Business Marketing Management

ASSIGNMENT On

Budgeting of advertisement for selected company

Submitted to: Prof. R.Sunitha

submitteb by Vikram singh Nitin Joseph B.Sidharth Shailendra Itishree Nayak

ADVERTISING Introduction
"The means of providing the most persuasive possible selling message to the right prospects at the lowest possible cost". Another definition given by Kotler and Armstrong is "Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services through mass media such as newspapers, magazines, television or radio by an identified sponsor". There are five main stages in a well-managed advertising campaign: Stage 1: Set Advertising Objectives An advertising objective is a specific communication task to be achieved with a specific target audience during a specified period of time. Advertising objectives fall into three main categories: (a) To inform - e.g. tell customers about a new product (b) To persuade - e.g. encourage customers to switch to a different brand (c) To remind - e.g. remind buyers where to find a product Stage 2: Set the Advertising Budget Marketers should remember that the role of advertising is to create demand for a product. The amount spent on advertising should be relevant to the potential sales impact of the campaign. This, in turn will reflect the characteristics of the product being advertised. Setting the advertising budget is not easy - how can a business predict the right amount to spend. Which parts of the advertising campaign will work best and which will have relatively little effect? Often businesses use "rules-of-thumb" (e.g. advertising/sales ratio) as a guide to set the budget. Stage 3: Determine the key Advertising Messages Research suggests that the clarity of the advertising message is often more important than the amount spent. The advertising message must be carefully targeted to impact

the target customer audience .A successful advertising message should have the following characteristics: (a) Meaningful - customers should find the message relevant (b) Distinctive - capture the customer's attention (c) Believable - a difficult task, since research suggests most consumers doubt the truth of advertising in general Stage 4: Decide which Advertising Media to Use There are a variety of advertising media from which to choose. A campaign may use one or more of the media alternatives. The key factors in choosing the right media include: (a) Reach - what proportion of the target customers will be exposed to the advertising? (b) Frequency - how many times will the target customer be exposed to the advertising message?
(c) Media Impact - where, if the target customer sees the message - will it have most

impact? For example does an advert promoting holidays for elderly people have more impact on Television (if so, when and which channels) or in a national newspaper or perhaps a magazine focused on this segment of the population? Another key decision in relation to advertising media relates to the timing of the campaign. Some products are particularly suited to seasonal campaigns on television (e.g. Christmas hampers) whereas for other products, a regular advertising campaign throughout the year in media such as newspapers and specialist magazines (e.g. cottage holidays in the Lake District) is more appropriate. Stage 5: Evaluate the results of the Advertising Campaign The evaluation of an advertising campaign should focus on two key areas: (1) The Communication Effects - is the intended message being communicated effectively and to the intended audience? (2) The Sales Effects - has the campaign generated the intended sales growth. This second area is much more difficult to measure.

In practice, the following approaches are used for setting the advertising budget: Approaches to setting the advertising budget According to William Cohen stated in The Entrepreneur and Small Business Problem Solver, "In some cases your budget will be established before goals and objectives due to your limited resources. It will be a given, and you may have to modify your goals and objectives. If money is available, you can work the other way around and see how much money it will take to reach the goals and objectives you have established." Along with marketing objectives and financial resources, the small business owner also needs to consider the nature of the market, the size and demographics of the target audience, and the position of the advertiser's product or service within it when putting together an advertising budget (1) Fixed percentage of sales In markets with a stable, predictable sales pattern, some companies set their advertising spend consistently at a fixed percentage of sales. This policy has the advantage of avoiding an advertising war which could be bad news for profits. However, there are some disadvantages with this approach. This approach assumes that sales are directly related to advertising. Clearly this will not entirely be the case, since other elements of the promotional mix will also affect sales. If the rule is applied when sales are declining, the result will be a reduction in advertising just when greater sales promotion is required! (2) Same level as competitors This approach has widespread use when products are well-established with predictable sales patterns. It is based on the assumption that there is an industry average spend that works well for all major players in a market. A major problem with this approach (in addition to the disadvantages set out for the example above) is that it encourages businesses to ignore the effectiveness of their advertising spend it makes them lazy. It could also prevent a business with competitive advantages from increasing market share by spending more than average.

(3) Task The task approach involves setting marketing objectives based on the tasks that the advertising has to complete. These tasks could be financial in nature (e.g. achieve a certain increase in sales, profits) or related to the marketing activity that is generated by the campaigns. For example: Numbers of enquiries received quoting the source code on the advertisement Increase in customer recognition / awareness of the product or brand (which can be measured) Number of viewers, listeners or readers reached by the campaign (4) Residual The residual approach, which is perhaps the worst of all, is to base the advertising budget on what the business can afford after all other expenditure. There is no attempt to associate marketing objectives with levels of advertising. In a good year large amounts of money could be wasted; in a bad year, the low advertising budget could guarantee a further low year for sales.

Major Media TypesMedia Advantages Limitations Short life; poor reproduction quality; small "pass-along" audience

Newspa Flexibility; timeliness; good local pers market coverage; broad acceptance; high believability Televisi on Combines sight, sound, and motion; appealing to the senses; high attention; high reach Audience selectivity; flexibility; no ad competition within the same medium; personalization Mass use; high geographic and demographic selectivity; low cost

High absolute cost; high clutter; fleeting exposure; less audience selectivity Relatively high cost; "junk mail" image

Direct mail

Radio

Audio presentation only; lower attention than television; nonstandardized rate structures; fleeting exposure

Magazi nes

High geographic and demographic selectivity; credibility and prestige;

Long ad purchase lead time; some waste circulation; no guarantee of position Limited audience selectivity; creative limitations High competition; long ad purchase lead time; creative limitations

Outdoor Flexibility; high repeat exposure; low cost; low competition Yellow Pages Excellent local coverage; high believability; wide reach; low cost

Newslet ters Brochur es

Very high selectivity; full control; interactive opportunities; relative low costs Flexibility; full control; can dramatize messages

Costs could run away

Overproduction could lead to runaway costs Relative high cost unless volunteers are used Relatively new media with a low number of users in some countries

Telepho Many users; opportunity to give a ne personal touch Internet High selectivity; interactive possibilities; relatively low cost

Apples marketing budget

Introduction:Apple Inc. (NASDAQ: AAPL; previously Apple Computer, Inc.) is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company's best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad. Apple software includes the Mac OS X operating system; the iTunes media browser; the iLife suite of multimedia and creativity software; the iWork suite of productivity software; Aperture, a professional photography package; Final Cut Studio, a suite of professional audio and film-industry software products; Logic Studio, a suite of music production tools; and iOS, a mobile operating system. As of August 2010, the company operates 301 retail stores in ten countries, and an online store where hardware and software products are sold. As of May 2010, Apple is one of the largest companies in the world and the most valuable technology company in the world, having surpassed Microsoft. Services Stores (retail, online, App, iTunes, iBooks) Mobile Me $65.23 billion (FY 2010) $14.01 billion (FY 2010) $75.18 billion (FY 2010) $47.79 billion (FY 2010)

Revenue Profit Total assets Total equity

Employees

49,400 (2010)

Advertisement budget of Apple Apples total advertising budget for 2008 came to $486 million. Apples 2007 ad budget was $467 million Ad spending in 2006 was $338 million Advertising came to about 13 percent of Apples $3.8 billion SG&A budget. Apple had a very good year in its longstanding war to steal market share from PC makers. According to IDCs most recent figures, Apple grabbed 8.2 percent of the U.S. desktop/laptop combined market. That puts Apple in the #3 slot behind Dell (29.4 percent) and HP (25.3 percent)

CONCLUSION:
The leading pharmaceutical companies spend around 20% of sales on advertising, whilst business such as Ford and Toyota spend less than 1%. An average for fast-moving consumer goods markets (FMCG) is around 8-10% of sales. So advertising is far more not only to increase the sell but also to increase the awareness about the product in between the customer. The advertising budget of a business typically grows out of the marketing goals and objectives of the company, although fiscal realities can play a large part as well, especially for new and/or small business enterprises