Todays Session

Setting Media Budgets

The actual money that would be

spent on Advertising the brand on
conventional media. It is a sub-set of
the advertising budget
 Topics to be covered
Components of the Brand budget

Factors that affect budget setting

Methods of setting budgets

Allocation of the budget

 Components of Brand
budget
ATL budget comprises of:
The Media budget
The Production budget
BTL budget comprises of:
The Trade budget: Trade offers-
important for brands in the Maturity
stage of the PLC, Pull component, part
of BTL budget
The Promotions budget: Consumer
offers, Events, part of BTL budget
 Factors
1.Advertising Task:
It has a direct impact on budget
Some brands have high advertising
elasticity: Sales= fn Advertising
The more differentiated a brand, the
higher the advertising elasticity and
better the return from increased level
of ad spending
 Factors
2. Competitive framework
Broader the TG base, higher is the
required budget
Niche TG base, lower is the required
budget
3. Market dominance
Large share, leader brands can
spend relatively less (in relation to
their MS) as compared to new
launches or low share brands: BDI &
CDI
 Factors
4. Market coverage
Wider the coverage, higher the
budget requirement- National versus
Local brand
5. Media costs
Costs vary from market to market
despite same GRP levels
Market prioritization filter will help :
overkill versus under deliver
 Factors
6. Market Task
Consolidate in market A, grow share
in market B
In addition, growth in sales is linked
to increased distribution coverage,
more trade and consumer promos,
more display in outlets etc: visibility
& availability
 Factors
7. TG to be targeted
More focused the TG, less budget needed:
women v/s all adults, kids v/s kids +
mothers
Media consumption shapes media mix and
hence impacts budget levels: refer media
involvement grid
8. Pricing
Price parity or advantage of brand- lower
budget needed
Price premium or looking at a price
increase- higher budget required
 Factors
9. Frequency of purchase
Non seasonal, bought frequently
needs to be advertised through the
year- higher budget
10. Effect of increased sales on other
marketing costs
Limited to production capacity: D>S
Control demand till capacity is
increased- resource allocation will
change
 Factors
11. Profit margin
Higher the profit margin of a brand,
higher is the advertising budget and
vice-versa
In reality, short term action leads to
cutting budgets to shore up profits
Methods of setting budgets
1. Status quo: follow the successful
last year level
. Pros:
Past success in line with brand
interests
. Cons
a. Ignores threats and opportunities
the brand would face in the changed
market dynamics
b. Inward looking
Methods of setting budgets
2. Inflation adjusted: inflation in media
cost factored with status quo
approach
Pros
Media agency uses not only past
inflation figures but also the vital
broad industry trends into the
budgeting process
Cons
Not sensitive to market realities and
hence brand realities
Methods of setting budgets
3. A-S Ratio : set as a % of Sales,
historical figure or benchmarked to
competition
Higher multiplier needed when:
Brand has high margin
Growth objective
New product or re-launch
New creative units
 A-S Ratio
Pros
Simple method, linked to revenue
Cons
If sales targets not being met, ad
spends will be reduced
The % decided becomes an arbitrary
thumb rule- past mistakes may continue
Other marketing variables and
dynamics are ignored
 Methods of setting budgets
4. SOV-SOM Method
The competitive situation is the basis for this
method. Brands with larger share can operate
with their SOV <= their SOM
Investment or lower share brands have to
operate at their SOV>SOM- growth stage
Pros
Marketing task led
Cons
If the category GRP prediction goes wrong, this
method fails
It does not factor inefficiencies- led by
competitive activity
Methods of setting budgets
5. EFER Method
This approach brings in the much
needed efficiency into the process of
setting objectives and budget
Effective frequency is the minimum
number of times the TG needs to be
exposed to our communication so
that it has the desired effect- helps in
ascertaining the PODR
 EFER Method
Pros
Helps to ascertain the ideal reach &
frequency combination- efficiency led
Cons
Does not factor competitive context or
brand task- it is entirely TG based
Can provide only one medium at a
time- a media mix situation cannot be
analyzed by this method eg only Print or
only TV, not Print + TV
Methods of setting budgets
6. Breakeven Planning Method
Normally used for a launch brand
It should be in an investment mode
for the first couple of years
This means a disproportionate
allocation of budgets to ASP
It is important to plan this out so that
we have a definite goal of when the
brand will breakeven and start
making profits
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 Allocation of the budget
Market prioritization, Media mix and
Scheduling as factors already
discussed
Let us look at other elements of the
Marketing mix and their context
1. Short term versus long term
2. Retailer power
 Short term v/s Long term
Advertising is thought to work in the long
term by building:
a. Brand awareness
b. Differentiation
c. Brand image
d. Brand preference
. Promotions on the other hand have an
immediate visible result on the top line
and effective in the short term- price
reduction or offers
. Pros and Cons of Promotions?
. Constant dilemma for the marketer- invest
or encash?
 Retailer Power
Distribution network is a time consuming
process- fragmentation and sheer numbers
Wholesalers are more powerful than
retailers- unlike a developed market like the
US where the opposite is true
In the US the budget is split as Trade (50) +
Promotions ( 26) + Advertising (24) unlike
India where Advertising takes a larger share
in most categories
Pressure on Push efforts due to market
factors
The explosion of new brands, variants and
SKUs has increased the Retailers
bargaining power
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Methods of setting budgets
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Any Questions Please?