Module II
Advertisement Budget
The advertising budget is actually one of the important components of
marketing budget. There are different techniques of setting the ad
budget which are discussed Below:
•
Based on previous years’ expenditure on advertising.
•
Percentage of sales technique, here advertisers assess the annual
sales and then set budget.
•
At par with competition, meaning whatever is spent by the
competition equal budget is set by the advertisers.
•
Objective-based budget, here advertisers first consider the available
funds and then either cut the number of objectives or prioritize them
according to the existing funds.
Module II
Advertisement Budget: Approach and procedures for determining the
size of the budget, Administration and control of budget. Regulation of
Advertising: Self-Regulation by advertising Media (ASCI), Economic,
social & ethical aspects of advertising. 15 Hour
Factors Influencing Advertising Budget
1. Advertising Plans: The advertising objectives, strategies and
programmes determine the total amount of expenditure to be
incurred by the company for advertising purposes.
2. Marketing Opportunities: Marketing opportunities are different in
different markets, so the quantum of advertising appropriation has
to be differently determined to arrive at the total amount to be
budgeted.
3. Competition: The nature and pressure of competition influence the
size of the appropriation. A greater intensity of competition may call
for larger funds for advertising. Competitive advertising helps expand
demand.
4. Product Life Cycle: The product life cycle is also an important
determinant of the size of the total budget Consumer awareness and
increased usage are taken into account to determine the level of
advertising and costs.
5. Costs of Advertising: The total costs of advertising are decided for
appropriation. The advertising costs include the expenses incurred on
developing and preparing advertisements, designing the message and
selecting the media.
6. Type of Product: The type of product to be marketed determines the
size of the appropriation. Consumer products require a larger advertising
budget than industrial products.
7. Retailing: Advertising will be less in demand if retailing is co-
operative and effective. If retailers do not communicate product
attributes to consumers, advertising becomes essential.
Procedures of Advertising Budget
1. Preparationof Budget: The advertising budget generally prepared by
the advertising manager in consultation with marketing manager.
The advertising budget mainly made on the basis of inputs such as;
type of product, target market.
2. Presentation and Approval of Budget: Once the advertising budget
prepared by the advertising managers, it is presented in front of the
top management for the approval.
3. Execution of the Budget: After approval, the approval process, the
advertising manager execute the overall budget. At the time of
execution, the budget allocation are to be considered for various
activities.
4) Control of Budget: Once the advertising department of an
organization execute the budget, the result come out. So in this stage of
advertising budget process, the management ensures the correct use of
advertising budget by evaluating the overall effectiveness of advertising
programe.
Approaches to Advertising Budget
1) Top Down Approach
•)
Top Management sets the spending limit.
•)
Advertising budget is set within the allocation limit
•)
Advertising objectives and activities are planned according to the
set budget.
•)
It is a Judgemental Approach
•)
Budget is not linked to the objectives.
•)
This leads to predetermined budget allocations which are not
related to advertising objectives.
•)
Methods–Affordable Method, Arbitrary Allocation, Percentage of
Sales, Competitive Parity, Return on Investment.
The top-down approach of budget setting includes following
methods:
(a) Affordable Method: Under this approach, a company spends as much
on advertising as it can afford. It can spend for advertising as much as
the funds permit. From the name itself, it is clear that the affordable
amount set aside for advertising is known as affordable method.
(b) Arbitrary Allocation: In this method, the budget is determined by the
manager solely (alone) on the basis of his/her judgment, or without
any rationality or rule.
(c) Percentage of Sales: This method is one of the most widely used
method for setting the appropriation. “Percentage of sales method is
based on the previous year’s sales, on estimated sales of coming year
or on some combination of these two”. This method include
(d) Competitive Parity: This approach is followed by organizations
whose product is well established and operating in market with
predictable sales pattern. Organizations following this approach
compare their advertising spending with that of its competitors.
(e) Return on Investment: This method, also referred to as ‘rate on
investment’ or ‘incremental method’, considers advertising and
promotion as investments, like plant and equipment. Therefore,
investment in the budgetary appropriation i.e. expenditure on
advertising and promotion is expected to bring certain returns.
2) Bottom/Build Up Approach:
•
Advertising objectives are set.
•
Activities necessary to achieve objectives are planned.
•
Costs of different advertising elements are budgeted.
•
Total advertising budget is approved by top management.
•
Budget is allocated on the basis of activities considered essential to
accomplish the objectives.
•
Methods– Objective and Task Method, Pay-out Planning,
Experimental Method.
The bottom-up approach includes following methods:
(a) Objective and task method:
(i) Defining the communication objectives to be accomplished.
(ii) Determining the specific strategies and task needed to attain them.
(b) Pay-out planning method: The method is widely used for making
advertising budget for the new product. A pay-out plan is developed to
determine how much to spend.” The basic idea behind pay-out
planning method is to project the revenues the product will generate
over two or three years, as well as the cost it will incur.”
(c) Experimental Method: In the experimental method varying
advertising expenditures are used in different cities. For example the
advertising expenditure in Pune may be greater than the advertising
expenditure in Hyderabad. Then sales in the two cities are compared
to find out which is optimum level of expenditure look alike, was a
striking television commercial that immediately gained attention.
Regulation of Advertising
Advertising regulation is a fascinating subject, and it is heavily
determined by political attitudes. Those who believe in less government
and think that business should be left alone to regulate itself tend to
favour less advertising regulation. Others who believe government has a
role to play tend to want more legislation and government regulation.
A Misrepresentation or Omission
There are a variety of ways in which misrepresentations or omissions
can occur:
[Link] that a small difference is important.
[Link] product demonstrations
[Link] an ambiguous or easily confused phrase.
[Link] a benefit that does not fully or partially exist.
[Link] that a product benefit is unique to a brand.
[Link] that a benefit is needed or that a product will fulfill a
benefit when it will not.
7. Incorrectly implying that an endorser uses and advocates the brand.
8. Making a claim without substantiation
9. Bait and switch
10. Identifying the advertising
11. Telemarketing
12. Intellectual property
Advertising Standards Council of India (ASCI)
ASCI consists of a Board of Governors and a Consumer Complaints
Council. The Board of Governors comprises four members from each of
the four sections connected with the advertising industry:
•
Advertisers
•
Advertising agencies
•
Media
“The Advertising Standards Council of India” in November 1985 under
the 1 Introduction At present in India, there is no central statutory agency
or uniform legislation regulating the advertising industry. The Indian
advertising market as a whole is regulated and controlled by a non-
statutory body, the Advertising Standards Council of India (ASCI). In the
absence of uniform integrated legislation, it is necessary for advertisers
Laws: Statutory Regulation of Advertising
Complementing the ASCI Code are Indian laws governing specific
media, specific populations, and specific goods and services. The most
significant of these laws are listed here.
Laws Governing Media
•
The press Council Act 1978
•
Cable Television Network Rules 1994
•
Code for Commercial advertising om Doordarshan and All India Radio
•
Electronic Media Monitoring Centre
•
Norms for Journalist Conduct issued by the Press Council of India
•
Code of Conduct of the News Broadcasters Association
Social, Economic and Ethical Aspects of Advertising
Advertising is praised but also criticized by critics in their own ways.
Advertising has many positive impacts along with its negative pictures.
1) Economic role of Advertising
(a) Value of Products: The advertised products are not always the best
products in the market. There are some unadvertised products also
present which are good enough. But advertising helps increase value for
the products by showing the positive image of the product which in turn
helps convincing customers to buy it. Advertising educates consumers
about the uses of the products hence increasing its value in minds of the
consumers. For e.g. mobile phones were first considered as necessity but
nowadays the cell phones come with number of features which makes
(b) Effect on Prices: Some advertised products do cost more than
unadvertised products but the vice versa is also true. But if there is more
competition in the market for those products, the prices have to come
down, for e.g., canned juices from various brands. Thus some
professional like chartered accountants and doctors are not allowed to
advertise. But some products do not advertise much, and they don’t need
much of it and even their prices are high but they are still the leaders in
market as they have their brand name. e.g., maruti cars.
(c ) Effect on consumer demand and choices: Even if the product is
heavily advertised, it does not mean that the demand or say consumption
rates will also increase. The product has to be different with better
quality, and more variety than others.
(d)Effect on business cycle: Advertising no doubt helps in employing
more number of people. It increases the pay rolls of people working in
this field. It helps collecting more revenues for sellers which they use
for betterment of product and services. But there are some bad effects of
advertisements on business cycle also. Sometimes, consumer may find
the foreign product better than going for the national brand.
2) Social role of Advertising:
There are some positive and some negative aspects of advertising on
the social ground. They are as follows.
(a)Deception in Advertising: The relation between the buyers and
sellers is maintained if the buyers are satisfied with what they saw in
advertise and what they got after buying that product. If seller shows a
false or deceptive image and an exaggerated image of the product in the
advertisement, then the relation between the seller and buyers can’t be
healthy.
(b) The Subliminal Advertising: Capturing the Minds of the consumers
is the main intention of these ads. The ads are made in such a way that
the consumers don’t even realizes that the ad has made an impact on
their minds and this results in buying the product which they don’t even
need.
(c ) Effect on Our Value System: The advertisers use puffing tactics,
endorsements from celebrities, and play emotionally, which makes ads
so powerful that the consumers like helpless preys buy those products.
These ads make poor people buy products which they can’t afford,
people picking up bad habits like smoking and drinking, and buy
products just because their favourite actor endorsed that product.
(d) Offensiveness: Some ads are so offensive that they are not
acceptable by the buyers. For example, the ads of denim jeans showed
girls wearing very less clothes and making a sex appeal. These kinds of
ads are irrelevant to the actual product. Btu then there is some ads which
are educative also and now accepted by people.
3) Ethics in Advertising:
Ethics means a set of moral principles which govern a person’s
behaviour or how the activity is conducted. And advertising means a
mode of communication between a seller and a buyer. Thus ethics in
advertising means a set of well defined principles which govern the
ways of communication taking place between the seller and the buyer.
(a) An ethical ad is the one which doesn’t lie, doesn’t make fake or
false claims and is in the limit of decency: Nowadays, ads are more
exaggerated and a lot of puffing is used. It seems like the advertisers
lack knowledge of ethical norms and principles. They just don’t
understand and are unable to decide what is correct and what is wrong.
(b) Ethics in Advertising is directly related to the purpose of
advertising and the nature of advertising: Sometimes exaggerating
the ad becomes necessary to prove the benefit of the product.
( C )Ethics also depends on what we believe: If the advertisers make
the ads on the belief that the customers will understand, persuade them
to think, and then act on their ads, then this will lead to positive results
and the ad may not be called unethical .
Module II
Advertisement Budget: Approach and procedures for determining the
size of the budget, Administration and control of budget. Regulation of
Advertising: Self-Regulation by advertising Media (ASCI), Economic,
social & ethical aspects of advertising- advertising. 15 Hour