While you are planning for promoting and marketing a product, one of the primary tasks you have is developing a budget for advertising. Generally, budgeting starts when the company has completed the situation analysis for determining its position in the current market and establishing objectives for deciding its future steps. According to experts in the world of business, advertising budgeting should be based on any of the following 4 strategies:

Sales percentage:

The thing that makes this budgeting strategy extremely appealing is its simplicity; going by this strategy, the budget of an advertising campaign should be decided according to the sales performance. Suppose, a business house has made sales of $1 million within a certain period of time and decided that their advertising budget would be 5% of their sales; their budget for advertising during the upcoming period would be $50,000. It is as simple as that.

Competitive party:

There are companies who decide their advertising budget based on the steps their competitors are taking. This strategy is mostly used in the industries having predictable business cycles and sales patterns. Similar to sales percentage, advertising budgeting done based on competitive party’s actions also involves uncomplicated steps. However, you will have to invest serious efforts for knowing the investments made by other companies for advertising.

Affordability:

As the name of strategy suggests, affordability budgeting is based on the amount that can be afforded by the company. This budgeting approach for advertising is considered to be the weakest option among the 4 common budgeting strategies adopted for advertising. Affordability budgeting does not understand that the investment made for advertising will eventually come with big returns for the company.

Objectives and tasks:

This strategy is designed for connecting investment done for advertising to the objectives of advertising. Based on this strategy, advertisement budgets are planned considering what amount will be required for making an advertisement that will help the company to accomplish its goals.