Advertising Budget & Factors Affecting It

Money Does Matter.

The advertising budget is the amount of money companies spend on promoting their product or services. It helps in marketing, attracting target customers, expanding the sales chart and delivering a reasonable ROI to the organization.

Before finalizing an organization’s or company’s advertising budget, one must consider the favourable and unfavourable market circumstances that will influence the advertising budget.

Let us observe the market circumstances that we need to be aware of :

  • Frequency of the advertisement
  • Competition and Clutter
  • Market Share of the Product
  • Product Life Cycle Stage

Frequency of the Advertisement

Frequency is the number of times an advert description of the product or service has been shown in the time slots allotted. So, if a corporation needs greater advertisement frequency for its product or services, it must increase its advertising expenditure.

Competition & Clutter 

Businesses have a lot of competition for their products and services. The marketing channels are populated with several rival adverts called clutter. When a company wants to get ahead of its competition and make its own position to the target customers, it has to increase its advertising budget.

Market Share

The company must have superior products in terms of quality, uniqueness, demand, and eye-catching marketing to have a competitive advantage over rivals. All of this is only feasible with a large advertising budget. It evokes a positive response from clients.

Product Life Cycle Stage

Suppose the business is a newbie, or the product is in the early stages of development. In that case, the budget should be high to compete with the market’s current competitors and have regular commercials. As time passes and the product gets established, it no longer needs constant promotion so that the company can reduce its advertisement budget. 

After thoroughly studying the market conditions, the company can set up its advert budget accordingly. When it comes to making a budget, there are few options.

Sales Percentage

This technique determines the budget based on product sales from past years’ data or projected future sales. This pure prediction-based strategy works well for businesses with predictable yearly revenues. However, if additional promotional activities are required, this strategy has a downside. As the budget is set already, the number of commercials will reduce.


Small businesses are the most likely to employ this strategy. Only firms with sufficient cash and the ability to pay for advertising use this strategy. Companies may advertise throughout the year if they have money to spend. The amount paid fluctuates from time to time depending on the advertising shown.

Intuitive Estimate

This strategy is mainly for newbies who have recently joined the market and have little or no knowledge of how the market operates or how much to spend on advertising. As a result, the company’s higher-level executives use this strategy since they are the only ones with experience.

As a result, completing your research and then as we advance for the ideal market circumstances and determining the optimum advertising budget will significantly influence the company’s growth and development.

Leave a Comment