Page 494 - Foundations of Marketing

Advertising and Public Relations | Chapter 16 461

the tasks are calculated and added to arrive at the total appropriation. This approach has one
main problem: marketers sometimes have trouble accurately estimating the level of effort
needed to attain certain objectives. A coffee marketer, for example, may find it extremely
difficult to determine how much of an increase in national television advertising is needed to
raise a brand’s market share from 8 to 10 percent.
In the more widely used percent-of-sales approach , marketers simply multiply the
firm’s past sales, plus a factor for planned sales growth or decline, by a standard percentage
based on both what the firm traditionally spends on advertising and the industry average.
This approach, too, has a major flaw: it is based on the incorrect assumption that sales cre-
ate advertising rather than the reverse. A marketer using this approach during declining sales
will reduce the amount spent on advertising, but such a reduction may further diminish sales.
Though illogical, this technique has been favored because it is easy to implement.
Another way to determine advertising appropriation is the competition-matching
approach . Marketers following this approach try to match their major competitors’ appro-
priations in absolute dollars or to allocate the same percentage of sales for advertising that
their competitors do. Although a marketer should be aware of what competitors spend on
advertising, this technique should not be used alone because the firm’s competitors probably
percent-of-sales
have different advertising objectives and different resources available for advertising. Many
approach Budgeting for
companies and advertising agencies review competitive spending on a quarterly basis, com-
an advertising campaign by
paring competitors’ dollar expenditures on print, radio, and television with their own spending
multiplying the firm’s past and
levels. Competitive tracking of this nature occurs at both the national and regional levels.
expected sales by a standard
At times, marketers use the arbitrary approach , which usually means a high-level execu- percentage
tive in the firm states how much to spend on advertising for a certain period. The arbitrary
competition-matching
approach often leads to underspending or overspending. Although hardly a scientific budget-
approach Determining an
ing technique, it is expedient. advertising budget by trying to
match competitors’ advertising
Developing the Media Plan outlays
arbitrary approach
Advertisers spend tremendous amounts on advertising media. These amounts have grown Budgeting for an advertising
rapidly during the past two decades. Figure 16.2 shows the share of time people spend with campaign as specified by a
different media categories compared to the share of total ad spending. While print advertising high-level executive in the firm

Figure 16.2 Share of Time Spent with Media per Day vs. Share of U.S. Ad Spending

50%
Share of time
spent with media
40%
Share of U.S.
ad spending
30%

20%

10%

0%
TV Online Radio Mobile Newspaper Magazines
(non-voice)

Source: eMarketer

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