MKTG 477 1st Edition Lecture 19 Outline of Last Lecture I In class activity Outline of Current Lecture I Percentage of Sales II All you can afford III Arbitrary allocation IV Competitive parity V Objective and Task Current Lecture March 6 2015 Budgeting What do you need to know about promotional budgeting 1 Budget items where the money goes 2 Budgeting methods techniques how the money is allocated 3 Budget considerations and effects factors that may influence the budget decision Budget items Creative production Media Research Budgeting methods techniques commonly used Percent of sales most companies use this even though it is not the smartest o Promotional budget is set as a percentage of current or anticipated sales o Typical percent of sales 2 to 5 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute All you can afford Affordability o sales revenue expenses advertising promotion Arbitrary allocation o Not systematic o Hit or miss o More at the local level vs national o Can be based upon mood of manager at time Competitive parity o Budget with competitors in mind o Keep the same proportion of dollars spent as competitors Company Sales Ad budget Percent McDonalds 34 17 billion 963 million 2 8 Subway 11 40 billion 475 million 4 2 Wendy s 8 51 billion 273 million 3 2 Burger King 8 40 billion 300 million 3 6 Pizza Hut 5 41 billion 220 million 4 1 Objective and Task o Set the promotional objective o Determine tasks to meet that objective o Estimate the costs associated with those tasks o Set the budget accordingly Should the money spent on promotion be considered an investment or an expense Or does it matter Expense a cost to doing business Investment attempting to achieve an objective As expenses Percentage of sales o Doesn t make sense to spend less on advertising when sales are down because you need to spend more to increase awareness leading to sales Arbitrary allocation All you can afford o Same logic as percentage of sales Competitive parity sometimes o Thinking you have to increase or decrease budget because competitors are does not make sense when your sales are different than theirs As investments Competitive parity sometimes o They hope to accomplish something see it as an opportunity to become more competitive Objective and task o We are hoping that by X time spending X amount of money will help us get there
View Full Document
Unlocking...