Advertising budget: calculation methods, distribution, savings, procedures. Formation of an advertising budget Advertising costs and advertising budget

IV. Determination of the compensating volume of sales when the analyzed factor changes

A. Determination of the electrical resistivity of the most humid rocks by the AC bridge method.

Automatic regulators. Determination of the regulation law of the regulator (by the example of the automatic control system of a heat exchanger). Classification of linear regulators. Non-linear regulator (example)

Consider now how I determine the size commonadvertising budget for the planned period (year). After the strategies of advertising communications and incentives have been determined, this budget can be allocated to individual campaigns (see Chapter 11). From our point of view, determining the total budget is the logical conclusion of the marketing goal setting process.

Determining the size of the PC budget requires that profit, sales or market share be considered as specific. tasks advertising or promotion. The manager must balance the costs of future events, the amount of which is determined at the beginning of the year, with profit, sales or market share, expected by end of the year.

Getting your PC budget right is no easy task. We will give a few general recommendations, capable of simplifying it somewhat. Below will be given a description of two methods by which the size of the budget is most often determined: the method of goals and objectives and the expert method. We will then present several ad-hoc approaches that apply to new and existing products. In conclusion, we will once again return to the problem of the quantity and quality of spending on advertising.

Here are three tips we believe will help a manager plan for ad spend.

2. Use at least two methods.

3. Be flexible in budget execution.

an estimate of the total costs. You should start building your budget as if it only consists of total advertising costs. (The only exceptions are firms that sell their products through Groceries and pharmacies and traditionally giving preference to sales promotion. The allocation for incentives should be approximately proportional to the planned market share, more precisely, the planned share in the distribution channels. The manager can then follow our procedure for determining advertising costs.) It is much easier to predict how advertising will affect sales than any other incentive. After the total amount of advertising costs has been determined, it is possible to decide how to distribute it among various means of advertising and incentives (read about IMC in Chapter 11, about the choice of advertising media - in Chapter 15).

use at least two methods. When determining the size of the total advertising budget, let alone the budgets of individual companies, it is rarely possible to get an accurate and reliable figure. This is because, as a rule, there is no complete picture of the relationship between the consumer's contact with the advertisement and his response to actions. In addition, the future is generally difficult to predict (especially for a long period). Therefore, it is wise to calculate the size of the total advertising budget using at least two methods: if one turns out to be imperfect, then you can rely on the other. The final budget should be based on a sensible combination of the two methods. Later, we'll talk about which combination of methods is best for a given situation.

be flexible about budget execution. We are currently in the process of determining the size of the total PC starting budget for the next year (typical planning horizon). But the budget is always a forecast. Over the course of this year, the starting figure will be revised more than once, taking into account the effectiveness of conventional advertising in relation to other PC options, the quality of advertising, the actions of competitors and corporate decisions on this budget. In addition, the budget should be increased when PC activities prove to be effective, and reduced (if not stopped altogether) when they are ineffective. We specifically stipulate the need for a flexible approach, because in practice, annual budgets are too often perceived as fixed, unchanging. As a result, the firm is unable to take advantage of the excellent advertising campaign or, on the contrary, wastes money.

Deciding on advertising is a five-step process that consists of setting goals, making decisions about the budget, circulation, and media, and then evaluating the results of the advertising program.

All companies that decide to invest in advertising sooner or later face the problem of determining the optimal amount of money to spend on advertising. On the one hand, at a certain stage in the development of a company, advertising is indispensable, on the other hand, how to find the level of costs that will be most effective. The answer to this question requires a detailed analysis.

Currently, there are a number of techniques that allow solving this problem with some approximation. However, each of the methods has its own advantages and disadvantages. Along with the simplicity of the method, its low reliability stands out; to increase the accuracy, it is often required Additional Information, which is not available on the information services market. In addition, in all methods there is no connection between advertising and other marketing elements. The existing problem is especially urgent for Russia. All methods can be roughly divided into two groups: traditional and new. More progressive new methods ( mathematical models and experimental formulas) allow you to determine advertising costs with a high degree of accuracy. However, in the current market conditions in Russia, they are often overly complex in practical application due to market instability or lack of information. In this case, traditional methods come to the rescue.

Let's consider the various methods from the point of view of advantages and disadvantages.

Let us note several features of the currently existing methods for calculating the advertising budget.

1. Almost all methods are designed for large advertisers.

2. Practically none of the methods gives an answer to the question - for which media and in what quantity within these media to distribute the advertising budget. That is, it is considered a priori that the main thing is “how much” to spend, and not how it is “how much” to distribute.

And now in more detail about each of the listed methods.

Easy to understand and use. In contrast to the two previous methods, the relationship between the volume of advertising costs and the volume of trade is recognized. At the same time, cause and effect in this case are reversed, the volume of advertising allocations is determined by the volume of sales, and not vice versa.

In these methods, it is not without reason that the increase in the company's turnover is proportional to the advertising inflows.

k - prevailing in the market (or in the firm itself) indicator of deductions for advertising in relation to the volume of sales;

Suppose the firm's sales are $ 500,000. The market's current advertising spend is 3%. Then the advertising budget will be 15 thousand dollars.

Perhaps the only dignity this method is its simplicity. Otherwise, this method is not far from the principle of evaluating the advertising budget, which is called "from the bulldozer."

The size of the incentive budget is set at the level of the corresponding costs of competitors. There are two reasons for this method. One is that the cost level of competitors epitomizes the collective wisdom of the industry. The second is that maintaining competitive parity helps avoid fierce competition over incentives. But here, too, none of the arguments is truly valid. There is no reason to believe that competitors have sounder views on how much to spend on incentives.

In this system, the advertising budget is selected as a share of the advertising costs for the entire category. In jargon, this value is also often referred to as the proportion of noise, where by noise is meant the total volume of advertising offered to the consumer.

This system allows you to set a competitive advertising budget; respond to changes in competitive environment, for example, on the appearance of new products on the market. It brings realism to the anticipation of the effect of advertising, for example, if you spend half as much on advertising as your closest competitor, you can hardly expect the same market share as theirs. In addition, if we take PR campaigns into account as well, then we get an additional advantage.

However, the information you collect may not be accurate because it is not easy to get data that reflects your competitors' advertising costs. Competitors can dictate your budget and force you to waste. The underlying assumption that there is a direct relationship between advertising spend and market share is incorrect. The budget will not be calculated correctly until the competition in the market is correctly identified. Judgment based on share of total ad spend can be quite narrow in terms of usage modern methods... At the same time, trying to account for the effect of other elements of marketing is time consuming and may not be cost effective.

These methods include the method of evaluating the advertising budget, taking into account the practice of competing firms.

It should be noted that this method is unlikely to carry at least any semantic load. Suppose there are two main competitors in the market. The first spends $ 20,000 on advertising, and the second $ 100,000. It is easy to calculate that this method gives an advertising budget of $ 60,000, although it is clear that everything depends on the size of the given firm. If this firm is comparable in size to the first firm, it is unlikely to be able to afford the estimated amount of the advertising budget without compromising working capital... If the firm is comparable to the second firm, then for successful competition it can and should spend on advertising more than the calculated amount.

You can also highlight the method of equity participation in the market. This method is based on determining the market share that a given firm expects to occupy. In addition, in this method, it is not necessary to estimate the amount of advertising budgets of each competing firm, but it is enough to estimate the total volume of advertising injections for a given product, work or service.

In this case, the total volume of advertising injections for a given product is an external value for a given firm (i.e., a certain one). This value can be estimated more or less accurately. However, it is much more important to correctly assess the size of the market share that a given firm expects to occupy. It is from the assessment of this value that it depends how much the value of the advertising budget will be optimal. And since this method does not provide a way to estimate this quantity, the value of this method is highly questionable.

3. Calculation of the advertising budget for residual funds. The amount of the advertising budget is calculated based on the funds remaining after use for all other needs. Determined by short-term financial capacity firms after taking into account all other budgetary costs. This is the simplest method, which does not take into account the real goals and objectives of the company, but rather shows the state of affairs in the absence of specific advertising tasks. The budget is cut when things go wrong; when there is money, it is spent.

This method, apparently, is one of the most unsuccessful, since it reduces advertising policy to the level of a "stepdaughter", and it is absolutely unfair. Investments in advertising are no different from any other investment. The value of their profitability can be either higher or lower than these other (alternative) investments. Therefore, advertising costs should be considered on an equal basis with other costs.

Firms budget for incentives a certain amount which they can afford to spend. This method of budgeting completely ignores the impact of incentives on sales. As a result, the size of the budget from year to year remains uncertain, which complicates the long-term planning of market activities.

There are also the following methods: a method of forming a budget based on its volume for the previous period. In this case, the budget is adjusted relative to the previous level in accordance with changing conditions ("from the fact").

Then the researchers identify a method for determining the volume of the advertising budget, taking into account the goals and objectives.

A goal and goal approach focuses on the goals to be achieved and the role that advertising should play in doing so. This is a multifaceted process. In a goal-oriented approach, advertising is no longer viewed as a consequence, but as a reason for making a sale.

When using this approach, the first stage of work is to formulate goals: what volumes of sales and profits are to be achieved; what is the market share to be won; what groups and market areas are to be processed; what the consumer response should be. Then the tasks are formulated, i.e. determine the strategy and tactics of advertising that can lead to the achievement of the set goals. And after that, the estimated cost of the advertising program is displayed, which becomes the basis for determining the budget.

At the same time, this approach requires periodic budget revisions. If the ad campaign delivers more than expected returns, costs can be reduced. If the results are lower than expected, the budget can be increased.

This method can be formalized in a linear form as follows:

Ea = p * n 0 * S / S max,

where p is the cost of one so-called rating unit;

S is the desired level of sales;

S max - the maximum level of sales volume (conditionally 100% coverage target audience).

Suppose S max = 100 thousand dollars, n 0 = 2000, p = 10 dollars.Then if the company aims to achieve the level of sales of 75 thousand dollars, it needs to cover 75% of the target audience with advertising (75/100), which will require payment of 1,500 rating units, which in turn will require $ 15,000 of the advertising budget.

Let's consider one more variation of the considered method - the "Yule model".

We bring in general view the formula for this model:

Ea = p * n 0 * 1 / (k 0 * k) * N / N max,

where p and n 0 have, in fact, the same values ​​as for the previous method;

N max - quantity potential clients advertiser firm;

N is the number of clients who will become regular customers this company;

k is the ratio of the number of clients of a given firm who have become permanent to the number of clients who will try the goods of this firm;

k 0 - the ratio of the number of customers who try the product of this company to the number of those who saw the advertisement of this company.

It is easy to see that N / k is the number of customers who have tried the product of this company, and N / (k * k 0) is the number of potential customers who have seen the advertisement of this company.

Let the company want to enter the market with a new type of cigarette. The market consists of 50 million smokers (N max = 50 million). The company wants 4 million smokers to switch to this brand (N = 4 million). According to the calculations of the company's marketers, this will account for 40% of the number of those who have tried cigarettes of this brand (k = 0.4, respectively = 10 million). This, in turn, will account for 25% of the number of those who saw the advertisement of this company (k 0 = 0.25, respectively = 40 million). Thus, the ad should reach 80% of potential customers (= 0.8). Conventionally, when reaching 100% of potential customers, 4000 units of advertising are needed (n 0 = 4000). Then 3200 ad units are needed to reach 80% (= 3200). One ad unit will cost $ 3,000 (p = $ 3,000). Then the total budget of the advertising campaign should be 9600 thousand dollars.

This model is almost identical to the previous method, with the only exception that instead of the turnover value, the value of the number of customers is used here, which in some cases (as in the case of cigarettes) is quite justified.

In the methods of determining the size of the budget based on the goals and objectives, two more models can be distinguished: the "Vidal-Wolf model" and "ADBUDG model", however, due to the fact that these models are very similar to those described above, and are also relatively rarely used in practice , we will not consider them in detail in our work.

Let's note the general drawbacks typical for methods of calculating the advertising budget depending on the turnover. The dependence of the value of the turnover on the size of the advertising budget is either linear or non-linear. These dependencies contain from 1 to 4 coefficients (both linearly dependent and linearly independent among themselves). From a purely mathematical point of view, to find these coefficients, it is necessary, firstly, to know the number of dependence points S = f (E A), equal to the number of linearly independent coefficients, and secondly, to solve the system of equations for these coefficients. However, if we can determine at least one point of dependence S = f (E A), then it is not clear why it is impossible to determine the point we need. So, for example, for the 2nd method, it would be possible to directly estimate that in order to achieve the level of sales of 75 thousand dollars, it would be necessary to spend 15 thousand dollars on advertising. that to attract 4 million smokers will require 9600 thousand dollars of the advertising budget. For the rest of the methods, the situation is similar. However, let’s even assume that we have correctly determined the amount of the advertising budget based on the amount of turnover (current or desired). But there is hardly any reason to believe that the value of the desired turnover is the optimal value. It can be both overpriced (then part advertising costs are wasted) and underestimated (then, with a larger amount of the advertising budget, the company would have more profitability than it turns out with a given amount of the advertising budget).

This method is based on the algorithm for finding the optimal value of the advertising budget according to the criterion of the maximum ratio of advertising efficiency to its costs. This is perhaps the first method before which you can already slightly raise your hat.

In this method, it is assumed that the effectiveness of advertising, expressed in the relative value of the target audience reach, depends on the cost of advertising as follows:

f = 1 - (E A0 / E A),

where f is the value of the target audience coverage (at 100% coverage f = 1);

E A0 - a certain coefficient, meaning equal to the amount of advertising costs, at which the effectiveness of advertising is zero (f = 0). It is obvious that advertising costs equal to E A0 and less than this value do not make economic sense.

It is easy to see that 100% coverage of the target audience (f = 1) is achieved with an infinite amount of advertising costs (E A).

Of course, it is difficult to judge how close this relationship is to the real one; nevertheless, although it is primitive, it correctly defines the economic essence of the relationship between the coverage of the target audience and the cost of advertising.

F = f / E A = 1 / E A - (E A0 / E A І).

Equating the derivative of this function with respect to E A to zero and finding the value of E A, we obtain the optimal amount of advertising costs. Substituting this value into the expression, we obtain the maximum value of the ratio of the target audience reach to advertising costs and the optimal target audience reach f opt = 0.5 (50%).

Since the formula contains only one coefficient (E A0), to determine it, it is necessary to find only one point of the dependence f (E A). For example, the firm's marketers have determined that with an ad spend of $ 25,000 (E A = 25), the target audience will reach 88% (f = 0.88). From the formula it is easy to find the value of the coefficient E A0: = 3. Accordingly, the optimal amount of advertising costs in this case is $ 6,000.

For example, the company's marketers have determined that at an advertising cost of $ 5,000 (E A1 = 5), the target audience reach will be 16% (f 1 = 0.16), and at a cost of $ 25,000 (E A2 = 25) - 88% (f 2 = 0.88). Substituting these values, we obtain the values ​​of the coefficients E A0 = 4.32, k = 1.21. Then the optimal value of the advertising budget is found E Aopt = 8.34 thousand dollars. The optimal coverage of the target audience will be f = 0.55 (55%).

In the original of this method, to characterize advertising costs, a certain intermediate value of the total rating units GRPs ( Gross Rating Points). Purely mathematically, this is not justified, since a fairly unambiguous correspondence is established between the cost of advertising and the number of GRPs in the method.

Now it should be noted that the function f (E A), which approximates the dependence of the coverage of the target audience on the value of the advertising budget, may have a different form. For example, this dependence can be approximated by a function. Here, the same as in the formula f = 1 for E A. The values ​​of the coefficients k and E A0 are similarly found by solving the system of equations. The value of E Aopt in this case cannot be found analytically, which does not prevent finding this value by the substitution method. For the same values ​​f 1, f 2 and E A1, E A2, the value of E Aopt = 10.39 thousand dollars for this type of approximating function. The optimal coverage of the target audience will be f = 0.46 (46%).

The main methodological error of this method consists, perhaps, in the fact that the maximum ratio of the target audience coverage and advertising costs acts as a decision criterion. In fact, this ratio is equivalent to the ROI:

where I is the profit due to investments in advertising E A, taking into account these costs.

Indeed, if we consider the profit I proportional to the effectiveness of advertising f (which is not devoid of economic sense), the optimization of the ratio of the reach of the target audience and the cost of advertising is tantamount to optimizing the return on investment in advertising. However, the criterion for making a decision on the amount of advertising investments (as, indeed, and any others) cannot be the optimal profitability of these investments. Let us explain.

For example, suppose an ad module in any publication costs 1000 rubles, and the profit brought by this ad module is 500 rubles. Suppose now that a module 2 times larger in area costs 2,000 rubles, and it will bring 800 rubles in profit. Then the profitability of the 1st module will be 500/1000 = 0.5 (50%), and the profitability of the 2nd module will be 800/2000 = 0.4 (40%). If you follow the optimality criterion adopted in the Danaher-Rust method, you need to choose a module that is smaller in area. However, in reality, it all depends on the profitability of the alternative investments. After all, a small module costs a thousand rubles. How can you use the second thousand rubles? If the return on alternative investments of the second thousand rubles is less than 0.3 (<30%), тогда общая прибыль при вложении двух тысяч рублей будет меньше, чем при взятии большего по площади модуля. Например, рекламный модуль в другом издании будет стоить также 1000 руб., однако он принесет 200 руб. прибыли. Тогда общая прибыль составит 500+200=700 руб., что меньше 800 руб., которые получит фирма, если возьмет больший по величине модуль в первом издании.

From the above reasoning, the following conclusion can be drawn. If advertising investments are the most profitable, then the advertising budget should not be lower than the optimal value according to the Danaher-Rust method. Further, it all depends on the amount of alternative investments. The less they are profitable in comparison with the profitability of advertising investments, the greater the value of the advertising budget should be relative to the optimal value according to the Danaher-Rust method.

In addition, it was considered that the profit I is proportional to the coverage of the target audience f. However, this is true only up to a certain value of coverage, above which the company may simply not have enough funds (both working capital and basic) to serve such a number of clients. Let's take a simple example. The firm sells mainly by telephone. Let's say a company has one telephone number, and as a result of an advertising campaign, the occupancy of the telephone line has increased to 90%. All the profit that would be brought by customers who did not get through due to the busy phone, is the lost profit of the company (opportunity cost). And in this case, the investment in additional telephone lines is likely to be more profitable than further investment in an advertising campaign. These are exactly those alternative investments, the profitability of which must be compared with the return on investment in advertising. In other words, the firm must have enough production capacity for a possible increase in turnover. Otherwise, some of the advertising money may be wasted.

Summing up some of the analysis of the above methods for developing advertising budgets, it should be noted that none of the above methods can be recognized as universal and offering the only correct way to calculate advertising costs. The communicator must independently choose the best method, taking into account the specifics of his marketing and advertising activities, as well as financial capabilities.

After the image of the campaign is determined - its image, the goals and objectives of the advertising campaign are determined, the proposed sources are selected

distribution, the most "difficult" question of the entire advertising campaign arises - determining the advertising budget. The composition of the costs of these activities is determined mainly by 2 options:

• -Based on the goals of the advertising campaign;
• -Based on allocated / available funds.

Objective factors:

The gross profit of the firm;

The curve of the dependence of sales on the volume of advertising costs

It should be remembered here that this dependence is difficult to track in the short term, since advertising works primarily on consumer awareness of the product / service.

Subjective:

In practice, very often the advertising budget largely depends on the skill of the advertising manager when discussing the advertising campaign with the firm's management. Both the management and the advertising manager may have different views on the advertising of the company, but the final decision always rests with the first persons. However, the degree of influence of a manager can be different and decisions can also be made differently.

The management often makes the final decision not based on the above scheme, but on the basis of the general situation in which the campaign finds itself.

Personal opinion of the head who makes decisions on the financing of the company's advertising.

In case of approval of a sufficient amount of the advertising budget for the advertising campaign (i.e. according to the target option based on the set

goals and the means necessary to achieve them), it is necessary to adhere to the following rule: "The amount and distribution of the advertising budget should ensure not only coverage of advertising costs through trade, but also the receipt of maximum income." It is difficult to comply with this rule, but it is possible with a competent and professional approach. At the same time, the indicators of the previous year, or a comparative assessment of competitors' budgets, are taken as the basis for determining the advertising budget. There are other methods as well.

In the case when the advertising budget is formed on a residual basis, then there are no rules for the formation of the budget, since initially advertising activity for an organization is not a condition for successful activity in the market. This is possible in 2 cases:

• -This is just the opinion of the management,
• - The demand for the company's products is not elastic, it is constant and its increase is not required.

There are several main methods for determining the volume of advertising budgets: the method "from the availability of funds", "% of sales", the method of "equity participation in the market", "competitive parity", "clothing budget", the method "based on the goals and objectives of the advertising campaign " and others. Method "from the availability of funds"

Development of an advertising budget for the promotion of products / services based on the opinion of the organization's management regarding the level of advertising costs. This method completely ignores the effect of costs on sales - costs can be either excessive or unreasonably low.

% Of sales method

Advertising costs are defined as a% of current or planned sales (for example, 2%). There are 2 points of view on this method. The first is that this method gives the management a stable indicator of advertising costs and no more. The amount of the advertising budget is not justified by anything, except for the tradition of the campaign, therefore, it makes no sense to consider the effectiveness of more or less investments in advertising campaigns.

The second point of view on this method forces the campaign management to think about the relationship between advertising costs, sales price and profit per unit of product / service. The disadvantage is that sales are viewed as a cause rather than a consequence of product promotion. It is also difficult to determine the amount of interest. Typically the percentage earmarked for advertising is based on the industry average or the experience of the campaign or leader. However, even in one industry, the size of funds allocated for product promotion can be different, since organizations differ in their capabilities and, in size and goals.

Thus, this method has its pros and cons.

Equity Method:

It is based on the fact that in industries where there is great similarity between goods / services, there is usually a clear relationship between market share and equity participation in the industry promotion of products. Based on this, some organizations are guided by the achievement of a certain indicator of the market share, and after that a certain percentage of costs is set slightly higher than this share for the promotion of products / services.

For example, an organization has 10% of the market share, then it must invest 12% of industry investments in promotion in product promotion. This method, if used by all market participants for a particular product, can lead to an increase in advertising costs in the overall cost structure due to competition in the market. Of course, both the organizations involved in such a struggle and consumers who are forced to pay additional costs for advertising campaigns will suffer. The cost of winning will be unreasonably high.

"Method of competitive parity"

The volume of the advertising budget is set at the level of competitors, often at the average industry costs (in% of sales). The same numbers give ad managers a sense of security. It is assumed that competitors' advertising budgets are based on the collective wisdom of the industry and that this approach discourages advertising wars. However, a mistake was initially made here, because, as mentioned above, campaigns are different both in their size, capabilities, and in goals, objectives and specifics of their activities. The point to keep in mind here is that the “top campaigns” in the industry with high profits should spend more on advertising than the rest of the competition.

"Clothes budget"

Method "based on goals and objectives"

The management of the campaign, forming the volume of the advertising budget, faces the question of which method of the above to use in order to avoid unreasonable costs and an increase in the cost of production. The "goals and objectives" method solves this issue in the most optimal way, since it includes the determination of production / planned indicators of sales volume, profit and the development of communication policy goals and an advertising campaign (product awareness, intention to make a purchase, etc.) to achieve the target sales level. After setting the goals, the coverage and frequency of advertising calls are determined. The cost of an advertising campaign with a given coverage and broadcast frequency is determined.

The advantage of this method is that advertising managers formulate the goals of the advertising campaign and are aware of the relationship between product awareness, trial purchase and subsequent regular purchases, and the relationship of these intermediate goals with the effectiveness of investment in the advertising activities of the firm.

There are also other methods of forming an advertising budget, which can also be used in their development and planning of an advertising campaign as a whole.

"Empirical method"

Determination of the volume of costs for an advertising company experimentally. After conducting a series of tests in different markets with different advertising budgets, the optimal volume is determined. However, with this method of budget formation, it is difficult to identify the final results of the impact of promotion methods and advertising measures in particular.

"Expert judgment" method

The technique of using the assessments of managers who are directly involved in the formation of the response curve It involves the assessment by managers of the level of sales without an advertising campaign and during its implementation, 2 times less than the current advertising campaign and 50% more. Calculating the overall score allows you to determine the optimal amount of advertising spending.

This method can be effective if the managers participating in the survey are professional and competent.

After determining the amount of costs for the advertising campaign and its approval by the company's management, further planning of advertising activities moves to the stage of allocating funds for the direction of the advertising campaign. The directions of use of the allocated funds can be approved together with the volume of advertising costs as a whole (for example, in shares,%).

Priorities in this matter will be given to those means of advertising messages that can provide the greatest coverage and consumers in general or the target group, the frequency of contacts with them. The success of an advertising campaign is determined precisely by these factors - with how many people, how often contacts are made and with what target groups.

Securing as many contacts as possible is an important but insufficient goal. In the process of contacting consumers, the advertising message must:

• - Draw attention to the product;
• - Arouse interest in him;
• - Arouse confidence and desire to purchase a product for trial;
• - Encourage you to buy it.
• - Study of the object of advertising.

The firm must have a clear idea of ​​its object of advertising. The difference between advertising for a product and advertising for a company lies in what is the object of the advertising appeal. The company is engaged, as a rule, as advertising individual products, and advertising the company as a whole. In the first case, the special qualities of the product are highlighted, in the second - through indications, for example, on the size of the enterprise and its world connections, an attempt is made to achieve customer confidence for the entire production program of the enterprise. You need to know and be able to highlight the uniqueness of your product or service. At the same time, for a systematic advertising activity related to the general policy and strategy of the enterprise, volumetric market and internal information is needed, in particular:

• -about the degree of market saturation;
• - about the stage of the product's life cycle;
• -on the activities of competitors;
• - about the characteristics of the target group;
• -about the availability and cost of advertising media;

The aspect of competition is very important. On the one hand, competitors pose some obstacles and create some problems. On the other hand, in a market economy, competitors contribute to the struggle for the quality of goods or services and are a kind of incentive to work.

So, a company should build its advertising policy on the ability to somehow stand out among competitors in the general market (if any), providing consumers with a unique type of service or in every way emphasizing the high qualifications of its employees, the specific properties of the product, the advantage of the product or service over other firms. It is important to find what the consumer is most sensitive to.

It is necessary to pay great attention to the choice of media carriers when placing advertisements. It is necessary to conduct a marketing research in advance of which radio stations are the most listened to by people in the segment of potential consumers of the Znayka Center. The selection of prizes was also carried out on the basis of the expected priority choice of potential consumers of a particular group of goods.

Table 3.3.- Choice of advertising media

To achieve the most effective advertising campaign, I believe that in this situation it is advisable to use various media, but some to a greater extent, some to a lesser extent.

TV. At present, it is unbearable for the "Znayka" DRC to spend a large amount of money on the purchase of television spots, on advertising sites of various television channels.

The weather forecast is a popular program on local television, most viewers watch the program to check the weather for the coming day. The frequency of exits is more than three times a day, every day. During the broadcast, the presenter will acquaint viewers with the show sponsor and convey the necessary information to the audience.

1) "Prioskolye" - information channel of the cable provider. Every hour weather forecast and advertisements. It is there that it is planned to place information about the Znayka center.

The audience is more than 500 thousand people, people from 30 years old and more.

2) Radio. Radio is a popular means of transmitting information among manufacturers and is less expensive than television. A wide range of offers, as well as age orientation allows the advertiser to choose a suitable radio station with optimal working conditions.

Based on the data provided by the radio stations, according to his work, he selected the most suitable:

"Europe +"

Broadcast frequency - 106.0 FM;

Audience - people from eighteen to forty-five years old;

Website - www.evropaplus.ru

The audience is about 750,000 people.

When choosing radio stations, I was guided by the frequency of broadcasting, audience coverage, social factors and coverage area. In this choice there are radio stations with FM and VHF frequencies, all listeners over eighteen years old and mostly working people, there is a fairly large coverage area. FM radio is mainly aimed at listeners who have a car and listen to information while driving in their car.

• 3) Press. To provide complete information about the conditions of the action, it is necessary to place thematic articles in periodicals.
• 1) Newspaper "Dawns"

Black and white edition on four pages A3 format, socio-political edition. Published on Tuesdays and Saturdays. Basic distribution subscription. The newspaper is read by people interested in events in the city, and this newspaper is also the official source of information for the City Administration.

2) The newspaper "Oskolsky Courier"

Two-color edition on twelve pages A3. It is published on Fridays with a circulation of up to one hundred and thirty-eight thousand copies. When choosing, you must be guided first by the circulation. The number of copies released can tell the advertiser how likely it is to reach the target audience. Secondly, the popularity of newspapers among the population was examined.

The circulation and popularity of these newspapers meets the requirements, so the choice is optimal.

The average cost of one publication in a newspaper using the example of "Oskolsky Krai" is eight hundred rubles.

Non-analytical methods are based on experience or simplified decision rules. Non-analytical methods greatly simplify planning, but have little or no connection to marketing goals.

Analytical methods are based on finding a functional relationship between the advertising budget and the level of achievement of marketing goals. This method requires the advertiser to form their ad budget based on specific goals and objectives and their costs. The sum of all these costs will give an approximate figure for the budget allocation for advertising. The advantage of this method is that it requires management to clearly state their ideas about the relationship between the amount of advertising costs, the level of advertising contacts and sales effectiveness.

From a tiered point of view, the advertising budget can be planned based on several marketing strategies, set an upper or lower level for each of the marketing variables - price and advertising budget. Then the market penetration strategy can be specified using the "product price - advertising budget" matrix (Figure 7.8).

The types of advertising budget plans include the following options: limit planning, when the size of the budget is set by the advertiser and advertising activities are carried out within the allocated funds; floating bar means a change in the advertising budget depending on the marketing situation; planning with a flexible target deficit means that performers can spend more money on an advertising campaign, if it becomes possible to achieve some predetermined goals, which are discussed as important but optional; tunnel planning is used when planning the budget for several advertising agencies, depending on the advertising media, and the transfer of funds from one to another is not possible; free planning is the importance of setting aside any amount of your advertising budget to achieve your marketing goals.

1. Calculation of the minimum advertising budget... There is a list of types of advertising performed by advertising by different advertising agencies or by one complex agency. Each type of advertising contains a certain number of different evaluation criteria and performance values. The amount of the advertising budget is known. It is necessary to determine a set of types of advertising that provide the required efficiency with the minimum cost within the advertising budget.

Thus, the goal of the problem is to minimize the cost of a set of types of advertising required for an advertising campaign.

Task parameters: NS- the number of different types or varieties of advertising offered to the advertiser; T - the number of criteria for advertising effectiveness; a ij- content i th efficiency criterion in j-th the form of advertising, i = 1,…, m :, j = 1,…, n; b i- number of values i-th criteria required by an advertiser in an advertising campaign ; with i - unit cost i-th type of advertising; x i is the amount i-th the type of advertising included in the advertising campaign for a given advertising budget. The conditions for determining the amount of each type of advertising have the form of a linear mathematical model

Optimality criterion C has the form:

By solving the mathematical model, the values ​​are determined x i-shares of funding i-x types of advertising necessary to solve the tasks at hand, according to the amount of which the optimal-minimum advertising budget is determined

2. Development of a budget based on the availability of funds (residual budget method)... Using this method means that the firm spends as much money on advertising as its management thinks it can afford. This is the simplest method, which does not take into account the real goals and objectives of the company, but rather shows the state of affairs in the absence of specific advertising tasks. The budget is cut when things go wrong; when there is money, it is spent. Such advertising costs are justified as long as they have not exceeded the optimal level of normalized advertising costs or the amount of profit from which they are formed, or the size of the budget for marketing communications.

3. Development of an advertising budget for based on cost planning. The advertising cost plan is an estimate of the costs of various planned activities aimed at achieving the set goals. Its purpose is to determine what is the dependence of the growth of turnover on advertising costs.

4. Method of calculation as a percentage of the amount of sales(current or expected) or to the selling price of the product, i.e.

This is the easiest way to calculate your ad budget. The sales forecast is calculated based on the compilation of a statistical sales trend. The percentage is traditional for each enterprise or is based on industry tradition. About 15% of entrepreneurs use this method. For example, the advertising share at the stage of brand promotion reaches 20% of the revenue, at the stage of the fait accompli of promotion it is 0.5 - 4%. It is possible to distinguish periods that are more attractive for an advertising campaign and less attractive for this.

In order to plan the amount of appropriations for an advertising campaign, first of all, on the basis of experience, it is necessary to build an approximate schedule of the dynamics of sales of goods based on the seasonality of demand for goods or the marketing policy of the enterprise (see Fig. 7.9). Advertising deductions are determined as a percentage of revenue. The graph in Fig. 7.9 will allow you to predict the advertising budget.

Rice. 7.9. Dynamics of seasonality of sales

Based on fig. 7.9, two sentences can be distinguished:

A). In areas of revenue failure (Q1 and Q3 of the year), it is necessary to conduct an advertising campaign in order to equalize the seasonal wave of sales. The advertising budget needs to be calculated from the projected peak in profits of the upcoming seasonal sales wave.

V). To exacerbate the wave of seasonality of sales, it is necessary, within the limits of the funds available to the company, at the border of 1 and 2, as well as 3 and 4 quarters (Fig. 10.8), to start an intensive advertising campaign lasting until the period of obtaining the maximum sales.

The disadvantage of the percentage of sales method is the possibility of violating the basic principle of marketing. The method is based on the fact that sales are the cause of advertising, and not a consequence, which is completely wrong. Advertising activity should increase sales, not be in terms of sales results. If advertising is automatically activated as a result of increased sales and falls as a result of a drop in sales, then all conditions of advertising activity are ignored.

This method of calculating the advertising budget does not allow experiments with new types of advertising and interferes with long-term planning. Using this method, it is impossible to form an advertising budget, taking into account the characteristics of each individual product and each individual sales area. In addition, marketing, advertising science and practice require increasing advertising costs when sales volume decreases. However, the "percentage of sales" method does not provide for this.

5. Method of competitive parity. Provides the amount of the advertising budget (R) at the level of the corresponding costs of competitors:

where Ri is the advertising budget of the i-th competitor (i.e. .: "Share in advertising media = Market share of the product in the mind of the buyer = Market share." The underlying assumption of a direct relationship between ad spend and market share is incorrect. The budget will not be calculated correctly until the competition in the market is correctly identified.

Two reasons are given in support of this method: the cost level of competitors epitomizes the collective wisdom of the industry; Maintaining competitive parity helps to avoid fierce advertising struggles, which are ruinous.

At the same time, they do not take into account: competitors can dictate your budget and force you to unjustified expenses; competitors have their own strategies, you have your own and, accordingly, a different allocation; following competitors you cannot become a market leader, etc.

6. The method of equity participation in the market. In industries where there is great similarity between products, there is usually a high ratio between market share and equity in industry advertising. Knowing this, some firms aim to achieve a certain market share and then set an appropriate advertising percentage of the budget. This method is based on the following proposal: all other things being equal, the distribution of the total market capacity between individual firms over time becomes proportional to the shares of these firms in the total advertising costs. Then, the advertising budget i-th company is defined as

where di- market share i-th company; Rj- advertising budget j-th competing firm.

In general, in order for a firm to maintain its market share, it is necessary to maintain its share in advertising at a level above market share. According to Peckham's formula, when a new brand is introduced, the advertising budget should be 1.5 times the market share expected in two years. For example, if a firm owns 10 percent of the market, then it should spend 15 percent of industry advertising on advertising.

7. Technical budget method... This method relies on an analysis of the ROI threshold for ad spend.

Q = S / (P - C),

where Q is the additional sales volume; S - advertising costs; P is the price of a unit of goods; C - costs (usually variable costs) per unit of goods; (P - C) - marginal profit per unit of goods. Required additional revenue = S / ((P-S) / P).

This method can be used to assess the level of advertising effectiveness in order to obtain the desired value of sales growth. It can be judged whether the budget under consideration does not imply unrealistic estimates of the existing market share. Here, advertising is viewed as an investment, not just a fixed cost.

W = t * U * Wк / Uк,

For example. Let's determine the size of the advertising budget for the Pepsi Co company if it wants to have a market share equal to 30%. The share of advertising costs in the sales volume is: for Coca Cola - 1.25, for Pepsi Cola - 1.66. The market share of Coca Cola is 23%, the advertising budget of the Coca Cola company is 28178149 USD. W = 1.25 / 1.66 x 30% x 28178149/23% = $ 48809454.

9. Method targets and goals. This is the most scientific method used by major advertisers. It analyzes the current situation, sets goals, identifies promotional tasks, calculates how much it will cost, and calculates the overall budget. An increase in the advertising budget enables an enterprise to: sell more with the prevailing price; sell a given volume of products at a higher price; sell more volume at a higher price (Figure 7.10).

Due to the increase in the advertising budget (W), the demand function shifts upwards to the right. The shift in the demand function due to advertising is the greater, the more the advertising budget increases. It is known that for each demand function there is a maximally profitable combination of price, commodity (P) and its quantity (Q). If the demand function shifts, then the maximum profitable ratio of the considered parameters also changes.

However, the maximum profitable sales volume of each subsequent value, located to the right of the achieved sales function, can be realized only with an advertising budget increasing in a larger proportion. The more you already have, the more difficult it will be to win one additional buyer. The criterion for the optimality of the advertising budget in this case is the maximum amount of net profit, that is, the excess of gross profit over advertising costs.

In a formalized linear form, the method for determining the volume of the advertising budget, taking into account the goals and objectives, is as follows:

,

where p- the cost of one so-called rating unit; n 0- the number of rating units required for conditionally 100% coverage of the target audience; S is the desired level of sales; Smax - the maximum level of sales (conditionally 100% coverage of the target audience).

,

where p- the cost of one rating unit; n 0- the number of rating units required for conditionally 100% coverage of the target audience; Nmax- the number of potential clients of the advertiser; N- the number of clients who will become regular clients of this company; k- the ratio of the number of clients of a given company, who have become permanent, to the number of clients who will try the goods of this company; k 0- the ratio of the number of customers who will try the product of this company to the number of those who saw the advertisement of this company.

It is easy to see that - this is the number of customers who have tried the product of this company, and - this is the number of potential customers who have seen the advertisement of this company.

10. Independent averaged forecast (NUP / 5V). It is based on expert assessments of the firm's management. Depending on the goals of the advertising campaign, 5-10 experts, based on experience, make independent forecasts for the advertising budget. Each expert should build his forecast independently of others, without discussing it with colleagues. The forecast budget is determined as the arithmetic mean of the experts' data, taking into account their weight significance. But the best thing is median all independent evaluations. ( Median- the value of the varying forecast, falling in the middle of the ranked population. Within the forecast interval, the median is calculated using the formula:

M e = X m H + d i (0.5N - F i -1) / f i,

where X m H - lower border of the median interval; d i- the size of the partitioning interval; F i -1- the accumulated frequency of the interval; N- the number of expert assessments; f i, is the frequency of the median interval.) From the point of view of statistics, such averaging gives acceptable results and does not depend on the extreme estimates.

11. The Dorfman-Stayman method. According to the Dorfman-Stayman rule, the ratio of the advertising budget to total sales is equal to the ratio of the elasticity of demand for advertising to the elasticity of demand for price. Thus, this method relies on three indicators - the total sales of the company, the price elasticity of demand and the advertising elasticity of demand. Having these indicators, you can calculate the amount of the advertising budget:

R = P E r / E c.

12. The method of modeling the relationship between the level of communication and consumer behavior. The initial premise of this method is the assumption that in order to achieve the planned sales volume, it is necessary to have a sufficient number of consumers, each of whom must buy a certain number of commodity units at the corresponding price per unit. To do this, it is necessary to achieve a certain level of awareness, motivation to test purchases and maintain the intensity of purchases during the first year after the product is on the market. The quantitative relationships between the audiences at the indicated stages of readiness to purchase are determined as a result of advertising research. Having determined them, they calculate the necessary degree of coverage and frequency of exposure, develop a plan for the use of advertising media. After that, you can determine the approximate amount of advertising costs.

The advantage of the method is the objective validity of the costs, their linkage with the set communication goals. Disadvantages: complexity, labor intensity, high cost.

13. Payment plan... He views advertising as an investment. It is assumed that it can take several years before the firm covers up the start-up costs and makes a profit. Using advertising as an investment, you can quickly achieve the required level of return on sales.

14. Advertising budget of an established brand is one of the most common situations. Test advertising, statistical forecasting and a purely practical method - the Schroer method - are used as methods for determining the advertising budget for a brand.

- Dough v a I'm advertising. In this case, several similar markets are selected and each of them is allocated a different amount of funds for advertising. How much depends on the experimental values ​​of the total budget, which may be more or less than the corresponding indicator of the previous year. The sales results in each of the test markets are then compared. The level of costs, which, depending on the goals of the company, gives the highest sales volume or the highest profit, is used as the advertising budget for the entire market.

If test budgets are distributed randomly across markets, then all other factors can be considered averaged. This means that advertising will be the determining factor. Even if budgets are not completely randomly allocated, discrepancies in other factors can be statistically eliminated after the results are obtained (for example, using analysis of covariance).

- Statistical forecasting. Z advertising costs and sales are compared over time (preferably by month, quarter, or year to identify short-term and long-term effects). To calculate the relationship between them, statistical tools are used (usually regression analysis). On the basis of the revealed dependence and the sales plan for the future period, the amount of the advertising budget is determined. In statistical forecasting, the influence of all other factors is taken into account mathematically, not experimentally.

The quality of advertising costs. The amount of the advertising budget does not fully determine the effectiveness of the marketing policy. The spending of the budget should coincide with the correct choice of the target audience, advertising media and channels, advertising delivery methods, etc. In fig. 7.13 shows the dependence of the sales volume depending on the quality study of the advertising campaign.

Optimization of the advertising budget allows companies to steadily stay in their market. European experience shows that with advertising costs up to 0.5 million dollars. the growth of fame proceeds linearly depending on the level of costs. With an increase in costs over 1 million dollars. fame grows faster: for each additional unit of cost, a higher level of fame is achieved than at the initial stage. In this case, fame is fixed in a certain period of time and includes recall (content attractiveness of advertising, potential availability for purchase, experience of real purchases).

All firms or companies use different methods of budgeting for an advertising campaign and develop their own cost allocation schedules for an advertising campaign.

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The successful existence of any enterprise today is impossible without advertising. She is not only responsible for the recognition of the company, but also contributes to the promotion and attraction of new suppliers and customers. Often, investments in advertising represent a significant part of the company's budget, along with other expenses. In order for these costs to be justified, it is necessary to carefully monitor the results of the campaigns, as well as to track the strategy of forming the advertising budget.

Why is the formation of the company's advertising budget necessary?

The types and purposes of advertising may differ depending on the characteristics of the organization and the product it offers. The formation of an advertising budget helps to determine the audience of the campaigns and the ways to attract the attention of potential consumers. Since advertising costs can be attributed to ongoing costs, the effectiveness of activities can be easily tracked. However, the specifics of the market, depending, for example, on seasonality, may delay receiving feedback from the funds invested in the promotion. Therefore, these costs can be classified as a long-term investment. Like other major investments, advertising costs must have a significant financial value in order for the effect of the campaigns to be comparable to the cost of the investment.

Formation of the advertising budget is based on the principle of reasonable spending of financial resources. High costs may not always lead to the desired results if the return on investment is not calculated. Therefore, the issue of forming an advertising budget must be approached from the point of view of the experience of past advertising campaigns and the specifics of the organization, taking into account the creative potential of the specialists responsible for advertising.

What factors influence the formation of the advertising budget

The most significant factors to consider are:

Market coverage

The intended target audience can determine the size of the advertising budget. Market coverage can be carried out both nationally and regionally. As a rule, when launching a new product on the market, large players can afford to operate within a specific country or even a continent. The advertising budget of such companies takes into account possible risks. However, smaller or inexperienced organizations prefer to reach the market gradually with advertising campaigns in specific regions. In this case, the formation of the advertising budget is relieved of the risks associated with the possible ineffectiveness of actions on a national scale.

The choice of the market segment to which advertising is targeted is largely determined by demographic characteristics. The smaller the audience, the more effective the campaign becomes through specific advertising media. If you need to reach a heterogeneous market, you have to use more advertising methods to attract, which can significantly reduce cost effectiveness. Reaching such an audience requires the use of television, the national press, etc., and such funds are very expensive, and the effectiveness of advertising may not be high enough.

The role of advertising

It's no secret that the sales volume directly depends on the effectiveness of the advertising campaign. If a manufacturer chooses to deliver their product to stores before the ad is released, this will increase customer acceptance of the product. This method is widely used by consumer goods companies. In this case, the formation of the advertising budget depends on the results of such a "launch": the higher the level of sales, the lower the cost of advertising, and vice versa. At the same time, the budget also takes into account the costs of monitoring demand.

In the industrial goods market, personal sales play an important role, and advertising is of an auxiliary nature. Therefore, when selling these products, there is a reduction in the advertising budget, the formation of which depends on demand.

The formation of the advertising budget is also influenced by additional marketing funds that are used to create sales channels. Often, printed materials (brochures, coupons), sample mailings, discounts to retailers, etc. are used to stimulate demand.

Product life cycle

Launching a new product requires a more intense advertising campaign. At the same time, the return on such advertising is often very low. This is due to the product life cycle, in the first year of which the demand is not yet large enough to justify the investment in the advertising budget. The formation of product recognition depends on the cost of "entering" the market, which includes the establishment and promotion of sales channels, the period of trial sales, etc.

As soon as the demand for a novelty has reached the predicted level and the amount of profit has reached or exceeded the cost of investment, the manufacturing company can choose one of three options for further development:

• stimulating further growth;
• maintaining the achieved position;
• maximizing profit within the existing situation.

To stimulate further growth, it is necessary to significantly expand the advertising budget, the formation of which can lead to a drop in income for a short period of time. This increases the likelihood of a more successful entry into the market and capture of its significant share. The maintenance strategy is widely used by companies with a strong position in a fully formed market. At the same time, the advertising budget remains practically unchanged, since no additional campaigns are required to stimulate demand. If the company seeks to "squeeze" the maximum profit from the achieved position, it will reduce advertising costs in addition to the planned revenue growth.

Product properties

Unique products with properties highly valued by consumers can significantly reduce the advertising budget spent on their promotion, the formation of which may even be canceled due to brand awareness and the absence of the need for aggressive advertising. As a rule, in order to strengthen the position of a given product on the market, minimal advertising messages are sufficient. However, if a manufacturer wants to maintain a leading position in the market in the long term, it is necessary to maintain the status of the product through advertising campaigns to maintain consumer loyalty to the brand.

Profit and sales ratio

The ratio of profit and sales can have the most direct impact on the formation of an advertising budget. The unit cost of a product is made up of these two indicators. If the profit is significant with a relatively small volume of sales, the formation of the advertising budget does not have a strict financial framework. At the same time, the significant volume of sales justifies the small amount of profit per unit of production.

Research by marketers has shown that well-known products that have significant advertising support can be more expensive than competitors who do not invest significant amounts of money in promotion. In this regard, the consumer may get the impression that he is overpaying for the brand, since a significant part of the advertising budget is included in the cost of a unit of goods. However, the unjustified overstatement of product prices is hampered by consumer demand. A buyer may compromise his "loyalty" to the brand if he finds that a competitor's product has similar properties at a lower price.

Competitors' expenses

The amount of advertising spend may be related to the size of the planned market share of your products. The percentage of consumers attracted by a campaign is roughly the same proportion of the market as your product. The formation of the advertising budget should take into account the volume of sales, which determines the amount of funds allocated for advertising. The desire to increase the advertising budget in order to attract more attention of consumers and win a larger market share does not always guarantee the desired result, since the ratio of shares may be well-established, and the campaign is not effective enough. Therefore, monitoring the advertising costs of competitors does not always reflect their real position in the market. However, this indicator should be taken into account when analyzing consumer preferences.

Funding level

The formation of an advertising budget must necessarily take into account the possible risks arising from the ineffectiveness of the campaign or the wrongly chosen method of promotion. The likelihood of failure increases proportionally when it comes to entering the national market. A relatively small number of companies can afford to invest significant amounts in the formation of an advertising budget. Firms with relatively low levels of ad spending can start by gradually capturing the market, increasing their ad spending as sales grow. Overestimation of the advertising budget by reducing subsidies to other areas of organizational activity can ultimately lead to bankruptcy of the enterprise, since such a risk is far from always justified in the long term.

Basic principles of forming an advertising budget

1. Top-down principle. With this method, targeted advertising funds are allocated simultaneously with investments in other areas of organizational activity. The final distribution of the advertising budget is carried out by the responsible department. The undoubted advantage of this principle is the ability to consider advertising subsidies as part of a single marketing strategy and adjust the selected promotion methods in accordance with the current market needs. However, with such a wide reach, the merits of some advertising media can be overlooked due to the lack of awareness among the staff responsible for budget allocation.
2. The bottom-up principle. In this case, the formation of the advertising budget is based on specific tasks at the moment. That is, the allocation of funds for advertising is based on estimates for the planned campaigns. The undoubted advantage of this method is close attention to the urgent tasks of promotion, while the probability of exceeding the advertising budget is quite high.

It is impossible to single out one of these principles as the only true one. The realities of the Russian market dictate their own rules. The advertising budget should be flexible and responsive to changes in political or economic situations. In order to choose the best way to form an advertising budget, it is necessary to rely on the specific experience and practice of conducting similar campaigns in the past.

The most common methods of forming an advertising budget

The concept of "advertising budget" refers to new categories of the modern market. However, even before the appearance of the current methods of promotion, the allocation of funds for advertising a product or service by companies of those years was widely practiced. Therefore, the methods of forming the advertising budget can be conditionally divided into modern and traditional. Most of the new methods are based on mathematical calculations that require processing a large amount of information in a short time, which means that one cannot do without the involvement of computers and the appropriate software. However, the Russian market is rather unstable and subject to the influence of political and economic macro-changes. Therefore, it seems unreasonable to completely reject the time-tested methods of forming an advertising budget.

Traditional methods include:

Method 1. Method of calculation "from cash"

Many companies are engaged in the formation of an advertising budget based on the available amount of funds. This method does not take into account the influence of the methods of promotion on the sales volume. In this regard, the advertising budget has an indefinite size, within which it is almost impossible to build a competent marketing strategy.

Method 2. Method of calculating "as a percentage of the amount of sales"

The formation of the advertising budget in this case depends on the predicted level of sales or the final price of the product. A certain percentage of the sales volume is allocated to promotion costs, the amount of which depends on the cost of advertising costs for the same period last year and the projected sales volume.

This method allows the use of simple mathematical calculations that do not require specialized software or expensive computing equipment. The final ad budget may vary based on additional factors. The disadvantage of this method is that it is retrograde: the calculation takes into account the data for the past period, which may not reflect the current state of affairs and market changes. If there is a need to promote a completely new product, this method does not allow you to correctly calculate the amount of the advertising budget that will need to be mastered. In addition, parameters such as the sales area and the existing capabilities of the advertiser are not taken into account.

Method 3. Historical method

The formation of the advertising budget in this case is based on similar data for the past period, taking into account the circumstances that have arisen. As a rule, the main parameter for changing the size of subsidies is the inflation rate. With this method, there is a fairly high probability of making a mistake in the calculations if it was missed during the formation of the advertising budget for the same period and transferred to the new promotion cost planning system.

Method 4. Method of competitive parity

This method is based on the analysis of advertising costs of competitors, who are supposed to have sufficient experience to form an adequate cost planning system. Such hopes for "wisdom" and maintaining a competitive balance can lead to miscalculations in terms of promotion costs. The formation of an advertising budget largely depends on the subjective assessments of the employees responsible for it, and no one is immune from mistakes. Therefore, do not rely on the common sense of competitors and their methods of calculating advertising costs.

Method 5. Method of calculation "based on goals and objectives"

To form an advertising budget using this method, you must first determine the objectives of the campaign to promote the product, as well as identify the amount of funds required for their implementation. To do this, the advertising budget must meet the following parameters:

• specification of goals;
• defining tasks on the way to achieving goals;
• analysis of planned costs;
• identifying the size and properties of the audience selected for advertising;
• formation of advertising campaign parameters;
• identifying the purpose of a specific promotion;
• monitoring of ways to attract audience attention to the advertised product;
• analysis of the amount of funds required to achieve the planned result.

This method, despite its laboriousness, turns out to be quite effective, since the process of forming an advertising budget is as transparent as possible from the moment of determining the goals of the campaign and the means of achieving them to predicting the amount of required financial resources. The undoubted advantage of this advertising budget planning is the ability to avoid both unjustified spending on promotion and insufficient funding.

Method 6. Equity Method

The use of this method of forming an advertising budget is relevant in cases where competing companies with a certain percentage position in the market for similar goods, the allocation of funds for promotion depends on this "place in the rating". For example, if a company owns 15% of the market, it sets the same promotion subsidy. At the same time, it is recommended to slightly increase this percentage so that the effectiveness of the campaign justifies the investment.

However, such a strategy is fraught with risks associated with the likelihood of a simultaneous increase in the advertising budget by all participants in this market sector. This can lead to an increase in the total cost of promotion costs, from which the end consumer will suffer, having to overpay for advertising the product he needs.

Method 7. Empirical method

The formation of the advertising budget can be carried out on the basis of the analysis of the data of a practical experiment. To do this, it is necessary to monitor the feedback after a series of tests showing the effectiveness of various advertising methods using advertising budgets of different sizes. However, the result of such an experiment is not always sufficiently informative due to the very high probability of distortion of the final results under the influence of indirect parameters.

This method is good in that when it is applied to form an advertising budget, the data of specific estimates drawn up for certain promotion methods are taken into account. This helps to avoid overspending or underfunding.

In this case, the advertising budget is formed according to the residual principle, that is, the funds remaining after the main payments are allocated for promotion. With this method, advertising costs are equated in importance to all other organizational expenses. Therefore, their value may have different expressions depending on the amount of profit for a specific period of time.

Budgeting an advertising campaign for new and established brands

Formation of an advertising budget for an established brand

When an organization decides to run an advertising campaign for an established brand, setting up an advertising budget is a relatively simple task, since the available experience helps to choose the best and proven ways to promote. For monitoring, traditional methods of analyzing marketing effectiveness are used, which include:

1. Test advertising. Such an experiment of promotion in the real market helps to reveal the effectiveness of the influence of the chosen advertising strategy of an established brand on the sales volume. For objectivity, markets that are similar to each other are used, while having different amounts of funds allocated for promotion. The amount of finance in each case is determined by the size of the test budget. The experiment carried out shows what sales figures are achieved in each of these markets. The optimal ratio of the invested funds and the highest profit indicators becomes the basis for the formation of the advertising budget of the project.
2. Statistical forecasting. The analysis of statistical indicators of past advertising campaigns and sales volumes, as well as the formation of models of future measures to promote the product based on these data, is a less costly method in comparison with the experimental method described in the previous paragraph. If you add flexible coefficients to these parameters (inflation, economic or legislative changes in comparison with the same past period), this option for forming an advertising budget can provide data that maximally reflects the amount of required expenses.
3. Schroer's method. The basis of this method is the assumption that for an established brand, the only way to increase profits is to expand market share. To develop the required market segment, it is necessary to concentrate on attracting the attention of small markets with a rather narrow specialization. The formation of the advertising budget in this case should take into account the mobilization of specific means of promotion, which are quite effective in this particular market segment.

Formation of the advertising budget for a new brand

When a company plans to launch a new product on the market, it is necessary to analyze the performance of competitors. Their successful experience of launching a new brand can become a reference point in the formation of an advertising budget. However, you should not absolutely rely on the methods of competitors, since no one is immune from mistakes. Many proven technologies can be used to improve the efficiency of a new brand's entry into the market, many of which have already been described in this article. The most accurate results are shown by the method of goals and objectives, however, when forming an advertising budget for a new product, it is necessary to use one more technique that helps to make the calculation of funds required for promotion more accurate, namely, the Peckham method.

Peckham method works only if you can trace a clear relationship between the share of advertising costs for your brand in the total costs in a given product category (the so-called "share of the vote") and the share of new product sales in total sales (the so-called "market share" ). Such indicators can only be detected with constant monitoring of competitors' advertising budgets and the market shares of their products obtained as a result of promotion. It should be borne in mind that the “share of the vote” previously acquired by other companies affects this interdependence, therefore the final results may be distorted.

Having found such a correlation, Peckhay suggested that when forming an advertising budget, it is necessary to take the following mathematical calculation formula as a basis:

This formula helps to accurately calculate the amount of planned advertising costs for a new brand. However, it is not always possible to predict the size of the “market share” for a new brand in 2 years. This is where the principle of sequencing the brand's entry to the market comes to the rescue.

It is no secret that the new brand, which was the first to appear on the market, is gaining the greatest popularity, and hence the largest market share. The second in priority product captures the market size that is smaller in relation to the first, and so on. Knowing what position your brand is in a given queue, you can accurately calculate the percentage of the market it has captured in terms of percentage. Such a forecast can be built for several years ahead, which means that it will not be difficult to find out the "market share" by the end of the second year of the new brand's existence.

Formation of an advertising budget for a new product category

Launching a new product category on the market is one of the most difficult situations in terms of forecasting advertising costs. Due to the fact that this product has no analogues, the formation of an advertising budget can be difficult due to the lack of information on the effectiveness of the use of certain promotion methods in this case. In addition, it is almost impossible to calculate the predicted timeframe from the moment a product is released to the market until it gains a confident share of this market and consumer popularity. Therefore, when launching a new category, you must rely on your own experience and parameters of subjective assessment.

The most relevant will be the use of the method of goals and objectives in conjunction with the method of independent averaged forecast (NPM).

The construction of theoretical forecasts using the method of goals and objectives will be the best option in the formation of an advertising budget for a new product category. Lack of information can lead to abstract guessing, but if the process is led by experienced professionals with the necessary qualifications, this will reduce the likelihood of error. The sequential formation of tasks, methods and final estimates, interacting with each other, will increase the reliability of the result.

When the forecast of promotion costs has been drawn up, it is necessary to conduct an experimental assessment of the final parameters using the method of test sales and test advertising. This will help you adjust your ad budget based on the bottom line. However, it is not always possible to carry out such tests. This is where the method of independent averaged forecast - LLP comes to the rescue. Its essence is as follows.

Experts with the necessary knowledge and experience in the field of marketing are invited to make a forecast. The optimal number of experts is 5. As the practice of using this method to form an advertising budget has shown, an increase in the number of “experts” does not improve the quality of the assessment. It is best to involve experts from different parts of the organization so that the bottom line is more independent. Each of the experts makes his own forecast for the formation of the advertising budget, on the basis of which the average estimate is built. Further joint discussion of the results by experts does not make sense, since this may distort the reliability of the final parameters.

Formation of an advertising budget for specific articles

To assess the effectiveness of advertising campaigns, you need to approach in detail the issue of planning investments in promoting your product. Each cost item requires special attention and extreme accuracy of calculations, which will help avoid underfunding the organization's advertising budget. At the same time, advertising itself consists not only of a direct design project and placement in sources. As additional items of expenditure, there are a variety of secondary materials, without payment for which it is impossible to build an effective advertising strategy. Advertising budgeting should take into account all aspects of the product promotion plan. This will help create a smart advertising investment scheme that will eliminate the need for additional costs or urgent revision of the entire budget plan due to suddenly changed circumstances. The communications program in this case will be most effective, since the feedback forecast will be based on real investment data.

Among the articles of marketing costs, the main ones can be distinguished:

1. Article "Direct advertising" (investments in advertising in the main sources of attracting the attention of consumers: television, radio, print media, outdoor advertising).
2. Article "Production" (direct costs associated with the production of advertising materials - posters, videos, design layouts, etc.). For the most competent development of the advertising budget, the cost of this expense item should be no more than 10% of the total amount allocated for the promotion of financial resources.
3. Article "Internet" (payment for the creation and promotion of a website or page on social networks, hosting and maintenance costs, as well as contextual advertising). In addition, this expense item includes the salaries of SMM managers responsible for filling content.
4. Article "Trade marketing" (payment for indirect methods of attracting the attention of consumers: promotions, promotions for distributors, POS materials, trade equipment).
5. Auxiliary materials article (payment for small consumables for marketing activities: brochures, leaflets, catalogs for buyers, catalogs for sales staff, branded pens, envelopes).

Any advertising materials must be of high quality. Otherwise, they will not be able to attract enough consumer attention, and the costs of their production will be in vain. High-quality printing of printed products is possible only in a printing house, whose qualified personnel will help not only create a layout, but also implement it on modern equipment using the latest materials. If you want to find such a printing house in Moscow, contact the SlovoDelo company. Our specialists carry out orders of any complexity in the shortest possible time and at affordable prices. In addition, they will help you develop a unique design for your printing products. Modern equipment meets all the highest requirements and allows you to make cards and invitations of complex shapes and exquisite design.

 

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