Setting advertising appropriations

Date of publication: June 14, 1978

Author: Gerald Eva

Abstract:

This paper shows how a number of advertisers currently set advertising appropriations; examines alternative methods designed to guide the decision making process; and cites more case histories to indicate the implications of given budget levels in the market place. Despite the presence of numerous techniques, many of them complex and sophisticated, present practice generally favours a rule-of-thumb approach. As far as a conclusion can be reached with universal application, it can be fairly said that most companies could benefit by considering a more objective approach to budget setting, and at least more to the 'Task' or 'Total' methods reviewed in the paper. In essence, these approaches force disciplines on the budget setter, but are flexible and designed to relate to any individual company's circumstances and market situations. In the final analysis, however, advertising budgets represent only one element of marketing costs. In turn, these marketing expenses account for a proportion of variable costs which are adjusted with due regard for shareholders' returns. Invariably this regard for the central purpose of a company's operations will set practical parameters for budget level decisions.

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