List And Describe Five Of The Most Commonly Used Methods

List And Describe Five Of The Most Commonly Used Methods For Setti

List and describe five of the most commonly used methods for setting advertising budgets.

As the Vice President of Marketing for a large consumer products firm, it is essential to understand the conditions under which increased spending on advertising and promotion relative to sales is justified, especially when transitioning from a conservative budget policy to a more flexible approach. Additionally, exploring effective sales promotion strategies suitable for Berkeley College within the education industry can enhance their marketing efforts and student engagement.

Paper For Above instruction

Setting an effective advertising budget is a fundamental aspect of strategic marketing, directly influencing the company's market presence and overall profitability. Various methods are employed by firms to determine appropriate advertising expenditures, each with its advantages and limitations. Here, we explore five of the most commonly used methods for setting advertising budgets: the objective-and-task method, the percentage-of-sales method, the competition-matching method, the affordable method, and the arbitrary method.

Objective-and-Task Method

The objective-and-task method involves establishing specific marketing objectives and determining the costs necessary to achieve them. This approach is considered the most logical because it ties advertising spend directly to desired outcomes, such as increased sales, market share, or brand awareness. Marketers first identify the specific tasks required to meet these objectives, such as media advertising, promotions, or public relations, and then estimate the costs involved. Although it provides a tailored budget aligned with strategic goals, this method can be time-consuming and depends heavily on accurate forecasting.

Percentage-of-Sales Method

The percentage-of-sales approach allocates a fixed percentage of past or projected sales to the advertising budget. It is straightforward and easy to implement, making it popular among firms. Typically, firms base this percentage on industry benchmarks or historical data. This method has the advantage of aligning advertising spending with revenue; however, it may perpetuate a cycle where poor sales lead to reduced advertising, potentially impeding sales growth, or conversely, result in excessive spending during high sales periods without strategic analysis.

Competition-Matching Method

The competition-matching approach involves setting the advertising budget to match or exceed the advertising expenditure of key competitors. This method is often employed in highly competitive industries where maintaining or increasing market share is crucial. By monitoring competitors’ advertising activities, companies can gauge an appropriate budget level. While useful for maintaining parity, this strategy may lead to over-spending if competitors are overspending or under-spending, and it does not necessarily align with the company's specific marketing objectives.

Affordable Method

The affordable method allocates funds based on what the company can afford to spend after other expenses are covered. Typically used by smaller firms or startups, this approach emphasizes financial caution. While it ensures that essential expenses are prioritized, it risks underfunding advertising, potentially limiting growth opportunities. This method lacks strategic rigor and can result in inconsistent or ineffective advertising efforts.

Arbitrary or Judgmental Method

The arbitrary method relies on the intuition or judgment of managers to set the advertising budget. It is often based on subjective estimates or organizational whims. Although it allows flexibility and quick decision-making, it can be highly inconsistent and lacks a solid analytical basis. This approach may work in situations where the marketing environment is stable, or managerial experience is extensive, but generally, it is considered less reliable.

Conditions for Increasing Advertising and Promotion Spending

As the new Vice President of Marketing, deciding when to temporarily increase advertising and promotion spending beyond typical limits involves evaluating specific market conditions and strategic opportunities. Six conditions under which increased spending makes sense include:

1. Market Penetration Opportunities: When entering new markets or segments, increased advertising helps build awareness and drive early adoption.
2. Competitive Threats: During aggressive competitive actions, such as new product launches by rivals or promotional blitzes, boosting advertising can defend or grow market share.
3. Product Lifecycle Stage: During the introduction and growth stages, more significant promotional efforts are often necessary to educate consumers and gain traction.
4. Seasonal or Promotional Campaigns: Special events, holidays, or seasonal peaks justify increased spending to maximize impact.
5. Brand Re-positioning: When repositioning a brand or product to attract a different audience, increased promotion helps communicate new value propositions effectively.
6. Changing Market Conditions: Economic shifts, technological changes, or consumer behavior trends may necessitate increased advertising to stay relevant and competitive.

Sales Promotion Strategies for Berkeley College

In the context of Berkeley College, a higher education institution, sales promotion can be an effective tool to attract new students and retain existing ones. One suitable strategy is offering limited-time scholarships or fee waivers targeted at specific demographics or programs. Such promotions can create urgency and appeal to prospective students hesitant to commit due to cost concerns.

For example, Berkeley College could introduce a "Spring Enrollment Bonus" campaign, providing application fee waivers or early registration discounts during specific months. This type of promotion capitalizes on the immediate decision-making window, encouraging prompt action. Additionally, partnerships with local high schools or community organizations could include campus visit incentives, such as free workshops or information sessions, which serve as promotional activities directly engaging prospective students.

All three types of sales promotion—consumer, trade, and business promotions—can be employed strategically. Consumer promotions, such as scholarships or discounts, directly motivate students. Trade promotions could involve incentives for high schools or educational counselors to promote Berkeley's programs. Business promotions might include collaborations with corporate partners for internship opportunities or co-branded marketing events, further expanding the college’s reach and appeal.

Conclusion

Choosing the appropriate method for setting an advertising budget depends on the company's strategic goals, financial capacity, and industry dynamics. The objective-and-task approach, despite its complexity, offers the most aligned and strategic budgeting process. Recognizing strategic conditions that warrant increased advertising expenditure allows firms to adapt effectively to market challenges and opportunities. For Berkeley College, adopting targeted sales promotions like scholarships and institutional partnerships can significantly enhance recruitment and brand visibility. These approaches, supported by well-planned marketing policies, foster growth and competitiveness in the education sector.

References

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