UNIT – 1

INTRODUCTION TO ADVERTISING
ADVERTISING
It is a popular product promotion strategy with the primary aim of selling
product/services to customers.
Advertising is a promotional activity which aims to sell a product or service to a
target audience. It is one of the oldest forms of marketing which attempts to
influence the actions of its target audience to either buy, sell, or do something
specific.
DEFINITION
“American Marketing Association” has defined as “Any paid form of non personal
presentation and promotion of ideas, goods and service of an identified sponsor”.
INTRODUCTION TO ADVERTISING COMMUNICATION
PROCESS/ELEMEMTS
1. Sender – A sender is also referred to as a source and is the one who has a
message to convey. For example, a company or a brand manager can be considered
as a Sender. In a marketing process, it is important to ensure that the source or the
sender is realistic and trustworthy. Also, source can be direct or indirect.

2. Encode – The sender encodes ideas into a message. A brand manager, for
example, decides to advertise a new product.

3. Message – Based on the ideas given by the sender, the marketer creates an
effective message that is clear and effective enough to achieve the communication
objectives.

4. Receiver – The receiver is the person or group of people with whom the sender
tries to communicate and share the message. For example, customers are the
receivers for a company.

5. Decode – On receiving the message from the sender, the receiver decodes it. It I
important here that the sender and the receiver have common experiences in order
to decode the message at the receiver’s end as it was intended to be.
6. Feedback – Feedback is considered as examining and evaluating how precisely
the intended message is being received by the receiver. Marketing research can be
a way to collect feedback from the receivers.

Essentially, it involves asking receivers if they have seen the message, whether
they remember the message, and their attitude towards the message (product).

INFORMATION RESPONSE HIERARCHY MODELS

* AIDA model
* HIERARCHY of effects model

AIDA MODEL
AIDA model is a model used in marketing that defines the stages act goes through
in the process of purchase a product
The AIDA model is an abbreviation of Attention, Interest, Desire and Action
American Business man “E.st. Elmo Lewis” introduced the AIDA model in 1898.

The steps involved in an AIDA model are:

 ● Attention: The first step in marketing or advertising is to consider how to
attract the attention of consumers.
● Interest: Once the consumer is aware that the product or service exists, the
business must work on increasing the potential customer’s interest level.

For example, Disney boosts interest in upcoming tours by announcing stars who
will be performing on the tours.

● Desire: After the consumer is interested in the product or service, then the
goal is to make consumers desire it, moving their mindset from “I like it” to
“I want it.”

For example, if the Disney stars for the upcoming tour communicate to the target
audience about how great the show is going to be, the audience is more likely to
want to go.

● Action: The ultimate goal is to drive the receiver of the marketing campaign
to initiate action and purchase the product or service.

Therefore, the AIDA model says that Awareness leads to Interest, which leads
to Desire, and finally, Action.

Let us consider ways to use the AIDA model by looking into each part of the
hierarchy.

First Step: Attention

Often, the attention part is overlooked by many marketers. It is assumed that the
product or service already got the attention of the consumers – which may or may
not be the case. In any event, don’t just assume that everyone is already aware of
your product. One of the best approaches to attracting consumer attention is what’s
called “creative disruption” – breaking existing patterns of behavior through a
highly creative message. This can be done in several ways:
 ● Placing advertisements in unexpected situations or locations. This is often
referred to as guerrilla marketing.
● Creating shock in advertisements through provocative imagery.
● An intensely targeted message. This is also referred to as personalization.

Essentially, the goal is to make consumers aware that a product or service exists.

Second Step: Interest

Creating interest is generally the hardest part. For example, if the product or
service is not inherently interesting, this can be very difficult to achieve. Make sure
that advertising information is broken up and easy to read, with interesting
subheadings and illustrations. Focus on what is most relevant for your target
market in relation to your product or service, and on conveying only the most
important message you want to communicate to consumers.

A good example of this is Wendy’s “Where’s the beef?” ad campaign that focused
on the fact that Wendy’s hamburgers contained more beef than their competitors’
hamburgers.

Third Step: Desire

The second and third steps of the AIDA model go together. As you are hopefully
building interest in a product or service, it is important that you help customers
realize why they “need” this product or service.

Think about how the content in infomercials is presented – they aim to provide
interesting information on the product, along with the benefits of buying it –
benefits that ideally make consumers want the product more and more.
Infomercials do this extremely well by showing the product being used in several
creative situations. Convey to the audience the value of the product or service, and
why they need it in their life.

Fourth Step: Action

The last step of the AIDA model is getting your consumer to initiate action. The
advertisement should end with a call to action – a statement that is designed to get
an immediate response from the consumer. For example, Netflix uses persuasive
text to convince the consumer to try their free trial. Netflix communicates how
convenient their product is and highlights its value, then urges consumers to sign
up for a free trial.

Good advertising should elicit a sense of urgency that motivates consumers to take
action RIGHT NOW. One commonly used method for achieving this goal is
making limited-time offers (such as free shipping).

New Developments in the AIDA Model

Many criticize the AIDA model for being too simplistic. For example, the AIDA
model does not take into consideration different possible points of sale. Marketing
will be very different for a customer visiting an online store than it is for a
customer looking to purchase a new car at a dealership. Therefore, there are many
variations of the AIDA model such as the:

● AIDCAS (Action, Interest, Desire, Confidence, Action, Satisfaction) model

● REAN (Reach, Engage, Activate, and Nurture) model
● NAITDASE (Need, Attention, and Interest; Trust, Design, and Action;
Satisfaction and Evaluation) model

HIERARCHY OF EFFECTS MODEL

The hierarchy-of-effects theory is a model of how advertising influences a

consumer's decision to purchase or not purchase a product or service. The
hierarchy represents the progression of learning and decision-making consumer
experiences as a result of advertising. A hierarchy-of-effects model is used to set
up a structured series of advertising message objectives for a particular product, to
build upon each successive objective until a sale is ultimately made. The objectives
of a campaign are (in order of delivery): awareness, knowledge, liking, preference,
conviction, and purchase.
The steps are defined as below:
1. Awareness
This is the most crucial step and the starting point for purchase. Brands must make
sure that the consumer is aware of the presence of your brand in a particular
product segment.
For example, if Tina wants to buy a toothbrush, and you as the marketing manager
of XYZ want her to buy your brand’s toothbrush, you have to make sure that you
advertise well so that she is aware of the existence of such a brand for
toothbrushes.
2. Knowledge
This is where your product will be evaluated against other brands by the consumer.
Make sure enough (positive) knowledge is available about your product – through
the internet, retail stores and the product package itself.
For example, now Tina, aware that there is a XYZ brand will try figure out what
unique features and benefits you are offering over any other brand like Colgate and
Oral-B.
3. Liking
This is where the consumer builds a liking to your product. This is where your
product is being considered for its emotional benefits; be sure to make them
prominent.
For example, now Tina has evaluated the pros and cons of buying a XYZ brush
but might not like the colour of it, or might feel that this brush is for the elderly. As
the marketing manager of XYZ, you have to make sure that these features, that
leave emotional impact, are taken care of properly in the marketing communication
program.
4. Preference
By this time consumer may be convinced to try out your product, but may like
other brands of toothbrush too. So what is it that will make her prefer XYZ over
the other brands? These points of differentiations or unique selling points need to
be highlighted to make sure that the consumer likes your brand more than the
others in her consideration list.
For example, Tina now may be actually considering buying a XYZ toothbrush.
But is she thinking that she’ll buy it to try it only or is she thinking that the next
buy will also be a XYZ brush?
5. Conviction
This is the stage where the doubt in consumers’ minds about buying the product of
your brand needs to be converted into action. Marketers can aid in this step by
giving out free samples, test drives etc. This step should also decide if the
consumer will stick to your brand i.e. actually buy your brand, or switch after
testing the sample.
For example, Tina tried the brush you gave her for a month and then when time
came to buy one, she bought an Oral-B one. Make sure that doesn’t happen and
that trial builds loyalty. Incorporate such unique features in your brand that will
encourage purchase.
6. Purchase
The last and the most crucial stage of the consumer buying cycle is the purchase.
You need to make sure that purchase experience is easy and perhaps even
enjoyable for the consumer. Some of the ways to encourage purchase is by keeping
simple and multiple paying options, making the product available easily, easy to
understand usage instructions, offers etc.
For example, now that Tina has decided to buy your brand after trying it out for a
month, make sure she knows where to buy it from and how she can pay. You may
also give her a tube of toothpaste free to delight her.

IMPORTANCE OF ADVERTISING
1)Spreading Awareness
By advertising, you can make consumers aware of the existence and availability of
your product. However, raising awareness is only the first stage in persuading
consumers to buy and use your product. Your advertising must convince them of
the quality of the product.
2)Popularizing a brand
While there is an overlap between the two, branding and advertising are distinct
disciplines with different goals. A branding agency is focused on creating and
shaping a brand's identity. An advertising agency, on the other hand, is responsible
for promoting that brand and getting customers to notice it.
3) Increasing Demand
Advertising plays an important role in increasing and decreasing demand for a
product or service. It's a way to engage consumers and educate them about the
business, product or service and results.
4) Increased profit
Advertising can stimulate consumer interest, ultimately leading to trial and
purchase. By showcasing the benefits and features of a product or service, an ad
campaign can persuade potential customers to make a purchase, thus increasing
revenue for the business.
5) Maintains the existing market
Advertising has three primary objectives: to inform, to persuade, and to remind.
Informative Advertising creates awareness of brands, products, services, and ideas.
It announces new products and programs and can educate people about the
attributes and benefits of new or established products.
6) It acts a salesman
Advertising has been rightly described as salesmanship in print. What a travelling
salesman does for the selling house is done by advertising at least cost. That is
why; most retail organizations do not employ large army of travelling salesmen.

Instead, they are willing to spend on advertising which attracts consumers to the
stores where the counter salesmen cater to their needs. In fact, advertising has been
heralded as a boon to retailers who are freed from the problems of sales
management. In fact, goods are sold in advance by advertising.

7) Reduces his burden of job

In case salesman alone is called upon to accept the challenge of selling, it goes
much difficult. In absence of advertising, he is forced to play a double role the role
of advertising and that of salesmanship both rolled into one.
Advertising provokes public interest, wins the confidence, and promotes
conviction. With such ready background, salesman can capitalise easily to sell
well. As advertising sells between the calls, the work of salesman is rendered
easier and cosier.

8) It is a driving-force in decision-making:
The present-day complex world of industry has been able to provide with the
largest possible varieties of products to such an extent that the consumers are at
loss to decide. Further, each producer claims that his own products are the best.

In such situation, it is advertising that comes to the rescue of a consumer to select

the best by providing him with comparative account of each in terms of features,
prices, utility, quality, durability, convenience and the like, the consumer finds it
easy to decide with such ready information.

OBJECTIVES OF ADVERTISING
1)Introduce a product : The most common reason Advertising is used is to
introduce a new product in the market. This can be done by existing brands as well
as new brands. Have a look at the latest IPhone in the market or a Samsung
smartphone and you will find a lot of advertisement for these new products. The
objective of advertising here is to tell customers – “Here is the new product we
have launched”
2) Spreading Awareness : According to the AIDA model, the most important job
of advertising is to get attention which is nothing but Awareness creation.
Advertising needs to capture the attention of people and make them aware of the
products or their features in the market.

Example – Most of the Bank ads that you see are awareness campaigns. The ads
that advertise the benefits of savings / mutual funds or benefits on credit and debit
cards are all awareness creation ads.

3) Brand Building : When a brand regularly advertises and delivers quality

products and fulfills the promises it makes, automatically the value of the brand is
built. However, there are many other aspects of brand building. One of the first
ones is to advertise via ATL and BTL campaigns etc.
Brands have different objectives of Advertising. Brands like P&G and HUL
regularly invest funds in building a good brand value for the parent brand. By
doing so, even if one brand is affected, the parent brand is untouchable.

Recently we observed the problems of Maggi in India where Maggi was banned
completely due to high lead content. However, this did not affect the parent brand
Nestle much and neither affected its other brands like Nescafe which had done
their own brand building and were independent of the parent brand. This brand was
built by good products and constant advertising towards building brand equity and
making a connect with the audience

4) Maintains the Existing Market : When you're looking for patentable

innovations, be sure to consider improvements made to existing products. Product-
market fit is a concept that captures how closely your product aligns with the
desires of the market. It should be a consideration on the forefront of your
organization’s mind when launching new products or tailoring existing ones. Not
only does it have a significant impact on your top line revenue and market capture,
but it is inextricably related to customer satisfaction, retention, and
cross-sell/upsell opportunities.
5) Acquiring customers : One of the major objectives of advertising and the first
objective of many advertising campaigns is to acquire more customers. This is also
known as making the customers switch brands. This can happen by passing on
a strong message so that the potential customer leaves the brand which he is tied up
with and comes to your brand.

Example – Most telecom companies launch plans and strategies just to acquire
customers and then advertise these strategies in the market so that the customer
switches brands. There is hardly any differentiation in the telecom market – thus
advertising is a major way to acquire customers. The Vodafone Zoozoo campaign
was just that – Influence the customers and create passion in such a way that they
do brand switching,

6) Value Creation : A most important aspect of Advertising is to differentiate the

product or the service from those of the competitor. A customer can only
differentiate between services based on the value the firms provides over that of
competitors.

If a competitor is just advertising the features, whereas your firm advertises the
promises and commitments that it will keep, naturally more customers will “trust”
your brand over others. This is the reason that advertising is used commonly to
create value and to differentiate one brand from another.

Coca cola, Toyota, Amazon are some of the most trusted brands in the market. It is
no doubt that these brands are also amongst the top advertisers in their
respective segments. These brands target value creation as well as differentiation
via their advertising campaigns.

TYPES OF ADVERTISING
I. Classification on The Basis of Media

On the basis of media, advertising may be-classified into the following four
categories:
1. Print Media Advertising
2. Electronic or Broadcast Media Advertising
3. Outdoor Media
4. Other Media

1. Print Media Advertising

The print media consists of newspapers, magazines, journals, handbills, etc. No

newspaper or, journal, today, can survive without advertising revenue.

Print media advertising, even today, is the most popular form; and revenue derived
by mass media from advertising has, therefore, been progressively increasing year
after year. Print media appeals only to the sense of sight, i.e. eyes.
 2. Electronic or Broadcast Media Advertising

Electronic, or, broadcast media consists of (i) radio, (ii) television, (iii) motion
pictures, (iv) video, and (v) the internet. The radio is audio in nature, appealing
only to the sense of sound (ears). Radio advertising is more effective in rural areas,
as compared to urban regions.

Television, as an advertising medium, is more attractive and effective because it is

an audio-visual medium appealing to both the senses of sight and sound (eyes and
ears). Different methods, such as spot announcements, sponsored programs, etc.,
are used for broadcasting advertising messages.

However, broadcasting media are a very expensive form of advertising.

Advertising is also undertaken through movies, videos, and the internet.

3. Outdoor Media

This includes posters, neon signs, transit, point of purchase (POP), etc. Outdoor
advertising can be a good supporting media for other forms of advertising. It is a
good form of reminder advertising, especially, POP advertising.

4. Other Media

This includes direct mail, handbills, calendars, diaries, cinema advertising, the
internet, and so on. These miscellaneous media can play an important supporting
role to the major media such as television, and newspapers.

II Classification on The Basis of Geographic

1. Local Advertising
2. Regional Advertising
3. National Advertising
4. International Advertising
1.Local Advertising

It is also known as „retail advertising‟. It is undertaken by local retail stores,

departmental stores, co-operative stores, selling cloth, saris, and other consumer
goods and consumer durables.

It is directed at local customers. Media, used for local advertising, are shop
decorations, local newspapers, magazines, posters, pamphlets, hoarding, new signs,
local cinema houses, etc.

2.Regional Advertising

It has wider coverage, as compared to local advertising. It covers a particular

region, which may be one state, or, more than one state, the people of which may
be having a common tongue, or, use one common product.

It is undertaken by the manufacturer, or, a regional distributor of a product. Media,

used for regional advertising, include regional newspapers, magazines, radio,
regional T.V., outdoor media, etc. It is considered to be an ideal form of
advertising for launching and marketing a new product in a specific region.

3.National Advertising

It is generally undertaken by manufacturers of branded goods, for which,

advertising messages is communicated to consumers all over the country. Almost
all possible mass media, including national newspapers, radio, and television
networks, are employed for national advertising.

Product services, and ideas, which have been demanded all over the country, are
suitable for national advertising. In India, Indian Airline Hindustan Lever Ltd.,
Vicco, Godrej, Bajaj, and Kirloskar are a few leading advertisers at the national
level.

Likewise, detergents, soaps, kinds of toothpaste, cosmetics, scooters, cars, and

bicycles, are some of the products, which are advertised all over the country.
4.International/ Global Advertising

This type of advertising is undertaken by those companies, which operate in more

than one country, known as „multi-national‟ companies. Exporters, generally
advertise their products and services in foreign countries, where ready markets are
available.

Air India and other airlines, and multinational companies advertise their products
and services all over the world. Coca-Cola and Pepsi are advertised globally, as the
sales are almost all over the world. International advertising is extremely
expensive, involving the services of professional advertising agencies in different
countries.

III Classification on The Basis of Audience

On this basis audience, advertising may be classified into the following four
categories:
1. Consumer Advertising
2. Industrial Advertising
3. Trade Advertising
4. Professional Advertising
5. Agricultural Advertising

1. Consumer Advertising

This type of advertising is directed to the ultimate consumers of the consumer

products, i.e., the individuals, who buy, or, use the consumer products, or services,
say, for example, toilet soap, toothpaste, toothbrush, tea, textiles, etc., for
themselves and for their families.

All types of consumer products need continuous and extensive advertising on T.V.,
radio, and press.
2. Industrial/B2B Advertising

This type of advertising is used by manufacturers and distributors of industrial

goods. Such as machinery, plants, types of equipment, spare parts, and
components, and are directed at industrial users or customers.

Such advertisements usually appear in trade journals, trade dictionaries, business

magazines, and so on. The appeal made is tactual and rational.

3. Trade Advertising

This kind of advertising is employed by manufacturers and/or distributors to

influence and persuade wholesalers and dealers (retailers) to stock and sell the
goods of the advertiser by offering incentive schemes to them, or, by inviting
dealerships for their particular products(s).

4.Professional Advertising

It is directed at professionals like doctors, professors, engineers, and others, who

are expected to recommend, prescribe, or, specify the advertised products to
ultimate consumers. This is done through professional journals and representatives
of the advertisers.

5.Agricultural Advertising

Agricultural marketing covers the services involved in moving an agricultural

product from the farm to the consumer. These services involve the planning,
organizing, directing and handling of agricultural produce in such a way as to
satisfy farmers, intermediaries and consumers.

IV Internet

1.Web Banner

Banners are the creative rectangular ad that are shown along the top, side, or
bottom of a website in hopes that it will drive traffic to the advertiser's proprietary
site, generate awareness, and overall brand consideration. This type of visual
banner-style online advertising is a form of display advertising.

2.Contextual

Contextual advertising refers to the practice of placing ads on web pages based on
the content of those pages. For example, this could be ads for running shoes on a
news article about running, or it could be ads for laptops on a tech ecommerce site.

3.Blog

Blog marketing is the process of reaching your home business' target market
through the use of a blog. Initially, business owners had a blog separate from their
websites, but today, you can easily integrate the two to make it easier for you to
manage, as well as easier for visitors to access.

4.Mobile Advertising

Mobile advertising is crucial in any effective marketing strategy considering the

ubiquity of smartphones and tablets. To maximize the impact of your advertising
campaigns, adapt them to mobile platforms or utilize a responsive design that
ensures optimal viewing across all screens. In today’s digital landscape, investing
in mobile platforms expands your reach, improves user interaction, and increases
your website’s SEO through Google’s Mobile First algorithm. Embracing mobile
advertising unlocks many benefits for your business.

TARGET AUDIENCE SELECTION

It refer to the specific group of consumer most likely to want your product\service.

Target audience may be dictated by age, gender, income, location, interest or other
factors.
BASIS OF TARGET AUDIENCE SELECTION

1. Consumer Advertising

This type of advertising is directed to the ultimate consumers of the consumer

products, i.e., the individuals, who buy, or, use the consumer products, or services,
say, for example, toilet soap, toothpaste, toothbrush, tea, textiles, etc., for
themselves and for their families.

All types of consumer products need continuous and extensive advertising on T.V.,
radio, and press.

2. Industrial/B2B Advertising

This type of advertising is used by manufacturers and distributors of industrial

goods. Such as machinery, plants, types of equipment, spare parts, and
components, and are directed at industrial users or customers.

Such advertisements usually appear in trade journals, trade dictionaries, business

magazines, and so on. The appeal made is tactual and rational.

3. Trade Advertising

This kind of advertising is employed by manufacturers and/or distributors to

influence and persuade wholesalers and dealers (retailers) to stock and sell the
goods of the advertiser by offering incentive schemes to them, or, by inviting
dealerships for their particular products(s).

4.Professional Advertising

It is directed at professionals like doctors, professors, engineers, and others, who

are expected to recommend, prescribe, or, specify the advertised products to
ultimate consumers. This is done through professional journals and representatives
of the advertisers.
METHODS OF SETTING ADVERTISING BUDGET

1.Fixed Guidelines Method

2.Task Method

3.Subjective Method

1. Fixed Guidelines Method

A) 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. Company has the tendency to
maintain certain per cent (or percentage) of sales as ad budget. Based upon the
past, the current and the expected sales, amount for advertising budget is
determined. This method is based on the notion that sales follow advertising efforts
and expenditure. It is assumed that there is positive correlation between sales and
advertising expenditure. This is not the scientific method to decide on advertising
budget.

B) Unit of Sales Method

Consumer durable firms make use of this method as a variant on sales percentage.
While it mostly works out same as a sales percentage, here the firm puts an amount
of advertising expenses on the unit as add on. This method may also be referred to
as the fixed-sum-per-unit-of product method. It is based on the premise that a
specific amount of advertising is required for marketing each unit.

This method proves more useful specially in the case of advertising of speciality
goods with higher prices, however this method might not prove efficient for
consumer goods of lower price bracket because the market situations are very
volatile and change frequently. This method is further undependable in case of
fashion products as the market is even more dynamic.

C) Competitive Parity Method

This method involves setting budgets to match competitors’ outlays and funds. In
this method, the company monitors competitors’ advertising and follows it. This
method is generally used in markets in which advertising is heavier and it is felt
absolutely important to the companies not to be left behind the competitors.

Normally, it is felt that the brand leader needs to spend proportionately less as a
share of total advertising to maintain its market share, while conversely a brand
trying to improve its market share will have to spend proportionately more. But
such a type of budgeting plan fails to reflect the firms’ own advertising needs or
marketing requirements.

None of the marketing managers in practice ever will accept the fact that they set
their advertising and promotions budgets on the basis of what their competitors
allocate. But a close examination of their advertising expenditures, both as a
percentage of sales and in respect to the media where they are allocated, will show
little variation in the percentage-of-sales figures for firms within a given industry.

The rationale for setting the budget this way is that the collective wisdom of the
industry is involved. Some are of the opinion that since it takes the competition
into consideration, marketplace is more stable and marketing warfare is minimized
in turn minimizing the unusual or unrealistic ad expenditures. However there are a
number of disadvantages with this method.

i. It ignores the fact that advertising and promotions are designed to accomplish
specific objectives and not merely to face competition.

ii. It assumes that the ad campaigns will be equally effective because firms have
done similar expenditures. This highly ignores the contributions of creative
executions and/or media allocations.
iii. It ignores a very natural possibility that some companies simply make better
products than others.

iv. There is no guarantee that competitors will not increase or decrease its own
expenditures, regardless of what other companies do because competition cannot
be fully assessed at the beginning of a financial year.

v. Finally there is no reason why competitive parity should avoid promotional

wars. We are a witness to the Coke versus Pepsi wars.

Nevertheless companies employ the competitive parity method. But a wiser

decision is not to ignore the competition but use this method in conjunction with
the percentage-of-sales or other methods. Marketing never suggests to always keep
parity with competitors however it suggests a very meticulous vigilant on them.

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.

Under this method, following steps are to be followed to set advertising budget:
● Determining the advertising objectives
● Calculating the amount required to achieve the objectives
● Determining whether the amount is affordable
● Finalizing the budgets
 ● Executing the plan
● Follow-Up

3. Subject Method
A) All you can afford 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. Under this method, budgetary
allocation is made only after meeting all the expenses. Advertising budget is
treated as the residual decision. If fund is available, the company spends; otherwise
the company has to manage without advertising. Thus, a company’s capacity to
afford is the main criterion.
B) Arbitrary Method
This method seems to be a weaker method than the affordable method for setting a
budget. The arbitrary allocation method is completely dependent on the
management’s discretion and hence has no theoretical basis. The budget is
determined by management solely. They on the basis of what they feel to be
necessary. So ultimately the decision depends on the psychological and economical
build up of the people in the management and not on the market requirements. The
arbitrary allocation approach has no obvious advantages because

i. There has been no systematic thinking

ii. No objectives have been budgeted for

iii. The concept and purpose of advertising and promotion have been largely
ignored.

It is thus understood that that the manager believes some money must be spent on
advertising and promotion and that is why he picks up an amount, which has no
logical explanation. Amazingly there are many companies both large and small,
profit making and non-profit making who continue to set their budgets this way. It
is now upon the readers to decide whether this method should be used or not.