Budget Calculation for Advertising

The consideration of different situations constitutes different choices for advertising, and the advertising scholar HarsbertHase cited four commonly used methods:

(1) Percentage method:

The advertising budget is calculated by taking a certain percentage of the sales or surplus in a certain period of time.

When using sales as a criterion, it can be calculated on the basis of the average total sales of the previous year or the past few years, and then on the basis of the projected total sales of the following year. In the case of surplus, the calculation method is based on the average gross profit of the previous year or the past several years, and then on the projected profit for the following year.

(2) Unit of sales method:

The unit of sales is calculated by multiplying the advertising cost by the number of units of goods sold, such as one unit of goods, or one box of the same kind of goods.

For example, canned goods are set at $10 per case unit for advertising, if 10,000 cases are sold in a year***, the advertising cost for a year is $10 x 10,000 cases = 100,000 yuan.

(3) mail-order method:

According to the inquiry price and the number of people who ordered goods from a particular advertisement, the advertising effect will be calculated to find out the reasonable relationship between the advertising cost and the effect of the advertisement, and the advertisement cost will be decided in a generalized way. Example:

Advertising cost per unitCatalog printing cost+Sales letter printing cost+Postage costNumber of products soldWith the figure of advertising cost per unit, you can figure out how much advertising cost is needed for a certain amount of sales.

(4) purpose fulfillment method:

First set up a certain sales goal, decide to achieve this goal must be needed for advertising activities and the scope of advertising, and then you can calculate the adequate advertising funds.

Advertising budgeting must take into account the company's financial resources to decide, at the same time to fully control, detailed list, the total budget, all types of budgets to be true and exhaustive.