What are four main ways of determining an advertising budget for a product or a service?

Based on buiness studies ,the four main ways of determining an advertising budget are:

1. AFFORDABLE METHOD -Based upon what the business can afford. -Major difficulty is it can lead to fluctuating advertising budget, making long range planning very difficult.

2. PERCENTAGE OF SALES METHOD -Based on percentage of either current or anticipated sales (either based on % of each item sold...or % of total dollars received). -Better than the affordable method because it bears a closer relationship to the movement of sales in the industry, it encourages management to think in terms of relationships between advertising cost with prices set and profit; and it encourages stability between competitors. -Disadvantage in it discourages experimentation and being dependant on yearly fluctuations, restricts long range planning.

3. COMPETITIVE PARITY METHOD -Budget is set to match what the competition is doing. -Advantage is put forward that it is based upon the collective wisdom of a particular sector of industry, on the other hand, there are no real reasons to believe that the opposition is more proficient than you!

4. OBJECTIVE & TASK METHOD -Involves defining an objective to be achieved by advertising, then setting up an advertising program to meet that objective. This might be done via the following steps for instance:

A) Establish a market share goal.

Determine the number of advertising exposures needed to get to one percent of the population. (e.g. How many copies of the advert, or how many times it is run on TV or radio....etc).

B) Determine the % of the market share which needs to be reached.

 Determine the number of gross rating points which would need to be obtained (e.g. A gross rating point is one exposure to one percent of the potential buying population).

C) Determine the % of potential customers who need to be convinced to do business. Determine the needed advertising budget to achieve the purchase of one gross rating point.

agree with Mr Tamer >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Very Great Question  I think they could be according to the targeted customers as follows;;

Their Location, Their Culture , I can not remember right now and waiting for the answers

Starting by defining the main variables of your campaign: 1- Your targeted clients. 2- Your capability or the market size you are capable to attend (reginal, national or international). 3- Gender if the product does not attract all or is not for both. 4- Nationality, in some occasions, as culture many times plays a role in some products or services. 5- Age. 6- Sometimes position.

Second, you define your campaign tools and social media costs and define the campaign period. At that stage, you can calculate expected (not always real) advertising budget.