ADVERTISING BUDGET:

An advertising budget is a plan that sets a limitation on advertising expenditure,

states how expenditure will be allocated and controls the dispersement of
expenditure over a designated period of time.

Deciding the advertising budget

1. Prepare draft budget proposals.
2. Discussion and decision making.
3. Final budget plan.

Methods of Advertising Budget allocation and settings

1. Affordable methodAfter the budget has been allocated to all other areas, the company allocates the
left over money for Advertisements.
2. Arbitrary allocationThis method is completely dependent on the managements discretion.
3. Percentage of sale methodAccording to this method Advertising and promotion budge is based on sales of
the product. The amount is determined by:
a. By taking a % of sales revenue.
b. Assigning a fixed amount of the unit product cost to promotion and
multiplying this amount by no. of units sold.

4. Percentage of profit method-

In this method companies set their budget at a certain percentage of their current or
forecasted profits.
5. Unit of sale methodThis method is based on the premise that a specific amount of advertising is
required for marketing each unit.
6. Historical methodIn this method last years advertising budget is adopted for the current year with a
view that no change has taken place in the market
7. Competitive parity methodThis method involves setting budgets to match competitors outlay and funds i.e.
the company monitors the competitors advertising and follows it.
8. Return on investment budgeting methodIn this method of budget setting, Advertising and promotion are considered as
investments which lead to certain returns.

Conclusion
The advertising budget is both a planning and control device. There are many
managerial functions that are performed through the process of budgeting. This
provides a forum of communication that resolves conflict and sets the priorities for
the communication plan of the company.