How crucial is your advertising budget?
It depends. If you value your advertising campaigns, you need to put a lot of thought into how you want to carry it out. But you can’t jump in right away, not before putting a figure on your advertising budget.
Selecting the appropriate budget is not an easy task. It requires you and your team to predict the cost, manner of distribution, and allotted time. Bear in mind that advertising budget decisions should not be treated separately. They are integrated into your general marketing strategy.
How to Choose Your Advertising Budget
Advertising is important in any business. It’s how you showcase your brand to your target consumers in the hopes of luring them in. Therefore, you should consider how much money you are willing to invest in this fundamental marketing aspect. Fortunately, there are different methods you can apply when deciding between budget choices.
This budget-friendly approach is, perhaps, what most businesses lean toward. Basically, all advertising decisions will rely on the firm’s financial capabilities. The company, most specifically the marketing department, will gauge how much money to invest in the advertising process. As a result, budget decisions are not goal-oriented. When there’s no clear direction, it will give rise to multiple issues. In some cases, the company might end up allocating the incorrect amount, making it difficult to hit the target.
Portion of Sales Method
In this approach, the company directly assigns a fraction of the sales for advertisement projects. The advertising budget decisions will rely on the marketing budget to guarantee profits.
This technique is beneficial to businesses in plenty of ways. Companies that cater to the international market setting can guarantee equal advertising across all countries. It’s easier to identify promotional budgets during business meetings because of how transparent the setup is. Lastly, much like the cost-effective method, the company does not go over budget with their advertising campaigns. The company is responsible for determining the ceiling amount for advertising.
On the downside, this technique does not allow for growth or experimentation. It uses historical performance as a reference in assigning the portion of sales suitable for advertising efforts. If sales are dwindling, the advertising budget is primarily affected. Therefore, any efforts to revive the product through advertising are not entertained. Overall marketing objectives are less significant than the budget itself. Because of how straightforward the technique is, the company might not realize advertising’s role in sales. It also overshadows the actual marketing campaign’s effectiveness. How will the company introduce new products if they are implementing this technique? A new product means no sales. No sales mean no advertising. Last but not least, price reduction becomes the go-to solution of most local managements. Lowering the price is a great way to increase sales, but it can harm the company in different ways.
Rival Analysis Method
This approach will have you studying your rival’s promotional budgets. Of course, you’ll be doing some estimating since it won’t be possible to get your hands on their confidential documents. So, this is where the challenge lies. Aside from not being able to work on actual data, it’s also difficult to track promotional activities even if you closely monitor your rivals.
When you use this strategy, you’re only piggybacking on their advertising team, instead of utilizing yours. Moreover, it does not take into account where you stand in the industry. Choosing the best advertising decision for your company requires you to consider all aspects of your business, including your situation in every market. For instance, a small business interacts with their clients and customers differently than a large-scale international company. If this distinction is not put into consideration, the advertising budget decision will be compromised.
Target and Task Method
Probably the best method in choosing the right advertising budget decision is the target and task method. Most firms use this approach to solve all the issues encountered in the abovementioned methods. Here, you need to determine the objectives and the necessary steps to achieve these goals first and foremost. These will be your guide in identifying the right budget, successfully meeting your campaign needs in terms of time, market, situation, and products.
This approach utilizes a cost-benefit analysis. How much do you value your business goals? If the end results are worth it, the advertising budget goes up to meet them.
When picking the right advertising budget, you need to approach the task with a clear understanding of your business industry. Develop precise goals and see to it that your budget decision can accommodate them, instead of the other way around.