Explain in detail the different methods of alocation of budget for marketing communication
Answers
1.Fixed percentage of sales. Start with last year’s total gross sales or average sales for the past few years, then allocate a specific percentage of that figure for advertising. Most businesses set aside between 2% and 5% of annual revenues for advertising. So if your annual sales are $300,000 then spend $6,000 to $15,000 on advertising.Fixed percentage of sales. Start with last year’s total gross sales or average sales for the past few years, then allocate a specific percentage of that figure for advertising. Most businesses set aside between 2% and 5% of annual revenues for advertising. So if your annual sales are $300,000 then spend $6,000 to $15,000 on advertising.
2. Comparable to the competition. Adopt the industry average for ad budgets for your company. Many trade associations and industry publications can provide the average amount or percentage companies spend on advertising
3. Objective and task-based. Begin by setting specific marketing objectives and deciding on the tasks required to meet those objectives. (Example: Increase out-of-state clients by 5% using online promotions.) Then determine your budget by estimating the costs of carrying out those tasks. If you can’t afford to fund all your ideas, rank them and focus on the top few.
4. The maximum amount. Lots of fast-growing businesses put their faith in this strategy, which advocates setting aside just enough money to sustain the business -- and your family -- then spending the rest on advertising.