Kerimova C.V., Financial University under the Government of Russian Federation

Planning and budgeting of advertisement campaign.

Planning an advertising campaign involves a gradual process of creating and maintaining marketing communications designed to change knowledge, attitudes and behavior of target audiences in order to achieve marketing objectives. This process includes setting goals, planning activities aimed at achieving these goals, implementing plans into practice and monitoring their realization.

The main tool for ensuring the implementation of all stages of the campaign, is the budget. In a sense, the entire administration - a review of the implementation, monitoring conducted by the planning upcoming events – is centered around the budget. Budgeting contributes the most profitable allocation of resources and helps to keep costs at a pre-defined framework.

In the advertising budget the most important information about the ongoing financial performance of business promotions is accumulated and summarized.

In accordance with the classical canons of the organization of the advertising business, advertising project financing is usually planned and implemented on the basis of a special advertising budget. In most cases it is a component of the budget to promote the advertised product (advertising is just one of the main promotional-means). And in each case the size of funds for advertising will be determined in accordance with certain rules.

Classification of the advertising budget can be carried out by a number of reasons.

There are short-term, medium and long-term projects, divided in terms of time. There are combined (for all brands of organization) and split (for each brand) projects, classified by moving objects.

The process of planning an advertising budget can be divided into two areas:

1. determination of the total funds for advertising;

2. distribution and control of budget expenditure items.

There are many methods for determining the advertising budget. It is required to select the optimal method for determining the required level of business spending on advertising. In summary in the scientific economic literature we can define main methods of advertising budgeting:

· method of a fixed advertising budget,

· the residual method,

· method, based on a percentage of sales,

· method, based on a percentage of sales taken by competitors,

· method, based on the advertising market share,

· method, that use the advertising intensity curves,

· method, based on the objectives of the campaign,

· method of Dorfman-Steyman,

· Danaher, Rust method,

· method of combining expert estimates.

1. Method of a fixed advertising budget sets a level of advertising expenditures, which remains unchanged despite of the changes in internal and external environment of the company-advertiser;

2. The residual method, whereby advertising expenses are allocated after covering all other costs of the company-advertiser;

3. Method of determining an advertising budget based on a percentage of sales sets a certain percentage on sales from last-year situation and forecast for next year. If we are using percentage of the sales unit of the commodity, we should determine a percentage of the price is spent on advertising unit price and the amount of advertising expenditure is made dependent on the quantity of goods to be sold;

4. According to the method of determining an advertising budget based on a percentage of sales taken by competitors, we firstly should estimate total volume of sales and promotional activity in terms of money, and then we should calculate the percentage of sales, taking into account their own sales;

5. Method of determining an advertising budget based on the advertising market share, sets an equal share of the commodity market, occupied by the company. According to this method we firstly should estimate the share of the commodity market of our company in its total volume, and then we fix the amount of our advertising expenses, that are equal to the share of the enterprise in the market;

6. Evaluation of advertising budget on the basis of advertising intensity curves is complicated calculation of the advertising market share, an equal share of the commodity market. So, for the curve of advertising intensity on one axis plotted values of the commodity market shares held by a company-advertiser, and the other axis - corresponding to the value share of the advertising market;

7. Forming of an advertising budget based on the objectives of the campaign. In this case, we define mains, targets, objectives, strategy, distribution channels, set the value of the design and product-placement of promotional goods and services and calculate the. The size of the advertising budget depends on the capabilities of the enterprise and is calculated by the experience of previous campaigns. In this case, as a rule, we use some corrections in the light of the situation;

8. Dorfman-Steyman method, whereby the ratio of the advertising budget to total sales is the ratio of the elasticity of demand for advertising products to the elasticity of demand by their prices;

9. According to the Danaher, Rust method, we determine the amount of the advertising costs by three objectives: to minimize the profitability of advertising expenditures, to maximize advertising effectiveness and maximizing return on investment in advertising;

10. Method of combining expert estimates expects several specialists to determine the advertising budget by different methods and select optimal results.

In summary, we’d like to mention, that all these methods of advertising budgeting have their own advantages and disadvantages and, ideally, should be used in conjunction.