting. It outlines 9 key factors such as market size, competition level, and product differentiation that influence budget needs. It then describes 6 common budgeting types including percentage of sales, objective-based, and affordability methods. Finally, it discusses top-down versus bottom-up budgeting approaches and typical budget allocations across advertising, promotions, and other tools.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 21

    MC Factors affecting MC

    Budgeting budgeting, budgeting


    methods
    Factors affecting MC budget
     MC budget differ between consumer markets and B2B
    markets

     For example much larger budget in B2B is allocated to


    telephone marketing than in consumer market
    1- The Goal of the Promotion
     To gain greater market share-----------promotional budget will be
    more

     Greater advertisement frequency needs high promotional budget

     Different goals depending upon the stage of buying


    process

    Hierarchy of effects model: Awareness, knowledge,


    liking, preference, conviction

    Exp: Verizon Wireless


    Graph 1 shows unrealistic
    2- Threshold effects relationship between promotion
    mix expenditures and sales
    Graph 2:

    a- There will be certain amount


    of sales even w/o any
    promotion
    e
    d
    b- Min. effect of promotion mix
    on sales at the start

    c- Then an increase in
    b c
    promotion expenditure will a
    increase sales

    d- There is a saturation point f

    e- After saturation point further


    expenditures have minimal f- Marginal analysis shows that even
    effect further promotion expenditure might
    even adversely affect profits
    3- Carryover effects
    • For products which are only bought when needed

    • Washing machines, refrigerators

    • Promotions are designed to generate carryover


    effects

    • Consumer has been exposed to company’s


    message so long that he remembers the key
    company when buying time comes
    4-Wear-out effects
     At certain point an ad becomes old or boring

     Consumers may ignore, tune it out, or even can develop


    negative attitude toward the brand

     MC challenge here is to keep an ad beyond threshold


    effect (see point c on the graph) and long enough to
    capture carryover effect
     But not so long that wear-out effect begins to take place
    5- Decay effect

    When company stops


    advertising:

    • Customers begin to
    forget the message

    • Due to carryover
    effect some time can • Butfor certain brands it can
    happen immediately because
    lapse before the of decay effects
    brand drops out of
    customer’s mind • Promotional budget must be
    structured to avoid decay
    effect
    6- Market size and potential
     Large market with more potential----more budget

     Concentrated geographic area-----less budget

     Dispersed market-----more budget

     Urban area (more potential)-----more budget

     Rural area (less potential)----less budget

     More demand of woolens in Lahore, Islamabad, Peshawar, and


    Quetta as compared to Karachi-----more budget
    7- Advertising economy of scale
     Advertising is more efficient for well-established brands
    of reputed companies

     Large scale advertising, better rates from media

     Advantage of advertising several products jointly

     Enjoy preferred time and space in media


    8- Target market and Differentiated Product
     If competition in the target segment is weak, promotional
    budget will be less

     For target segments with high competition, promotional


    budget will be more

     If product offered is highly differentiated, promotional


    budget required will be less
    9- Random events
    A natural disaster or any unpredictable event can reduce the
    impact of a promotional campaign
    Exp: Lifebuoy ad after corona virus pandemic
    Types of Budgets
    1- Percentage of Sales Method
    A fixed percentage (say 10%)
    a- 10% of previous year’s sales
    b- 10% of this year’s forecasted sales

    Positive point: Simple and easy


    Problems: More sales more budget and vice versa

     Some times we need more budget when sales are declining


     Some times we need not to spend much in growth period
     No allocation for special needs or to meet competitive
    pressure
    2- Competitive parity method
     In highly competitive markets
     Where competition is tough
     Objective is to prevent market share loss

    Drawback:

     Budget might not be spent efficiently


     Not how much spent but how well spent is important
    3- Affordability method
     Marketing budget is allocated after all of the company’s
    other budgets

     Management view’s marketing expenditures as non-


    revenue generating activities

     Newer and smaller companies with limited finances


    4- Objective and task method
    MC objectives Cost
    Objective 1 Cost to achieve objective 1
    Objective 2 Cost to achieve objective 2
    Objective 3 Cost to achieve objective 3
    MC budget = Sum of all costs

     Most accurate and best method


     Time taking
     Difficult for large companies with number of
    brands/SBUs
    5- Payout planning
    Spending budget with c d
    respect to product life a b
    cycle stages (blue line
    in graph)

    a- heavy promotional
    and advertising activity
    designed to raise
    awareness of the new
    product
    c- expenditure levels may be
    b- promotional much lower than earlier
    activities will tend to
    focus on expanding the d- no further promotional
    market
    expenditures
    6- Quantitative models
     Computer simulations are used to determine the
    relationship between promotional expenditure and sales

     More objective and accurate

     Only for large companies with marketing analytics


    department
    Budgeting approaches
    1- Top-down approach

    Top management sets the budget

    Passes to marketing department

     Used for percentage of sales method, competitive parity


    method, and affordability method
    2- Bottom-up approach

    Approved by top management

    Cost of these activities = MC budget

    Activities to achieve these objectives

    Setting MC objectives

    Marketing department

     Used for objective and task method


    Distribution of MC budget
     Approximate distribution of MC Advertising 40%
    budget on various promotional tools Consumer Promotions 29%
    Trade Promotions 28%
     Varies from industry to industry
    Others 3%
     For exp: consumer product Total Budget 100%
    manufacturers spend more on trade
    promotions toward retailers

     While services sector spends more


    on media
    Lecture Summary:

     Also varies for different products • MC Budget


    • Factors
    • Types

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