Page 146 - Marketing the Basics 2nd

138 Marketing: the Basics
telephone, email or regular mail, satellite television, or simply face to face. Whereas non-personal communication channels involve using the media to transmit the message.
ESTABLISHING THE BUDGET
Traditionally, there is a tension between marketing managers and financial managers. Marketers believed that the product that was the most heavily promoted would be the product that succeeds in the market. Financial managers, who agree with that assessment for the most part, temper the enthusiasm with the droll reality that resources are not unlimited; a corporation exists to maximize profit after all. Because of this tension, compromises must be reached in establishing the communications budget.
affoRDaBLe MeTHoD anD coMpeTiTive paRiTy MeTHoD
The affordable method is an ad hoc approach to establishing a communications budget. Often it entails a manager asking the accounting department what is the most that can be spent on advertising. This approach can work if high demand exists for the product, or if the company is a small firm, where formalities are blurred. However, if this method is employed in a medium- to large-sized organization it leads to chaos. Without a reliable budget, marketers cannot forge long-term promotion plans, and financial managers cannot reliably forecast future profits. As a general rule of thumb, about 15 per cent of marketing budgets are earmarked for online marketing purposes.
The competitive parity method is also an ad hoc approach to establishing a communications budget. Instead of using its own expertise, the firm decides to use the expertise of its competitor to determine how much money should be spent. In other words, its communication expenditures mirror the competition’s. It is not a good sign if a firm relies on the marketing expertise of its competitors, though if Coke sees Pepsi running a big new campaign, it may well feel obliged to respond in kind.