Methods for determining the company's advertising budget. Formation of the advertising budget Advertising budget necessary to achieve market share

determine the main factors on which the advertising budget depends;
choose the method of forming an advertising budget;
decide on the types of advertising;
evaluate the cost effectiveness and, if necessary, revaluate costs.

Step 1. Determine the main factors on which the advertising budget depends

The goal you want to achieve

Often, the goal of the marketing campaign is formulated very vague: "To find out about us ..." The task can be specified (to make a quantitatively measured), responding to the following questions:

Who should learn? Determine the target audience of products and advertising. The target audience of products is directly consumers of goods, the target advertising audience - those who decide to purchase or significantly affect the adoption of this decision. The more detailed description of the target audience you have, the better. If you do not have the data - spend the study and find out who your consumer. Namely: where, when, as often, under what circumstances, with whom and with what emotions, the consumer buys and uses your products.
What exactly should be the consumers? An object of advertising (products, services, new products, company image, conditions of cooperation, unique offer, etc.) are established.
What will it give you and in what time interval? Clarifies how time the task will be solved how it is associated with sales and profit.

For budget planning, all goals must be quantified, otherwise it is impossible to evaluate the achievements or distribute resources. Typically formulate slogans: "Let's give advertising", "I will conduct an action." Instead, it is necessary to plan to achieve specific goals, such as the attraction of 1000 new customers using advertising in a specialized press.

A new product or service require more intensive advertising. Costs for the withdrawal of goods or the service of a new company to the market with high competition often absorb the first year's gross profit. The promotion of the company, its goods and services always requires major starting spending (see Table 1).

Table 1. How to market costs depend on the goals

Indicators	Implementation	Height	Maturity	Recession
Marketing goals	1. Attracting buyers to a new product or service. 2. Formation of image of a new product or service.	1. Expansion of sales. 2. Expanding assortment groups. 3. Formation of commitment to the company.	1. Maintaining distinctive advantages of goods or services. 2. Settlement of market share. 3. Finding new niches, new ways to consume goods or services.	1. Preventing the fall in demand. 2. Restoration of sales. 3. Hold the profitability of sales.
Volume of sales	Height	Fast growth	Stability, slowing growth	Abbreviation
Competition	None or insignificant	Moderate	Strong	Insignificant
Profit	Negative	Increasing	Shrinking	Rapidly cut, no profit, losses
Marketing costs	Extremely high growing	High, stable	Shrinking	Low
Coefficient	1,6	1,2	0,8	0,4

Step 2. Choosing a budget formation method

Methods for determining the budget for marketing are shown in Table 2. The most common method - definition of the budget as a percentage of expected (or from achieved) sales or from profit. This method is quite simple and at the same time accurately reflecting the main goal of tactical marketing - an increase in sales. Also popular methods for planning "on the residual principle" and in comparison with the cost of the leader or the nearest competitor. All these ways to determine marketing costs are logical and consistent, but it is better to use them in the complex.

Method	Description
By residual principle	When planning, proceed from the amount remaining after the distribution of funds to more priority directions
Parity with competitors	The basis of the competitor's marketing costs is taken as a basis.
By targets	Depending on the objectives and tasks of the company in the field of marketing
From sales	The budget is defined as a percentage of existing or planned sales volumes.
From achieved level	Increase or reduce costs depending on the results of the last period

In developed countries, the share of marketing costs is about 25 percent at the cost of traditional goods and up to 70 percent - in new products. Given the profitability, the basic proportion of the marketing costs of traditional goods is in the range of 10-15 percent of revenue from sales. In Russia, the share of marketing costs ranges from 1 to 5 percent, that is, an average of 3 percent of revenue.

Example: The company plans to bring a new brand to the Russian market and intends to take 15 percent of the market. The volume of market analytics market is estimated at $ 2 billion.

Target sales \u003d market volume x target market share:

$ 2000 million x 0.15 \u003d $ 300 million.

the percentage of marketing costs \u003d average percentage of marketing budget in Russia (3 percent) x corrective coefficient depending on the purpose (1.6 - "implementation").

Thus, the required percentage of marketing costs \u003d 3% x 1,6 \u003d 4.8%.

The amount of marketing costs \u003d percentage of marketing costs x target sales volume: 300 x 0.048 \u003d $ 14.4 million.

In Russian companies, as a rule, a "compromise" approach to the formation of an advertising budget is used. The essence of it in the preparation of two budgets - the desired and valid. The desired is a budget that you would like to have to achieve the maximum coverage of the target audience. Valid - what you really can spend on advertising based on the calculation of product payback periods. By comparing these two budgets and the development of an acceptable (compromise) option for the company is developed.

Step 3. Decide with the types of advertising

The distribution of the marketing budget for the main costs of costs depends on the industry in which your company works, from the strategy for solving marketing tasks and the type of market. Experts recommend an integrated approach when the effect on the consumer occurs in several channels at the same time. Ask yourself the question: where most likely, my advertisement will notice the target audience? Often it is at this stage that fails to deliver your message to the consumer.

Step 4. Evaluate the cost effectiveness

The final indicator of marketing activities is the turnover or revenue of the company from sales. But, for example, at the initial stages of the conclusion of the product to the market, it is more important to achieve a certain awareness of consumers and form a favorable image of a product or service. Therefore, at each individual stage, it is advisable to use different indicators depending on previously formulated (quantitatively measured) to estimate the effectiveness of marketing costs. The goal itself should serve as the main indicator of efficiency: they have achieved the goal, it means that the costs effectively planned and implemented the plan, not reached - adjustments.

The famous phrase of the American entrepreneur began last century John Vanamaker about what he knows that he spends half money on advertising Wasted, but does not know what half, not lost the relevance and nowadays. Almost all companies face a problem definitions Optimal advertising budget And almost no one can determine this magic number - budgetwhich would allow to get a republic advertising. Any deviation from optimality leads to inefficiency: with less budget company does not pay profit from sales (since not all consumers are aware of the product), with more budget company Just throws part of the funds to the wind (as all consumers are aware and additional advertising not required). Nevertheless, the first situation is when due to insufficient level advertising company may suffer significant losses, is more serious than the second - when company Overtakes funds on advertising. In favor of a higher level of expenses, the fact that purpose also says advertising It is not only informing consumers, but also a reminder and belief. However, in this case, the main question is about the optimal level. budget - It remains open. Many professionals when calculating advertising budget Rely on your own experience, common sense and uncomplicated interdependence. Recently, more complex calculation methods have appeared. advertising budgetBut their assessment and application should not be divorced from practice. Below are described below methods definitions of advertising expenses Based on the current practice and several theoretical methods worthy of all those involved in solving this difficult task.

Fixed budget method

The company establishes a certain level of advertising spending, and these expenses remain constant from year to year in spite of any changes in the company's internal and external environment.

Residual method

Fortunately, the two above-described methods for determining the advertising budget are randomly due to their obvious inefficiency and inability to reflect changes that are constantly occurring both in the internal and external environment of the company. According to Krueger, such methods are characteristic of small companies whose leadership "does not believe" in advertising.

Definition of the budget based on a certain interest from sales

Determining the size of the budget as a certain percentage of sales is a more advanced method. Typically, the advertising budget is from 1.5% to 3% of the total sales for industrial goods and from 15% to 30% of the total sales for consumer goods. The company can establish a certain percentage of both last year's sales and sales forecast for the next year. In the latter case, the accuracy of the forecast is important. Indicator Advertising / Total sales is a numerical expression ratio of two variables (since the total sales volume, and the percentage that the company establishes may change). The preservation of the same interest suggests that the optimal, according to the company, the ratio between the amount of advertising costs and the total sales volume is found.

One of the options for this method is to establish advertising expenses per commodity unit. This is a common practice to which car manufacturers, beer and cigarettes are resorted. In this case, the advertising / total sales indicator is expressed in dollars per car, one TV, one block, etc. When calculating on the basis of the number of product commodity produced units, the advertising budget can be adjusted more quickly depending on the oscillations of sales and production.

Determining the budget based on a certain interest from sales adopted from competitors

The company estimates in monetary terms the advertising activity of competitors and their total sales. Then the percentage of sales, which competitors are sent to advertising are calculated. As a result, with the final definition of its advertising budget, the company is focused on this percentage (using its own sales volume).

In some areas of business, there has been their specific indicators of advertising expenses in relation to sales. And although there are also no guarantees that these indicators are optimal, many companies try to adhere to them from strategic considerations - keep up with competitors.

Despite the fact that these two above-described methods are far from excellence, it is they used to calculate advertising expenses in most companies. The problem of determining the advertising budget here is solved on the basis of the practice of their own experience and general logical assumptions. It should be noted that when calculating advertising budgets, in this way it is necessary to provide for a reserve fund, which can go to the "repayment" of unaccounted changes in the company's external environment. For example, due to the increase in the cost of advertising funds in recent years, advertisers have to sharply increase their advertising budgets only to maintain the number of purchased place and time at the same level (that is, to achieve a planned level of advertising).

When determining the advertising budget, the company estimates the share of the commodity market, which it occupies, evaluates the overall size of the advertising market, and then calculates the budget necessary to cover the same percentage of the advertising market, which company occupies in the commodity market. Simply put, if the company's share in the commodity market is 15%, then its advertising should occupy the same 15% of the advertising market (under the advertising market in this situation it is understood as advertising of the same type of goods placed by the company and all of its competitors).

This method is based on the assumption of the linear relationship between advertising expenses and the share of the commodity market, which the company occupies (see Fig. 1).

For linking in a single indicator of own expenses for advertising, advertising expenses of competitors and total sales, the magnitude of advertising costs per unit share of the market are used. Obviously, an aggressive competitor will try to spend a little more advertising funds in order to increase its market share. If, for example, the company plans to increase its market share by 5%, and the generally accepted amount of costs of 1% on average is 500 thousand dollars, the company's advertising budget will have to increase by 2.5 million dollars. Due to the fact that the total volume of the advertising market varies depending on the size of the advertising budgets of competitors and on the number of competitors, the budget defined by this method needs to be constant adjustment. As soon as the total volume of the advertising market increases, the company must increase its budget in order to maintain a planned share. A decrease in the total volume of the advertising market automatically leads to an increase in the share, which the company occupies in the advertising market (which is also not always good).

In fact, this is a somewhat complicated calculation of the same share of the advertising market, which companies need to be achieved. True, the basis of this method lies a slightly personal assumption: the fact that large companies receive some benefits due to the action of the law of saving scale ( economies of Scale) - When saving efficiency, advertising costs are reduced (see Fig. 1).

To build an advertising intensity curve, the values \u200b\u200bof the commodity market shares are applied to one axis, and the corresponding values \u200b\u200bof the advertising market of these companies are applied to another axis. Thus, each company appears on the graph in the form of a point. When connecting them, the curve of advertising intensity is obtained, showing that the more the company, the smaller the percentage of sales it spends on advertising. Or, in other words, the increase in advertising costs lags behind the increase in the share of the company's commodity market (of course, this happens after reaching a company of a certain share of the commodity market).

The company puts specific goals and defines the budget necessary to achieve these goals using an advertising campaign. In contrast to all the above methods, this is characterized by the procedure for action - first the goals are determined, and then the budget. In principle, it is an ideal order, however, in practice, this method occurs infrequently. First, most companies are limited in financial resources. Secondly, this method also does not allow budget optimality guarantees. Rather, on the controversy - to perform advertising purposes, the performers will try to reinforce and increase the budget, as far as possible, systematically exceeds the optimal level.

Method Dorfman Stayman

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

P / P \u003d E R / E C,

P \u003d P.× E R / E C.

According to McMeekin. With this calculation, advertising and price strategies of the company are synchronized. The complexity of the method is that it is necessary to correctly define the two indicators of elasticity, which always causes difficulties.

In the most general case, the elasticity of demand for any indicator is a change ratio in the total sales volume when the indicator changes by one percent (all other indicators remain constant). If elasticity is less than a unit, it means that a change in the indicator for one percent leads to a change in the total sales of less than one percent (inelastic demand). If elasticity is more than one, it means that a change in the indicator for one percent leads to a change in the total sales of more than one percent (elastic demand). The elasticity of demand is calculated by the following formula:

K \u003d (∆q / Q) / (∆P / p),

where q. - Total sales of goods before price change;

∆q. - change in the total sales of goods after changing the price;

R - price of goods before its change;

∆R - change price of goods.

K \u003d (∆q / Q) / (∆R / R),

Usually the calculation of the elasticity of demand for the price of the company is able to make itself. But the elasticity of advertising demand is quite difficult to determine, so this indicator is better to take from marketing research. Lambin. As a result of studies of numerous European trademarks, identified the value of the elasticity of advertising demand in 0.1. In the review of the beginning of the 80s, performed Leone et al.. The value of the elasticity of advertising demand oscillates ranging from 0.003 to 0.482, most of them are less than 0.2. SETURMAN. and Tellis. And later predictors also confirm that the elasticity of advertising demand does not go beyond 0.1-0.2.

One of the limitations of this method is that it is applicable only for goods with elastic demand for the price.

Travel company selling vouchers determined the following parameters:

the cost of one voucher \u003d $ 500;
sales forecast \u003d 200 vouchers (or 100 thousand dollars);
elasticity of demand for price \u003d -2;
elasticity of demand for advertising \u003d 0.1.

Substituting this data in the formula, we get the optimal advertising budget \u003d 5 thousand dollars.

When the price changes, the advertising budget is recalculated in several stages. Suppose, for example, that the firm reduced the cost of the vouchers by 10%, that is, up to 450 dollars. Such a decrease in price will lead to an increase in sales forecast by 20%, that is, up to 240 vouchers (or 240 × 450 \u003d 108 thousand dollars). Substiving new data in the formula, we get a new advertising budget \u003d 5.4 thousand dollars. However, it will be only an intermediate figure, because an increase in advertising expenses in itself will increase the sales forecast by 0.8% (or about 2 × 450 \u003d 900 dollars). Thus, the overall sales forecast will be 108.9 thousand dollars, and therefore the advertising budget will increase to 5.45 thousand dollars. Due to insignificance, amounts can be stopped on the last advertising budget and not adjust it further. However, with more significant amounts of "configuration" of the advertising budget, it will be necessary to carry out as many times as necessary (until the amounts become insignificant).

Dameman-Rusta method

Danaher. and Rust. Consider advertising as an investment and offer a formula for calculating the advertising budget, which will allow to obtain a maximum refund on advertising investment.

To determine the optimal level of advertising expenses, it is necessary to put a clear financial goal. Consider three such possible goals. The first of them is to maximize the profitability of advertising expenses (profitability is defined as an additional profit, obtained exclusively by advertising, minus advertising costs). As a financial goal, the maximization of the return of investment in advertising may also be a percentage of the ratio of advertising expenses and return on advertising investments). Another goal can be the maximization of advertising efficiency (effectiveness is defined as the relationship of the effect received as a result of advertising to advertising expenses).

Now consider these goals separately.

Suppose that we have the ability to accurately measure the advertising efficiency, which may be (at least, in principle) directly related to income. Then you can withdraw the profitability formula of advertising expenses:

E (1) \u003d kf - c,

One of the main problems in this formula is the uncertainty of the coefficient k.

E (2) \u003d kf / c,

C. Maximization of return investment in advertising

This criterion is most preferable for financiers who are accustomed to assessing any projects based on a refund / return on these projects.

In principle, the idea of \u200b\u200bequating advertising expenses to investment is not new. Back in 1976, Vice President of the American Advertising Agency Jwt Nariman Dhalla I wrote that to improve business results, managers should perceive advertising as capital investments.

E (3) \u003d (KF - C) / C \u003d KF / C - 1 = E (2)- 1,

As in the two previously shown formulas, the coefficient is also present in this to,determine which is extremely difficult. However, in this case, it can not be taken into account. From the formula it is clear that with increasing value F / C. Increases value E (2), so I. E (3). From here it can be concluded that maximizing advertising efficiency and maximizing the return of investment in advertising in essence the same thing. Moreover, the relation f / C.which must be maximized, does not contain a complex coefficient to.From here it turns out that in practice it is quite possible to calculate both advertising efficiency and return investment in advertising. And this in turn makes it possible to derive the formula to determine the optimal level of advertising expenses.

The output of the formula for calculating the optimal level of advertising expenses

In order to fill the above calculations with a specific content, choose the planning of the advertising campaign on television as an example. Such planning in the world (including in Russian) practice is carried out with the help of the so-called total rating units of television shows - Gross Rating Points.(hereinafter - GRPs). GRPS. - this is the sum of all the ratings that TV shows (and consequently, a specific advertisement placed in them) for the reporting period. Ratings are usually calculated for regular transmissions. Telversion rating actually reflects the relative coverage (or size) of the audience. If, for example, this TV shows watched 10% of the viewers (from the total number of all viewers during this period), then the rating of such a transfer is 10. When advertising in various TV shows, or in the same, but several times, the ratings of the TV shows also develop and Thus, it turns out GRPs. To determine the optimal level of advertising expenses, it is necessary to first find out how the cost of buying a certain amount of GRPs is correlated with the efficiency of GRPs.

GRPS cost

In fig. 2 shows a typical curve of cost. This curve reflects two major assumptions that have long been tested in practice. The first is the more GRPs purchased, the greater the total cost of buying. Obviously, the higher the rating of the gear and the more the number of gears in which the advertiser intends to place advertising, the more advertising expenses. And the second - the more GRPs buy, the less the cost of each GRP unit (due to discounts) 1.

Fig. 2. Curve the value of GRP

This function is described by the following formula:

C (G) \u003d Cx. G D., (1)

where g. - the number of purchased GRPs;

C (G) - The cost of buying GRPs in quantity g.;

from - the cost of buying one GRP unit;

d. - coefficient reflecting the magnitude of discounts when buying GRPs in quantity g.

Values d.fluctuate from 0 to 1. The less discount, the d.closer to one. For d,equal unit, there are no discounts at all.

GRPS efficiency

The organizers of the advertising campaigns often hope that the more GRPs will be typed during an advertising campaign, the greater the effect of this campaign. The effect here may be understood as an audience coverage, an increase in sales, etc.

Curve in fig. 3 binds the number of GRPs - g. and efficiency - f (G).It is based on several assumptions. First - There is a minimum level of GRPs - g (min), Which must be purchased so that the advertising campaign has at least some kind of effect. The second is a further increase in the amount of GRPs leads to an increase in efficiency. Third - After the level of saturation, the efficiency of GRPs obeys the law to reduce returns Diminishing Returns) - with the purchase of each next rating return from it (efficiency) falls compared with the purchase of the previous rating (this dependence reflects the coefficient b.).

Fig. 3. Dependence of advertising efficiency from GRP

This function is described by the following formula:

f (G) \u003d F (MAX) - ax. G (-B) for g. > g (MIN),

With a minimum level of GRPs, we obtain the following formula:

f (G min) \u003d F (max) - a× g (MIN) (-b).

From it you can get the value of the coefficient but:

a \u003d. [f (Max) - F (G min)] × g (MIN) b.

Thus, the effectiveness of GRPs in quantity g. It can be expressed as follows:

f (G) \u003d F (MAX) - [f (Max) - F (G min)] × (G / G MIN) (-b).(2)

In fig. 4 shows an advertising efficiency curve (or return investment in advertising), built on the basis of the cost curve and the efficiency curve of the GRPS, formulas 1 and 2, respectively. All the results of calculations, as well as the assumptions that were made before the calculations and which do not contradict each other, show that the optimal level of advertising spending really exists. From the resulting formulas using the simplest differential computing, you can find the equation to determine the optimal amount of GRPs:

g (OPT) \u003d G (MIN)× [ ((F (MAX) - F (G min)) / f (max))× (D + B) / D)] 1 / b. (3)

Fig. 4. curve advertising efficiency

The optimal amount of GRPs maximizes both advertising efficiency and return on investment in advertising.

Knowing the optimal amount of GRPs, you can find the cost of buying GRPs g (OPT) - C (G OPT). It is this cost and will be equal to the optimal value of the (optimal budget) of a certain advertising campaign.

In order to take advantage of the formula (3), you need to know all five components of its elements. Two of them are empirically.

Any experienced media planning expert will be able to more or less accurately determine the minimum amount of GRPs, after overcoming which the rapid increase in the efficiency of the advertising campaign begins - g (MIN). This can be done with the help of computer programs used in media planning. Having determined the value of the minimum amount of GRPs, you can immediately determine the efficiency resulting from the purchase of GRPs in the amount g (MIN) - F (G min).

The third component of the formula is the maximum possible efficiency in the absence of restrictions on advertising expenses - F (MAX)equals 1, as any effectiveness can not be more than 100% (that is, it is impossible to reach more than 100% of the audience, it is impossible to gain more than 100% of the market and so on).

The following two formula elements - coefficients d. and b.- are derived from formulas (1) and (2):

d \u003d ln.[B / C (G min)]/ LN.[g (B) / G min] (4)

b \u003d - LN[(F (MAX) - F (GB) / (F (MAX) - F (G min)]/ LN.[g (B) / G (MIN)], (5)

Thus, we obtained a semi-empirical formula for calculating the optimal amount of GRPs, the knowledge of which is necessary to calculate the optimal advertising budget.

In order to verify how the resulting formula works, consider the following example from the New Zealand media planning practice.

Suppose that the budget of the television advertising campaign is 100,000 dollars. As an indicator of efficiency, we take the coverage of the audience (REACH). From experience It is known that the purchase of less than 100 GRPs does not bring almost no effect (that is, advertising in the same TV shows as many times that GRPs does not exceed 100, or advertising in several telecasts with a total total GRPs not exceeding 100, or accommodation Advertising in several TV shows several times, so the total total GRPs again does not exceed 100). Target audience of an advertising campaign - women aged 25 to 49. From the data collected by the company AGB MCNAIR NEW ZELAND Ltd. In June 1995, it follows that when buying 100 GRPs, the coverage of our target audience was 15.75%. The cost of purchasing 100 GRPs at the same time was 49,800 dollars. When placing advertising, discounts were provided (60 seconds cost more than 30 seconds 1.8 times, and not 2 times). So when purchasing 200 GRPs, their cost would be 49,800 × 1.8 \u003d 89,640 dollars.

Using formula 1, we obtain two equations:

1.8 × 49 800 \u003d FROM × 200. d;

49 800 = FROM × 100. d.

Hence the coefficient d. Equal:

d \u003d ln.1,8/lN.2 = 0,848.

Now from formula (1) you can get the cost of one unit GRP:

FROM \u003d 49 800 × 100 (-0.848) \u003d 1002.8 dollars

Therefore, by $ 100,000 allocated to the television advertising campaign, you can buy 228 GRPS:

g (B)\u003d (100 000 / 1002.8) (1 / 0.848) \u003d 228 GRPs.

When buying such a number of GRPs, the coverage of our target audience will be 47.86% (according to AGB MCNAIR NEW ZELAND Ltd.).

Now we calculate the coefficient B:

b \u003d -LN.[(1 - 0,4786)/(1 - 0,1575)]/lN. = 0,5822.

Thus, all components of formula (3) were determined, and now it is possible to calculate the optimal amount of GRPs:

g (OPT) \u003d 100 × [((1 - 0.1575) / 1) × ((0.848 + 0.5822) / 0,848)] (1 / 0,5822) \u003d 183 GRPs.

The optimal amount of GRPs turned out to be lower than the amount of GRPs that can be bought by spending the entire budget (228 GRPs).

These calculations show that the maximum return on investment in advertising is possible with a smaller value of GRPs and therefore on advertising should not spend the entire allocated budget.

Substituting all the data in formula (1), we get the optimal level of advertising expenses:

c (G OPT) \u003d 1002.8 × 18300,848 \u003d 83 182 dollars

And the effectiveness or in this case, the coverage of the target audience when buying 183 GRPs is 40.73%:

f (G OPT) \u003d 1 - (1 - 0.1575) × (183/100) (-0.5822) \u003d 0.4073.

Thus, spending $ 17,000 less, we get greater efficacy. Efficiency, defined in our case as an audience coverage ratio to the cost of advertising, with an optimal level of advertising expenses 2.3 times higher than the effectiveness when spending the entire advertising budget.

In the process of calculations, it turned out that when determining the minimum amount of GRPs - g (MIN)quite large errors can be allowed, and at the same time the optimal amount of GRPs will be determined more or less accurately. When substituting in the formula to determine the optimal amount of GRPs of other values g (MIN)it turned out the following picture.

At values G (MIN) from 75 to 125 difference of the corresponding values g (OPT)was 28 GRPs, with values g (MIN)from 90 to 110 difference of relevant values g (OPT) Massed only 9 GRPs. From here we can conclude that g (OPT)not too sensitive to some fluctuations g (min).This circumstance allows media planning experts not to worry about not entirely accurately determining. g (min).

Conclusion

As practice shows, the problem of determining the optimal advertising budget does not have an absolute solution. Nevertheless, this does not mean that companies have no guidelines in this area. In each particular case, technical computing must be preceded by a thorough analysis of the situation and the existing methods for determining the advertising budget. Search for suitable methods and their "setup" on a specific situation can prevent large financial losses and significantly increase the efficiency of the advertising campaign.

Literature

Danaher, Peter J.and. Roland T. RUST.Determining The Optimal Level Of Media Spending, Journal Of Advertising Research, January / FEBruary 1995.
Danaher, Peter J. Optimizing Response Functions of Media Exposure Distributions, Journal of the Operational Research Society, July 1991.
Kaplan, Robert S.Discount Effects on Media Plan // Journal of Advertising Research. Vol.11. - No.3. - 1971.
Kruger, josheph.Developing a Marketing Budget, Target Marketing, October 1996.
Lynch, James and Graham J. Hooley. Increasing Sophistication in Advertising Budget Setting, Journal of Advertising Research, FEBRUARY / MARCH 1990.
McMeekin, Gordon.How to Set Up An Advertising Budget, The Journal of Business Forecasting, Winter 1988-1989.
Mitchel, Lionel A.An Examination of Methods of Setting Advertising Budgets: Practice and Literature // European Journal of Marketing. - Vol. 27. - No. 5. - 1993.
TURNER, AUGUSTINO.Cost-Effective Advertising, Marketing, May 1989.

1 In Russian and world practice, it is possible to buy at least a certain time in certain transmissions (which is called a fixed advertising system), and a certain amount of GRPs (which is called a "floating" advertising system). "Floating" system allows you to protect advertisers from unforeseen drops of rating certain programs, which hosts advertising. Since GRPs are bought with a "floating" system, and not the time, then so many commercials are released on the air, as needed to dial the purchased amount of GRPs. Therefore, with any unforeseen inclination ratings, the advertiser will receive its own - due to additional commercials. With the fixed system, only a certain amount of time is bought in certain transmissions, and the number of GRPs typed is considered in fact.

Non-analitical Methods are based on experience or simplified decision-making rules. Non-analitic methods greatly simplify planning, but do not have almost no connection with marketing objectives.

Analytical methods based on the search for functional dependence between the advertising budget and the level of achieving marketing purposes. This method requires the advertiser to form his advertising budget based on specific purposes and tasks and their costs. The sum of all these costs and will give an approximate number of budget allocations for advertising. The advantage of this method is that it requires the guidance of a clear presentation of its ideas about the relationship between the amount of advertising costs, the level of advertising contacts and the efficiency of sales.

From the level position, the advertising budget can be planned based on several marketing strategies, set the upper or lower level for each of the marketing variables - prices and advertising budget. Then the market penetration strategy can be specified using the matrix "The price of goods is advertising budget" (Fig. 7.8).

The types of advertising budget plans include the following options: limit planning when the budget is established by the advertiser and advertising activities are carried out within the framework of the allocated funds; Floating Plank, means changing 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, in case of the possibility of achieving some pre-agreed objectives, which are negotiated as important, but optional; Tunnel planning is used when planning a budget to several advertising agencies, depending on the means of advertising, and the transfer of funds from one to another is impossible; Free planning is the importance of allocating any amount of the advertising budget to achieve marketing purposes.

1. Calculation of the minimum advertising budget. There is a list of types of advertising performed by advertising different advertising agencies or one integrated agency. Each type of advertising contains a certain number of different evaluation criteria and efficiency values. Known the magnitude of the advertising budget. It is necessary to determine the set of types of advertising, which requires efficiency with minimal cost within the advertising budget.

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

Task Parameters: p- the number of various types or varieties of advertising offered by the advertiser; t -the number of advertising efficiency criteria; a ij. - Content i.-Ho performance criterion in j-M. the form of advertising i \u003d 1, ..., m:, j \u003d 1, ..., n; B I.- Number of values i-GOthe criterion required by the advertiser in the advertising campaign ; c i - unit value i-GO type of advertising; x I.- This is the number i-GO The type of advertising included in the advertising campaign with a given promotional budget. Conditions to determine the number of each type of advertising have the form of a linear mathematical model.

Optimality criteria with has the form:

Solving mathematical model, determined values x I. - Financing i-H. Advertising types necessary for solving standing tasks in the amount of which is determined by the optimal and minimum advertising budget

2. Budget development based on the availability of cash (the residual budget method). The use of this method means that the company allocates so many funds to advertising as, according to its leadership, it can afford. This is the easiest method that does not take into account the real objectives and objectives of the company, and rather shows the state of affairs in the absence of specific tasks for advertising. The budget is reduced when things are bad; When there is money, they are spent. Such promotional costs are justified until they exceeded the optimal level of normalized advertising costs or the magnitude of the profit from which they are formed, or the magnitude of the budget for marketing communications.

3. Development of an advertising budget on the basis of cost planning.The advertising cost plan is an estimate of expenses for various planned activities aimed at achieving the goals. Its goal is to determine what the dependence of the growth of commodity turnover from the cost of advertising.

4. Executive method as a percentage of sales (current or expected) or to the selling price of goods, i.e.

This is the easiest way to calculate the advertising budget. Sales forecast is calculated based on the preparation of a statistical trend of sales. The percentage share is traditional for each enterprise or focus on traditions in the industry. About 15% of entrepreneurs use this method. For example, the advertising proportion at the stage of promoting the brand reaches 20% of the revenue, at the stage of the sighted fact of the promotion of 0.5 - 4%. You can allocate periods more attractive for advertising campaign and less attractive for this.

To plan the volumes of allocations for the advertising company, first of all, on the basis of experience, it is necessary to build an indicative schedule for the sale of goods on the basis of seasonality of demand for goods or the company's sales policy (see Fig. 7.9). Advertising deductions are determined as a percentage of revenue. Schedule in fig. 7.9 will predict the advertising budget.

Fig. 7.9. Dynamics of selling sales

Based on fig. 7.9 You can allocate two suggestions:

BUT). In zones of failure (1 and 3rd quarter of the year), it is necessary to conduct an advertising campaign in order to align the seasonal sales wave. The advertising budget must be calculated from the predicted peak profit of the upcoming seasonal sales wave.

IN). To exacerbate a wave seasonality, sales is necessary, within the framework of the funds available at the focus on the border 1 and 2, as well as 3 and 4 quarters (Fig. 10.8), to start an intensive advertising campaign to the period of receiving the maximum of sales.

The disadvantage of the sales percent method is the ability to violate the basic marketing principle. The method is based on the fact that sales is the cause of advertising, and not the consequence of what is completely incorrect. Advertising activities should increase sales, and not be in terms of sales results. If the advertisement is automatically activated as a result of the activation of sales and falls as a result of the fall in sales, it is observed ignoring all the conditions for advertising.

This method of calculating the advertising budget does not allow experiments with new types of advertising and prevents promising 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 requires a decrease in sales to increase advertising costs. However, the method of calculating "as a percentage to sales amount" does not provide.

5. Method of competitive parity. Provides for the magnitude of the advertising budget (R) at the level of competitors' costs:

where Ri is the advertising budget of the i-wow (, i.e. .: "Share in advertising means \u003d market share of goods in the consciousness of the buyer \u003d market share." The fundamental assumption about the direct relationship between advertising costs and the market share is incorrect. The budget will not be calculated correctly until the market competition is correctly determined.

In support of this method, two arguments are given: the cost of competitors personifies the collective wisdom of the industry; Maintaining competitive parity helps to avoid the acute struggle in advertising, which is ruined.

At the same time, they do not take into account: competitors can dictate your budget to you and coordinate to unjustified costs; competitors have their own strategies, you have our own and, accordingly, other allocations; Following the competitors, it is impossible to become a market leader, etc.

6. The method of equity participation in the market.In the industries where the similarity between goods, usually there is a high relationship between market share and equity participation in sectoral advertising. Knowing this, some firms are aimed at achieving a certain share in the market and then establish the corresponding advertising percentage of the budget. The following proposal is based on this method: 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.the firm will determine how

where dI - Market share i.firm; RJ. - Advertising budget j.- Competitor company.

In general, in order for a firm to keep its market share, it is necessary to maintain a stake in advertising at a level that exceeds the market share. According to Pekama's formula, when a new brand of goods is being introduced, the advertising budget must exceed 1.5 times the market share awaited in two years. For example, if the company owns 10 percent of the market, then it should be spent on advertising 15 percent of the sectoral advertising.

7. Technical budget method. This method is based on the analysis of the profitability of promotional costs.

Q \u003d s / (p - c),

where q is an additional sales; S - advertising costs; P - the price of a unit of goods; C - costs (usually variable expenses) per unit of goods; (R - C) - marginal profit per unit of goods. Required additional revenue \u003d S / ((R-C) / P).

This method can estimate the level of efficiency of advertising to obtain the desired value of sales growth. It can be judged if the budget of unreal estimates of the share of the existing market does not intend. Here advertising is considered as an investment, and not just as permanent costs.

W \u003d T * U * Wq / UK,

For example. We define the magnitude of the advertising budget for Pepsi Co., if she wants to have a market share of 30%. The share of advertising costs in the sales volume is: for Coca Coca - 1.25, for Pepsi Cola - 1.66. Coca Coca Market Share - 23%, Coca Cola Computer Budget - 28178149 USD. W \u003d 1.25/166 x 30% x 28178149/23% \u003d $ 48,809454 $.

9. Method goals and objectives. This is the most scientific method that large advertisers enjoy. It analyzes the current situation, set targets are identified, the tasks for the promotion of goods are identified, calculated how much it will cost, and the total budget is calculated. An increase in the advertising budget gives an opportunity to the company: with the dominant price to sell more; sell this volume of products at a higher price; Implement a greater volume at a higher price (Fig. 7.10).

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

However, the maximum profitable sales volume of each subsequent value, which is rightful to the achieved market, can only be implemented with an increase in the advertising budget in a greater proportion. Consider one additional buyer will be the harder than them already exist. The criterion of the optimality of the advertising budget in this case is the maximum amount of net profit, that is, the exceeding gross profits over the advertising costs.

In a formalized linear form, the method of 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 necessary for conventionally 100% coverage of the target audience; S - the desired level of sales; SMAX is 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 necessary for conventionally 100% coverage of the target audience; Nmax. - the number of potential customers of the company-advertiser; N. - the number of clients that will become regular customers of this company; k. - the ratio of the number of customers of this company who was constant to the number of clients who will try the product of this company; k 0 - The ratio of the number of customers who will try the product of this company, to the number of advertising of this company.

It is not difficult to see that this is the number of customers who have tried the goods of this company, and is the number of potential customers who have seen advertising this company.

10. Independent averaged forecast (NUP / 5B). It is based on expert assessments of the company's management. Depending on the objectives of the advertising campaign, 5-10 experts, based on experience, are building independent forecasts for the advertising budget. Each expert should build its forecast regardless of others without discussing it with colleagues. The forecast budget is defined as a medium-ray of these experts, taking into account their weight significance. But the best is median All independent estimates. ( Median- The value of the varying forecast, coming to the middle of a ranked totality. Inside the forecast interval, the calculation of the median is made by the formula:

M e \u003d x m h + d i (0.5n - f i -1) / f i,

where X M H - lower limit of the median interval; d I. - the magnitude of the partition interval; F i -1.- accumulated frequency of the interval; N. - number of expert estimates; f I.- the frequency of the median interval.) From the point of view of statistics, such averaging gives acceptable results and does not depend on extreme estimates.

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

P \u003d p e p / e c.

12. Method of modeling the relationship between communication and consumer behavior.The initial prerequisite for this method is the assumption that to achieve the planned sales volume it is necessary to have a sufficient number of consumers, each of which must buy a certain number of commodity units at the corresponding price per piece. To do this, it is necessary throughout the first year after the exit of the goods to the market to achieve a certain level of awareness, encourages the trial purchase and maintenance of the intensity of purchases. Quantitative relations between the audiences located at the specified preparedness stages are determined as a result of advertising research. Having defined them, calculate the necessary degree of coverage and frequency of impact, develop a plan for the use of advertising. After that, you can define the estimated size of advertising costs.

The advantage of the method is the objective validity of the costs, their linking with the communicative goals delivered. Disadvantages: complexity, laboriousness, high cost.

13. Payout plan. He considers advertising as an investment. It is assumed that you can pass for several years before the firm will block the initial costs and will make a profit. Using advertising as an investment, you can quickly the achievements of the required level of profitability of sales.

14. Promotional budget established brand- One of the most common situations. Test advertising, statistical forecasting and a purely practical method are advocated as the method of determining the advertising budget for the brand.

- Doughin buti am advertising. In this case, several similar markets are selected and each of them highlights a different amount of funds for advertising. How exactly - depends on the experimental values \u200b\u200bof the total budget, which may be greater or less than the corresponding indicator last year. Then compares sales results on each of the test markets. The level of costs given depending on the goal of the company the largest sales volume or the greatest profit, is used as the advertising budget of the entire market.

If the test budgets are randomly distributed in the markets, then we can assume that all other factors are averaged. This means that the defining factor will be advertising. Even if budgets are not entirely distributed, discrepancies in other factors can be eliminated statistically after receiving results (for example, using covariance analysis).

- Statistical forecasting. Z.atrates for advertising and sales are compared in accordance with the times (best for months, quarters or years to identify short-term and long-term effects). To calculate the relationship between them, statistical funds are used (as a rule, regression analysis). Based on the detected dependence and market plan for the future period, the magnitude of the advertising budget is determined. In statistical prediction, the influence of all other factors is taken into account mathematically, and not experimentally.

Quality of costs for advertising.The magnitude of the advertising budget does not fully determine the efficiency of the sales policy. The spending of the budget should coincide with the right choice of target audience, means and channels of advertising, advertising methods, etc. In fig. 7.13 shows the dependence of sales, depending on the high-quality study of the advertising campaign.

The optimization of the advertising budget allows companies to sustainably keep in their market. European experience testifies that in the cost of advertising up to 0.5 million dollars. The growth of fame comes from the level of costs is linear. With increasing costs of more than 1 million dollars. Fame is growing faster: a higher level of fame is achieved at each additional cost than at the initial stage. In this case, the fame is fixed in a certain period of time and includes recalls (informative advertising attractiveness, potential accessibility for the purchase, experience of real purchases).

All firms or companies enjoy different methods of forming an advertising campaign budget and develop their cost distribution schedules when conducting an advertising campaign.

Similar information.

Advertising management is mainly in setting goals, planning activities aimed at achieving these goals in the implementation of plans to life and monitor their implementation. The main tool providing all these functions is the advertising budget. In a sense, all administrative activities are an overview of the control and planning of the upcoming events carried out - focused around the budget. Budget development contributes to more accurate planning. It contributes to the most advantageous distribution of resources, and it also helps keep expenses in advanced framework.

The advertising budget involves making decisions in two areas: the total amount of funds allocated for advertising and frequently referred to as appropriations and how they will be used. As with the adoption of the majority of other solutions, in advertising, the definition of costs is mainly a matter of sound judgment. When there is no method of accurately determining the contribution of advertising in the increase in sales and profit, managers cannot rely on the development of a budget for some simple formulas. On the contrary, they must take into account many factors and go to the figure, which, in their opinion, most fully meets the requirements of a specific combination of circumstances.

The complexity of determining the exact size of the advertising budget, the necessary company, is also explained by the fact that advertising is only one of many factors affecting sales volumes. Therefore, it is very difficult to distinguish between the influence of advertising on the level of sales of certain goods and services. And when promoting the market, and with direct sales, along with an advertisement, play a large role: price, distribution, packaging, product properties, consumer tastes, competition, professional qualities of distributors, market condition, foreign economic factors, etc.

For example, the elasticity of the price reaction to lower prices is approximately twenty times more than the elasticity of the sales due to an increase in advertising costs. That is, the change in prices is much more significant on sales than changing the number of advertising.

However, at least an estimated advertising budget is necessary. On the one hand, to know the total amount allocated for advertising from the entire company turnover, on the other hand, to avoid obviously unreasonable spending.

Factors affecting the size of the advertising budget

Here are some of the most significant factors that need to be considered: 1) volume and size of the market, 2) the role of advertising in the marketing complex, 3) stage of the life cycle of goods, 4) product differentiation, 5) profit and sales volume, 6) competitors' costs and 7) Financial resources. Each factor will be considered separately, based on the principle "with other equal terms", which naturally never happens in reality. All these factors are interdependent, interrelated, constantly changing, and when developing a budget, they must be considered in aggregate.

Consider the first factor - the volume and size of the market. The budget is determined depending on how many people need to be covered. The coverage of large, widely scattered nationwide markets is more expensive than the coverage of highly concentrated small local markets. However, when leaving with a new product or with the desire to expand the market, the market size is still to be defined. A relatively small number of advertisers can afford to enter the market with new products in a nationwide scale immediately. The firms are most likely to present the goods to the market for the market, the region behind the region. It is much more reasonable to spend a sufficient amount of funds in a small area than to spray these means.

From a demographic point of view, the coverage of a wide heterogeneous market is more expensive compared to the coverage of one or two well-defined market segments. In heterogeneous markets, it is required to use expensive television, general directions and newspaper magazines. On smaller in volume, well-defined segments, you can do cheaper specialized logs and local radio, characterized by a smaller degree of useless coverage. For those who spend much, usually there is an advantage in the form of a lower cost rate per thousand. However, the use of local advertising with elevated selectivity allows you to achieve specific market segments with minimal useless coverage.

The following factor is the role of advertising in the marketing complex. The more significant the role of advertising in the formation of sales, the greater, probably, the size of the advertising budget will also be. On the market of widespread consumption goods manufacturers of competing brands - regardless of whether these brands are sold by self-service method or not, they consider it necessary to preliminarily affect their products, creating awareness of the brand and forming demand for it even before the buyer enters the store. The dependence of the results of such a preliminary question from advertising leads to a higher advertising budget. With the marketing of industrial goods, when the number of consumers is much less and easier with them to enter into direct contact, advertising plays an auxiliary role in personal sale, and the advertising budget is reduced. In real terms, such sellers of industrial goods, as concerns, "Yu. S. Styl "and" DuPont ", spend large sums on advertising. However, in relation to the volume of the question, the percentage of their advertising appropriations is lower than that of the sellers of most of the goods of widespread consumption. Advertising budgets of major firms increase and due to the cost of prestigious advertising, depending on how useful, they consider to contact the public with the presentation of controversial issues or issues of public policy affecting their interests.

An important factor in the marketing complex, which directly affects the amount of planned advertising costs is the amount of funds that must be allocated for measures to stimulate sales, aimed at both the consumer and the sphere of retail. Due to the distribution of samples, the distribution of coupons, the provision of discounts by retail merchants, etc. Often, in the year of releasing new items on the market to stimulate sales, spend much more than on advertising.

Let us turn to the consideration of the third factor - the stage of the life cycle of goods. A new product, as a rule, requires more intensive advertising. Costs to withdraw the goods of a new brand to the market with a high degree of competition can be absorbed by the entire gross profit of the first year. The formation of awareness of the brand, including a period of test sales and the establishment of a retail distribution network, requires large initial costs for advertising and stimulating sales.

After successfully withdrawing a new brand to the market, i.e. After reaching or exceeding control orientations in the field of sales, conquest of market share, cost reimbursement, etc., the company can use one of the following three strategies: 1) the strategy of further growth, 2) the retention strategy of the reached or 3) of the reinforcement strategy of the fruit achieved. A further growth strategy requires a significant expansion of advertising, which is accompanied by a drop in income on the nearest period of time, but opens the opportunity to win a higher market share before the brand. For recognized brands in a fully formed market, which is characteristic of most vintage goods, the retention strategy of the achieved position requires from year to remain approximately the same relative level of advertising. The reinforcement strategy of the reached fruit is designed for income in the nearest segment of time and replenish funds by reducing allocations for advertising and falling market share.

No less important is the fourth factor - the differentiation of the goods. When the goods have a unique advantage that consumers are instantly recognized in the process of use, the amount of ads necessary is, as a rule, less than in cases where there is no clear difference. A visual demonstration of the properties of such a product is a promotional appeal, which does not require complex text and frequent repetition, which is clearly perceived, to which they believe on the basis of which are taking actions. Less frequent and shorter appeals are cheaper, and this will be reflected in the reduction of the budget as a whole. On the other hand, in the absence of visible differences in competing brands, the budget should provide for the creation of a promising long-term value of the object of advertising in the form of an image of the brand.

The following factor is the profit size and sales volume. The amount of profit per unit of goods and sales volume indicators are inseparable from each other. With a substantial amount of profit - even if the sales volume is small - the advertiser has quite greater freedom when determining the size of the advertising budget.

The small amount of profits per commodity unit can be more compensated by a large volume of sales.

In the course of one study, it was found that vintage goods supported by relatively high advertising budgets and cost more than other brands in the same product category. In this regard, an interesting question arises: is the consumer really pays more for the intensively advertised brands or as the gross arrived sellers begin to advertise more intensively? In practice, there is also something. Advertising increases the value of the vintage goods in the eyes of consumers, allowing the seller to charge a higher price, which in turn contributes to the growth of the advertising budget. This progressive movement, naturally, is constrained by the elasticity of demand, depending on the price level and competition.

Then we consider how the costs of competitors affect the size of the advertising budget. Indicators of stamps shares in the total sales volume and in the total amount of advertising costs within the commodity category are usually closely interrelated. In other words, the share of the brand in the amount of sales, in all likelihood, quite accurately corresponds to its share in the total amount of advertising costs. The share in terms of the ratio of relationship with the share of conquered attention, which in turn, is a consequence of the share of advertising (the share of audible voice). This ratio can be a self-burning prediction: the higher the sales, the more we spend on advertising. In any case, the estimated share of the brand market involves a certain level of the advertising budget, taking into account the total costs under the commodity category.

Costs themselves do not yet guarantee advertising success, and the cost of competitors should not be considered as the only defining factor. However, since the share of attention for which the competitive struggle is competing, relationship with market share, this factor should not be overlooked.

Finally, the fact is the last - as financial resources. The most obvious limiting factor in the size of the budget is the availability of funding funds. Advertising costs to enter the national market in many product categories, perhaps, a relatively few firms that have enormous financial resources.

Relatively small firms offering a first-class product or a first-class service, but with limited funds, can start with small and increasing advertising allocations gradually, as sales growth. The scope of advertising, as well as production scope, must be poisoned with the value of the existing funding funds.

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