Communication strategies & planning: Budgets & new products (MR, unit 6)

1) % sales - most used
calculate ratio between past expenditure and sales (expenditure as % of total sales) multiply to meet this year's sales forecast

• out of date by time implemented
• budget will only increase if higher sales expected (fails to see that MC can CREATE sales volume)
• if brand under threat, no budget to counteract

2) % product gross margin - as & sales using gross margin

3) Residue of last year's surplus

• Demands surplus achieved in order to spend money
• Fails to recognise need for investment in growth brands or impact of competitive activities

4) % expected turnover - allocate fixed % of future turnover

5) Unit or sales ratio method - calculate fixed MC spend per unit and multiple by expected sales volume (benefits growth, disadvantages declining)

6) Parity (competitive expenditure) - base levels on assessment of competitor's expenditure
Calculate a % related to brand's share of market

• Ensure brand expenditure in line with competition
• Difficult to make accurate assessment of competitors spend (advertising is often published but not other categories)
• Fails to recognise competitor spending may be dictated by different problems/objectives

7) Share of Voice - as above on share of market reach rather than sales

8) Media inflation - previous year's budget increased in line with growth in media costs

• Real level of expenditure maintained
• Fails to acknowledge any other variables

9) Object-and-task method (DAGMAR)
Campaign objectives defined at outset. Numerical target given and cost of achieving this are calculated.

• Monitors campaign achievement v. targets
• Accuracy limited by ability to access sufficient information to cover all variables

10) Experimentation - most use at some time
Balance need to protect investment v. need to innovate
Sets overall marketing communications budget then tests in a mini-market (one region)

• Main sources of business protected
• Gain real experience and enhance budgetary process with this knowledge
• Restrict number of experiments to ensure data readable against the norm and that individual variables can be assessed

11) What we can afford - management determines level profit desired (fails to recognise contribution of MC and bit arbitrary)

BUDGET FOR NEW PRODUCTS
Can't use many usual approaches as past data unavailable
Approach similar to objective and task
Establish realistic time frame for achieving goals

[any more research here?]