1. Budgeting Getting it Right Chapter 6

2. Decisions Objectives Budget  Control tool, planning, accountability Advertising Budget Media Selection Media Strategy Creative/Message

3. Advertising Budget How much money to spend Budget distribution across Promotional tactics Four Main Methods: – Percentage of Sales – Peckham’s Formula – Competitive Parity – Objective and Task

4. Percentage of Sales A 2 = f(S 1 ) A 2 = total advertising dollars for period 2 f = a percentage figure S 1 = sales for period 1 (previous period) Using past sales to determine future promotion $$ Doesn’t allow for emergency adjustment Used to compare spending ratios across companies Doesn’t consider objectives Limiting

5. Percentage of Sales (2) A 2 = f(S 2 ) A 2 = total advertising dollars for period 2 f = a percentage figure S 1 = sales for period 2 (forecast) Based on “affected” sales period Still only based on sales Good initial base allocation Doesn’t consider objectives

6. Peckham’s Formula Relationship between sales and advertising $$ Applicable in certain categories – Correlation between SOV and SOM SOV = (1.5)SOM d n Based on 18yrs of sales and advertising data Only for new products – Results cannot be generalized

7. Competitive Parity Ad $$ as a proportion/share of product’s market share Establish a share of the total ad $$ for all products of the category – SOV = SOM Useful in planning and control Provides a yardstick – Used in stable markets Doesn’t apply to all products or categories Established brands require less SOV

8. Objective & Task Used by majority of advertisers Relates specific tasks to the dollars that will be spent Doesn’t consider relationship between short- term and long-term effect of promotion Requires clear objectives and reliable estimations of audience response

9. Other “Methods” Historical – Based on previous year – Adjust for inflation – Objectives are irrelevant All you can afford – “whatever is left over” – Lack of value to promotion

10. Recent Trends Shift in Budget allocations – Digital media Declining in traditional media Increasing in digital media – Cable and Spanish media on the rise Increased ROI measurement of brand equity Increased accountability – Measurable results and investment

12. Facebook Growth Projections

13. Q1 2012 vs. Q1 2011