The money set aside by the corporation for promotional activities in the form of advertising campaigns is referred to as the advertising budget. The expenditures of performing advertising research, producing materials, providing funding to the media, and guaranteeing the implementation of advertising campaigns should all be included in advertising budgets.
How to calculate the advertising budget:
There are many methods that companies use to calculate their advertising budget such as:
- Sales Percentage
In this method, the advertising budget is calculated as a fixed percentage of sales or estimated sales.
- Comparison with competitors
In this method, the advertising budget is calculated based on competitors’ promotional expenditure. Either equal, more or less, depending on the objectives of the company.
In this method, the advertising budget is calculated based on the availability of funds.
- objective and mission
In this method, tasks related to objectives should be evaluated and then costed.
- Allocate all available funds
In this method, companies allocate all available funds for promotional activities.
Advertising budget calculating steps:
- Define advertising goals based on the company’s goals
- Determine the tasks and the advertising campaigns that can be carried out
- Draft, evaluate and prepare advertising budget
- Take approval from senior management
- Allocate funds for various activities under the advertising budget
- Monitor and control expenses and review them to achieve the best profit