How Much Should you Spend on Advertising? Budget

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Shubhi Kotiya
CxO / Board, Germany
What amount is right or optimal to spend on the advertising? If we spend too little, the effect would be negligible and if we spend too much then some of the money could probably be put to better use. Another issue is that advertising has a carryover effect that lasts beyond the current - short-term - period. Although advertising is often treated as a current expense, part of it is really an investment that slowly builds up an intangible asset called "brand equity". FACTORS TO DETERMINE THE ADVERTISING BUDGET There are at least 5 specific factors to consider when setting the advertising budget: STAGE IN THE PLC: New products typically receive large advertising budgets to build awareness and to gain consumer trial. Established brands usually are supported with lower advertising budgets as a ratio to sales. MARKET SHARE AND CONSUMER BASE: High-market-share brands usually require less advertising expenditure as a percentage of sales to maintain their share. To build share by in (...) Read more? Sign up for free

  Gandhi Heryanto
Management Consultant, Indonesia

Justifying the Advertising Budget by Estimating Future Cashflows

I believe the 5 specific factors that you describe (...)

  Jaap de Jonge
Editor, Netherlands

Justifying an Advertising Budget with NPV

@Gandhi Heryanto: Thanks for sharing this interest (...)


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