Setting Up an Advertisement Budget for a Business

Expose your business to those who need your services or product.

             The greatest thing in business is exposing your business to potential clients. Thousands of people are in need of your products and services. Sometimes some businesses close don because they have not had the required number of clients they expected after a given period of time. Many people starting a business usually focus on the profits that are behind the business. It is also important to set a budget for advertisement. This is the first task of the marketing department  .

The are a good number of sites to advertise your business online such as Google adwords, chitika , social media marketing such as facebook and twitter,. when you have mad the decision on how to advertise you business be it online or offline, you will need to set up a budget.

Below are the various methods of setting up an advertisement budget.

1.       Percentage of Sales Method (PSM)

The major goal of any business is to get the maximum number of clients. By the   PSM advertising cost are linked to the firms or company’s sales volume level.

                      This method is good for business with few customers. As such as the percentage of sales increases, the advertisement budget will also increase which means as the advertisement budget increases, the percentage of sale will increase. Thus making the business successful. If you have some clients who buy your products or service, you can use the profit made  to start  exposing your business.

2.       Competitive Parity Method

      Every business has competitors and there are many ways to top the list. This can also be done using advertisement.

            By This method the company or firm first assessed the budget of the various budgets set by competitors and set its own budget inline with those of its competitors. It can be used by starting firms and existing businesses with no or low advertisement budget. 

3.      Objectives And Task Business (OTB) Method

    Some companies have policies that they have put in place for the success of their business.

With the OTB method, specific objectives are set and policies that are best to achieve these objectives are developed. The advertising budget is determined based on the policies put in place.

4.       Units of  Sales Method

                  In this method, a firm with different products set a fixed amount of money to advertise each units of each product to be marketed. MTN is using this method to advertise Mobile money.  If you have a variety of products you can this method can really increase your sales.

5.       Executive Decision Method

               This method is used by companies with a marketing manager.  By this method, the marketing manager decides how much to spend on advertisement. The success of this method greatly depends on the manager’s experience and skills.

6.       Build Up Method

                 This is for a firm or company that wants to use a variety of media to advertise their products or services. You might want to advertise on a new paper, journal, website etc. The budget will be assigned will thus consist of the sum of all the financial allocations assigned to the various advertising media.

7.       Corporate Evaluation

                                  Those who use this method try to ensure that for any money spent in advertising, an equal or a more than proportionate increase in profit.  The budget set here is targeted towards certain profit range.

8.       Affordable Method :

                         By this method, the advertising budget on the basis of what can be afforded. Those who use this method regard advertisement as a luxury which can be afforded in good times (when the advertisement is successful) and cutback in bad times (when it the advertisement is unsuccessful). This is not a very good philosophy in business. Your thought should be towards success if you think your brand or your business is the best. This is not a very good philosophy for a success oriented person.

9.       Residual method

With the residual method of setting up an advertising budget, the budget is assigned after all other cost had been covered.