What is the Advertising budget?
The advertising budget is the portion of the marketing budget that is allocated to advertising by an organization over a time period. The advertising budget is typically broken down into smaller budgets for each medium that will be used, such as television, radio, print, online media, and digital branding.
Types of Advertising Budget
The four main types of advertising budgets are:
- Percentage of sales: This is the most common type of advertising budget, and it’s based on a percentage of your company’s sales. For example, if your company’s sales are $50,000 per month, and you want to spend 2% of that on advertising, your advertising budget would be $1,000 per month. By doing this, companies generally measure ROI (return of investment) for each penny spent on advertising.
- Competitive parity: With this type of budget, you match the advertising spending of your closest competitors. If your competitor is spending $5,000 per month on advertising, and you have a competitive parity budget, you would also spend $5,000 per month on advertising. This method will help you invest a sensible budget in advertising and at par in the space of branding in the market.
- Affordable: An affordable advertising budget is one that doesn’t strain your company’s finances. It’s important to set an affordable advertising budget so that you don’t overspend and get yourself into financial trouble. Small businesses and startups start measuring their advertising impacts over their revenue generation and slowly increase their budgets.
- Objective and task: This type of advertising budget is based on specific objectives and tasks that you want to accomplish with your advertising. For example, if you want to increase brand awareness by 10%, you would set an advertising budget that would allow you to reach that goal.
Importance of Advertising Budget
The advertising budget is the amount of money that a company allocates to its advertising campaigns. It is very important for companies to carefully consider their advertising budget because it can have a big impact on their business. A company with a large advertising budget can reach a wider audience and have a greater impact on sales. However, a company with a small advertising budget may not be able to reach as many people and may not have as much of an impact on sales.
The advertising budget is also important because it can help to determine the effectiveness of a company’s advertising campaigns. If a company is not getting the results it wants from its advertising, it may need to increase its advertising budget. On the other hand, if a company is getting good results from its advertising, it may be able to reduce its advertising budget.
Overall, the advertising budget is a very important tool for companies to use to achieve their marketing objectives.
Factors affecting marketing budget
Current market share: A company with bigger market share may spend less on their promotional activity whereas a company with less market share will spend more.
Competition in Industry: Higher the level of competition in the industry more a company has to spend on marketing to capture the attention of the audience.
Frequency of Advertising: The frequency of ads will decide on the investment done on them. Running campaigns on holidays or regularly will impact the decision making as well.
Preparing an advertising budget helps control the cost of the advertisement. Advertisement helps to increase revenue. But, the budget of advertisement is also important as it includes many factors such as production capacity, market demand, availability of the funds, etc. All these factors should be considered while setting the advertising budget.