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Budgets - Coggle Diagram
Budgets
Factors influencing budgets
Market size
Market potential
Economic recession
Market share objectives
Determines the percentage of market share an organization aims to capture.
Unexpected opportunities or threats
Contingencies
A future event or circumstance which is possible but cannot be predicted with certainty.
Economies of scale
Organisational characteristics
Planning gap
The mismatch between the planned goals and the effectively attained objectives.
Crisis situation
Communications budgeting methods
Inertia
Keep budgets constant year on year, while ignoring the market, competitive actions or consumer opportunities.
Arbitrary allocation
Whatever the general manager or managing director decides will be implemented.
Is very subjective way of deciding how to spend promotional funds does, of course, lack critical analysis and overall strategy.
Marginal analysis
Invest resources as long as extra expenses are compensated by higher extra returns.
Marketers should invest in promotional or communications efforts as long as their marginal revenue exceeds the marginal communications cost.
Percentage of sales
Budgets are defined as a percentage of the projected sales of the next year.
Could lead to overspending in markets.
Competitive parity
Companies look at the amount of money competitors spend on communications and then copy their budgets.
This is method is often used in fast-moving consumer goods where sales are believed to be highly influenced by advertising and communications spending.
Affordability method
In this method ‘left over’ resources, after all input costs are invested in communications.
This method is often used in small and
medium-size enterprises.
Objective and task method
Starts from communications objectives and the resources that are needed to reach these planned goals.
Budgeting for new brands or products
The marketer may decide to set a budget that is higher than the industry average in order to make an impact.
Doubling the advertising-to-sales ratio is considered a safe guideline for the first year of introduction.
Advertising intensity
How the communications budget affects sales
The higher the investments, the greater the additional sales will be.
Sales response models
Describes the relationship between the increase in expenses due to advertising and its corresponding effect on the sales of the product.
Shows the cause-and-effect relationship between commercial activity and sales for a particular time period.