An advertising budget is how much money is allocated to market a product or service. This money can be used to buy advertisements in newspapers, magazines, television, the Internet, and the like.
Each comany will allocate a different amount. Of course, larger companies will usually allocate more money for advertisement to gain more market share. As you probably know we are bombarded with advertisement all day long.
Some factors that determine advertising budgets are the amount of money a company has to spend in this area and how well the company believes the advertising is doing. If a company believe that the advertising plan is not going well, then they may cut their budgets. If a company believes more advertising is needed and they can afford it, they may increase the budget.
Advertising is an aspect of promotion in an organization's marketing mix. Organizations need advertising because it communicates what the organization is selling. The purpose of advertising is to persuade, inform and distinguish products from competitors. An advertising budget is therefore an organization’s resource plan with regards to advertising activities. The organization allocates some company resources to facilitate the advertising activities from planning to implementation. Advertising budgets also offer projections on returns on investment, because a company would not normally put funds in an advertising campaign which would otherwise not achieve expected objectives. Therefore, during the budgeting process the company would wish to understand some of the issues involved which include:
- The target consumer, this ensures the communication is directed to the right people
- The type of media that will be used for communications and this includes TV, radio, billboards, and the internet, among other media
- The message that would resonate well with the target consumer and works with the media optimally
- The feedback from consumers who have encountered or interacted with the advertisement
The type of media, for instance, determines advertising expenditure because TV adverts may be more expensive to produce while radio adverts may be cheaper.