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The document defines different types of advertisements and discusses factors to consider when setting an advertising budget. It begins by defining advertising and advertisements, noting that advertisements come in many forms from copy to interactive video. It then discusses common types of advertisements including online, print, broadcast, outdoor, public service, and product placement advertising. The document also outlines five common methods for setting an advertising budget: percentage of sales, objectives and tasks, competitive parity, affordable/available funds, and expert opinion. It concludes by discussing specific factors to consider when setting an advertising budget such as a product's life cycle stage, market share, competition/clutter, advertising frequency, and product differentiation.

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73 views5 pages

Unit - 1

The document defines different types of advertisements and discusses factors to consider when setting an advertising budget. It begins by defining advertising and advertisements, noting that advertisements come in many forms from copy to interactive video. It then discusses common types of advertisements including online, print, broadcast, outdoor, public service, and product placement advertising. The document also outlines five common methods for setting an advertising budget: percentage of sales, objectives and tasks, competitive parity, affordable/available funds, and expert opinion. It concludes by discussing specific factors to consider when setting an advertising budget such as a product's life cycle stage, market share, competition/clutter, advertising frequency, and product differentiation.

Uploaded by

ChaiTanYa Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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The definition of advertisement

To understand what an advertisement is, we must first understand


what advertising is. The definition of advertising is an industry used to call the attention
of the public to something, typically a product or service.

The definition of advertisement is the means of communication in which a product,


brand or service is promoted to a viewership in order to attract interest, engagement,
and sales. Advertisements (often shortened to ads or adverts) come in many forms,
from copy to interactive video, and have evolved to become a crucial feature of the app
marketplace.

Why are advertisements important?


Advertisements are a guaranteed method of reaching an audience. By creating an
engaging ad, and spending enough to reach your target users, advertisements can
have an immediate impact on business. This effect could be seen in improved trade or
boosted brand recognition, among many different metrics.

Types of Advertisement

Advertising has evolved into a vastly complex form of communication, with literally
thousands of different ways for a business to get a message to the consumer. Today's
advertisers have a vast array of choices at their disposal. The internet alone provides
many of these, with the advent of branded viral videos, banners, advertorials,
sponsored websites, branded chat rooms and so much more. Here are a few examples
of what's available for your media arsenal:

Online Advertising (aka Digital) If you see an advertisement via the internet, then it is
classified as online advertising. In fact, there are ads on this very page, and most other
websites you visit, as they are the primary revenue driver for the internet. Another
avenue of online advertising is native advertising, which is the digital variation of the old
print advertorials and sponsored content. There are many digital marketing strategies
including placing ads on popular websites and social media sites.

Print Advertising Once a huge driver of sales, print is taking a back seat to the many
digital forms of advertising now available to marketers. However, if there is one thing
that's certain about advertising, it's that being different is good. And when consumers
tire of digital ads, a return to printed pieces and the tactile feeling and permanence they
provide is definitely in the card
Broadcast Advertising
A mass-market form of communication including television and radio, broadcast
advertising has, until recently, been the most dominant way to reach a large number of
consumers. Broadcast advertising has suffered from the popularity of DVRs and "ad-
skipping" technology. However, it is still an effective way to reach millions of people,
especially when the Super Bowl comes around.

Outdoor Advertising
Also known as out-of-home (OOH) advertising, this is a broad term that describes any
type of advertising that reaches consumers when they are away from home. Think of
billboards, bus shelter posters, fly posters, and even those big digital boards in Times
Square.

Public Service Advertising


Unlike traditional commercials, Public Service Advertisements (PSA) are primarily
designed to inform and educate rather than sell a product or service. PSAs traditionally
appear on TV and radio but are also heavily promoted online

Product Placement Advertising


Product placement is the promotion of branded goods and services within the context of
a show or movie, rather than as an explicit advertisement. If you have ever seen a
"Wow, they sure are driving a lot of Fords in this scene," or "Does everyone in this TV
show \?" then you are noticing product placement. It's a way that these films and shows
get funding, and is a great way for advertisers to reach a targeted demographic.

Advertising Budget:

1. Percentage of Sales Method:

It is a commonly used method to set advertising budget. In this method, the amount for

advertising is decided on the basis of sales. Advertising budget is specific per cent of

sales. The sales may be current, or anticipated. Sometimes, the past sales are also

used as the base for deciding on ad budget. For example, the last year sales were Rs. 3
crore and the company spent Rs. 300000 for advertising. It is clear that the company

has spent 1% of sales in the last year.

2. Objectives and Task Method:

This is the most appropriate ad budget method for any company. It is a scientific

method to set advertising budget. The method considers company’s own environment

and requirement. Objectives and task method guides the manager to develop his

promotional budget by (1) defining specific objectives, (2) determining the task that must

be performed to achieve them, and (3) estimating the costs of performing the task. The

sum of these costs is the proposed amount for advertising budget.

The method is based on the relationship between the objectives and the task to achieve

these objectives. The costs of various advertising activities to be performed to achieve

marketing objectives constitute advertising budget.

3. Competitive Parity Method:

Competition is one of the powerful factors affecting marketing performance. This

method considers the competitors’ advertising activities and costs for setting advertising

budget. The advertising budget is fixed on the basis of advertising strategy adopted by
the competitors.

Thus, competitive factor is given more importance in deciding advertising budget. For

example, if the close competitors spend 3% of net sales, the company will spend, more

or less, the same per cent for advertising. Here it is assumed that “competitors or

leaders are always right.” If not followed carefully, this method may result into

misleading.
It is obvious that a company differs significantly from the competitors in terms of product

characteristics, objectives, sales, financial conditions, management philosophy, other

promotional means and expenses, image and reputation, price, etc.

4. Affordable or Fund Available Method:

This is, in real sense, not a method to set advertising budget. The method is based on

the company’s capacity to spend. It is based on the notion that a company should

spend on advertising as per its capacity. Company with a sound financial position

spends more on advertising and vice versa.

5. Expert Opinion Method:

Many marketing firms follow this method. Both internal and external experts are asked

to estimate the amount to be spent for advertisement for a given period. Experts, on the

basis of the rich experience on the area, can determine objectively the amount for

advertising. Experts supply their estimate individually or jointly.

Budget Decisions

After outlining its advertising objectives, the company moves on setting its advertising
budget for each product. Adverting aims at manipulating demand for a product. The

company tries to spend the amount required to achieve the sales goal.

We will discuss some specific factors that should be considered when setting the

advertising budget; these factors can be stated as under :

 Stage in the Product Life-Cycle: A product in the introduction stage needs

large advertising budgets to create awareness and gain consumer trial. In


contrast, products in the maturity stage usually require lower budgets as a ratio

to sales.

 Market Share: Brands that enjoy high-market share need more advertising

budget as a percent of sales than low-share brands. Building the market or taking

share from competitors requires larger advertising budgets than simply

maintaining the current share.

 Competition and Clutter: In a highly competitive market where advertising

spending is also large, a brand should be advertised heavily to attract buyers.


 Advertising Frequency: The advertising budget must be larger in a situation

where advertising frequency is higher.

 Product Differentiation: A brand that closely resembles other brands in its

product class requires heavy advertising to maintain its distinctive image. If the

product differs significantly from competitors, advertising can be used to project

the differences to consumers.

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