Budgeting is a very crucial element of the advertising plan as advertising is one of the most expensive modes of marketing communications. Some of the techniques that advertisers use for planning the budget are inclusive of historical method, objective-task method, percentage-of-sales method, competitive method and all-you-can-afford method.
The first method, that is the historical method, focuses on the past budget of the previous year and adds a percentage of inflation in the present advertising budget to it. The second method is the objective-task method in which the objectives for each advertising activity are contemplated and the cost to fulfil those objectives is determined. The third method is the percentage-of-sales method in which the sales and the advertising budget of the last year are compared. The percentage that the advertising budget forms of the total sales is computed and the same percentage is used for the upcoming year. As for the competitive method, it involves looking at the mode of budget allocation of the competitors and shaping one's own budget in accordance with it. As for the last method, a company spends the money in all other activities and whatever is left over is used for the advertising budget.
The first method, that is the historical method, focuses on the past budget of the previous year and adds a percentage of inflation in the present advertising budget to it. The second method is the objective-task method in which the objectives for each advertising activity are contemplated and the cost to fulfil those objectives is determined. The third method is the percentage-of-sales method in which the sales and the advertising budget of the last year are compared. The percentage that the advertising budget forms of the total sales is computed and the same percentage is used for the upcoming year. As for the competitive method, it involves looking at the mode of budget allocation of the competitors and shaping one's own budget in accordance with it. As for the last method, a company spends the money in all other activities and whatever is left over is used for the advertising budget.