kb/data/en.wikipedia.org/wiki/Advertising_management-5.md

title	chunk	source	category	tags	date_saved	instance
Advertising management	6/11	https://en.wikipedia.org/wiki/Advertising_management	reference	science, encyclopedia	2026-05-05T15:17:26.704627+00:00	kb-cron

Setting advertising objectives provides the framework for the entire advertising plan. Therefore, it is important to specify precisely what is to be achieved and outline how advertising will be evaluated. Advertising objectives should be Specific, Measurable, Achievable, Relevant, and Time-dependent (SMART). Any statement of advertising objectives must include measurement benchmarks – that is the norms against which advertising effectiveness will be evaluated. One of the first approaches to setting communications-oriented objectives was the DAGMAR approach (Defining Advertising Goals for Measured Advertising Results) developed in the 1960s. While memorable, the DAGMAR approach fails to provide concrete guidance on how to link advertising objectives with communications effects. In order to set realistic and achievable advertising objectives, most advertisers try to link advertising or communications objectives with the communications effects. Rossiter and Bellman have argued that, for advertising purposes, five communications effects should be considered, namely:

1. Category Need: The consumer's acceptance that the category (the product or service) is necessary to satisfy some need
2. Brand awareness (brand recognition and brand recall): The consumer's ability to recognise a brand or to recall a brand name from memory
3. Brand preference (or brand attitude): The extent to which a consumer will choose one brand over other competing brands in the category
4. Brand action intention (purchase intent): The consumer's self-instruction to purchase a given brand
5. Purchase facilitation: The extent to which the consumer knows how and where to purchase the brand

For many purchases, category need and purchase facilitation will be present in the customer's mind and can be omitted from the advertising objectives. However, for some purchases, the customer may not be aware of the product category or may not know how to access it, in which case these objectives will need to be addressed in the communications objectives. Brand awareness, brand preference and purchase intention are almost always included as advertising objectives.

=== Setting advertising budgets === A firm's advertising budget is a sub-set of its overall budget. For many firms, the cost of advertising is one of the largest expenses, second only to wages and salaries. Advertising expenditure varies enormously according to firm size, market coverage, managerial expectations and even managerial style. Procter and Gamble, the top US advertiser, spent US$4.3 billion in 2015 on national media (exclusive of agency fees and production costs) while a small local advertiser might spend just a few thousand dollars in the same period. The size of the budget has implications for the promotional mix, the media mix and market coverage. As a generalisation, very large budgets are required to sustain national television campaigns. Advertisers with tight budgets may forced to use less effective media alternatives. However, even advertisers with small budgets may be able to incorporate expensive main media, by focusing on narrow geographic markets, buying spots in non-peak time periods and carefully managing advertising schedules. A number of different methods are used to develop the advertising (and/or marketing communications) budget. The most commonly used methods are: percentage-of-sales, objective and task, competitive parity method, market share method, unit sales method, all available funds method and the affordable method.

==== Percentage-of-sales method ==== Using the percentage-of-sales method, the advertiser allocates a fixed percentage (say 5% or 10%) of forecast sales value to the advertising budget. This method is predicated on the assumption that advertising causes future sales volume. The percentage of sales method is the easiest method to use and for this reason remains one of the most widely used methods for setting budgets. A major problem with the %-of-sales method is that there is no consensus about the percentage value to apply. Some companies use industry averages as a guide to set their marcomms budget. The following table, based on industry averages, shows that the % value can vary from around 20% of sales to less than 1 percent.

==== Objective and task method ==== The objective and task method is the most rational and defensible of all budgeting methods. In this method, the advertiser determines the advertising objectives and then defines specific, measurable communication tasks that will need to be undertaken to achieve the desired objectives. Cost estimates are developed for each communication task in order to arrive at a total budget estimate. This method is time-consuming and complex, and as a consequence has been less widely used in practice, however, recent research suggests that more marketers are taking up this approach.

==== Competitive parity method ==== The competitive parity method allocates the advertising or promotional budget based on competitive spending for comparable activities. This approach is a defensive strategy used to protect a brand market position. It assumes that rival firms have similar objectives and is widely used in highly competitive markets. The main criticism of this method is that it assumes competitors know what they are doing in relation to advertising expenditure. There are several approaches to using the competitive parity method:

a) Allocate the same budget on advertising as a key rival; b) Allocate the budget based on the industry average expenditure levels; c) Allocate a similar percentage-of-sales as a key competitor; d) Allocate the same percentage-of-sales on advertising as the industry average; e) Use competitive activity as a benchmark to which sums are added or subtracted based on managerial judgement. Competitive parity requires a detailed understanding of competitor's expenditure in key areas. Market intelligence used to inform this approach can be obtained by consulting company annual reports and also from commercial research service providers such as Nielsen's AdEx. Other methods used to set advertising and promotional budgets include the market share method, unit sales method, all available funds method, affordable method, marginal analysis and others. Contemporary budgeting rarely relies on a single method, but instead uses a combination of methods to guide the marketer in determining the optimal expenditure levels.