When budgeting advertising campaign should be taken into account: the stage of the product life cycle, its market share; geography and sales volume; the level of competition in the market; financial capacity of the organization; the costs of different alternatives (for example, the price of TV ads compared to radio ads and magazine ads); changes in prices for advertising in the means of its distribution; the level of differentiation of the commodity of this group; reputation of the company itself and other factors.
The world theory and practice of advertising has developed a number of methods for forming the budget of an advertising campaign, each of which has its own advantages and disadvantages. So, along with the simplicity of the method, its low reliability comes forward; to improve the accuracy of calculations, it is often required Additional Information which is not available in the information services market. Therefore, in practice, the choice of method depends on the planning specialist, his education, experience, worldview.
All methods can be conditionally divided into two groups: traditional and new. More advanced new methods (mathematical models and experimental formulas) make it possible to determine advertising costs with a high degree of accuracy. However, in the current market conditions in Russia, they are often overly complex in practical application due to market instability and lack of information, therefore, they will not be considered on the pages of this textbook; you can familiarize yourself with them in the sources. Consider the main traditional methods of budgeting an advertising campaign.
- 1. Calculation method "from cash". Many firms allocate a certain amount in the advertising budget that they can afford to spend. This method of determining advertising budget completely ignores the impact of advertising on sales. As a result, the size of the budget from year to year remains uncertain, which makes it difficult to plan ahead for promotional activities.
- 2. Calculus Method as a percentage of sales. Advertising expenses under this method are calculated as a certain percentage of either the amount of sales (current or expected) or the selling price of the product.
This method has a number of advantages: it is easily accessible, fairly simple to use, and can be improved by varying percentages depending on various factors. The disadvantages of this method are that the percentage of sales can only be determined on the basis of past experience or the actions of competitors, there is no other logical basis for choosing a percentage. When forming the advertising budget, the need for advertising a specific product and a specific sales territory is not taken into account; the size of the budget does not fully take into account the available opportunities of the advertiser. This method is based on the argument that sales are the cause of advertising, not the effect.
- 3. historical method. The basis of this method is the formation of the budget by reviewing the previous budget and adjusting it in accordance with changing conditions. With this method, the budget may be based on the previous year's budget, with a corresponding increase based on inflation or other market factor. However, the mistake made earlier in the preparation of the budget will remain and will be carried over to the new budget.
- 4. Competitive parity method. This method involves the formation of the budget of an advertising campaign at the level of the corresponding costs of competitors. This assumes that the level of costs of competitors represents the "collective wisdom of the industry", and maintaining competitive parity helps to avoid sharp competition in the field of advertising. But there is no reason to believe that competitors have more sensible views on the formation of an advertising budget.
- 5. Calculation method "based on goals and objectives". This method consists in considering each task of the advertising campaign and determining the costs required to complete it. It requires that the advertising budget be formed on the basis of:
- precise formulation of advertising objectives;
- determining the tasks to be solved to achieve the goals;
- cost estimates for solving these problems;
- precise definition (quantitative and qualitative) of the audience for which the this advertisement;
- choosing the style of advertising, the nature (intensive or extensive) of the advertising campaign;
- determining the nature and direction of advertising activities (campaign to release goods to the market; to increase the prestige of the company; to maintain the achieved sales volume, etc.);
- evaluating the means (information and advertising) that can convey this advertising message to the target audience;
- calculation of the cost of funds provided for the effective achievement of the intended goals.
The sum of all these costs will give an approximate figure for the budget appropriations for advertising. The advantage of this method is that it requires management to clearly state their understanding of the relationship between the amount of costs, the level advertising contacts, the intensity of testing and regular use of the product. This method of budgeting is more laborious than those described above, because in reality it requires preliminary consideration and calculation of the entire advertising campaign.
- 6. Equity method. The essence of this method is that in industries where there is a great similarity between goods (services), there is usually a clear relationship between market share and equity participation in the industry promotion of products. Based on this, some organizations are guided by the achievement of a certain indicator of market share, and then a certain percentage of costs is set slightly above this share for the promotion of products (services). For example, if an organization has a 12% market share, then it must invest 14% of the industry's investment in promotion in product promotion. This method, if used by all market participants for a particular product, can lead to an increase in advertising costs in the overall cost structure due to competition in the market. Ultimately, both the organizations involved in such a struggle and consumers who are forced to pay additional costs for advertising campaigns will suffer.
- 7. empirical method. The amount of expenses for an advertising campaign is determined experimentally. By conducting a series of tests in different markets with different advertising budgets, the optimal volume is determined. However, with this method of budgeting it is difficult to identify final results the impact of promotion methods and promotional activities in particular.
- 8. Development of an advertising budget based on cost planning. The advertising cost plan is an estimate of the costs of various planned activities aimed at achieving the goals.
- 9. The method of calculating the advertising budget by residual funds. According to this method, the amount of the advertising budget is calculated based on the funds remaining after use for all other needs. Investments in advertising are no different from any other investments, the value of their profitability can be either higher or lower than other (alternative) investments. Therefore, advertising costs should be considered on a par with other costs.
There are also other methods of forming an advertising budget, which can also be used when developing them and planning an advertising campaign as a whole.
Definition 1
The advertising budget reflects the overall size and structure Money allocated or spent by the advertiser to conduct certain promotional activities in a specific period of time. By and large, it reflects the amount of funds that an organization or firm is willing to invest in promoting its products and services in local, regional or global markets.
- specification of advertising impact;
- monitoring the effectiveness of advertising activities;
- effective distribution of advertising resources.
Like any other budget, the advertising budget can be planned and actual. The planned budget is drawn up for a predetermined time horizon, and the actual budget is drawn up upon the fact of the advertising company. The actual budget may differ significantly from the planned one.
As usual, advertising budgets include such items of expenditure as direct costs for the design and development of the necessary printing products, promotions and advertising campaigns in the media and the Internet, the cost of paying full-time and freelance employees and other costs.
One way or another, planning and developing an advertising budget are an integral part of the system for forecasting profits and controlling the organization's income and expenses. The advertising budget is formed when planning any advertising campaign and must be reduced at the end of its implementation. Let's take a closer look at the basics of advertising budgeting.
Fundamentals of developing and planning an advertising budget
- setting goals for an advertising campaign;
- assessment of the financial potential of the advertiser company;
- selection and formation of key areas of support;
- drawing up a budget.
So, first of all, it is necessary to determine the goals of the ongoing advertising campaign. Next, you should evaluate the maximum financial capabilities of the organization. To this end, it is recommended to determine the average level of income and predict it for the near future. Finally, the key areas of support are identified and the cost estimate itself is compiled, their overall value and structure are determined.
In the marketing system, there are certain factors that can affect the advertising budget. It is customary to refer to them the specifics and life cycle of the product, the volume and geographical size of the market, sales and profit indicators, advertising costs of competing firms, etc. All these factors should be taken into account and taken into account when planning an advertising budget.
Remark 1
According to the formal approach, advertising budget planning is carried out without taking into account marketing factors and profitability. promotions. Its main advantages are ease of use and no additional costs. At the same time, its main drawback is inaccuracy, since it does not make it possible to clearly coordinate the volume of the advertising budget with the marketing tasks of the company's activities.
A meaningful approach involves planning an advertising budget based on an analysis of the effectiveness of the company's advertising activities and taking into account marketing factors. Its features are high precision. At the same time, its practical use is difficult, since it requires the involvement of qualified specialists. In addition, a meaningful approach to advertising budget planning requires the use of special techniques. In Russian practice, it is used quite rarely.
Advertising budget example
First, let's look at the initial conditions. Let's assume that the online store opened recently. Its product range includes dozens of products, including smart bottles, automatic dog feeders, sleep controllers, etc. It is expected that the products offered by the company will be of interest not only to gadget lovers, but also to the general public.
- determine the objectives of the advertising campaign;
- evaluate financial opportunities;
- make a list of the main key phrases used to search for typical products of an online store;
- make a budget forecast contextual advertising in services such as AdWords, myTarget and Direct;
- evaluate the overall complexity of the launch;
- create KPIs (Key Performance Indicators).
Everything is pretty simple here. However, if we are talking about developing a budget for a large advertising campaign, the task becomes somewhat more complicated. In accordance with the principle of cost structuring, all costs for an advertising campaign are conditionally divided into five groups (Figure 2).
As can be seen from Figure 2, in this case, all advertising costs of the planned advertising campaign are divided into direct advertising, Internet promotion, production costs, trade marketing and incidental costs. For each article, the costs are decomposed, and their total is summed up.
To ensure the development of an advertising campaign and its successful implementation, it is important to determine the advertiser's possible allocations for these purposes. It is important for any advertiser to get the most bang for their buck.
In the process of implementing an advertising campaign, the main costs are for advertising in the media (purchase of space or time). At the same time, significant costs are associated with the development and production of promotional products. The ratio of the cost of production and placement of advertising depends on the specifics of the advertised product, as well as the chosen means of advertising distribution.
Planning in advertising management has several stages: defining the goals (tasks) of advertising; definition of the market segment; choice of the main theme of advertising; choice of means (channel) of placement; developing an advertising budget.
Stage 1. Definition of goals. This work provides a brief description of the process of determining the objectives of the advertising that the manufacturing company is going to develop. This process can be divided into two stages. In the first stage, the company's management responsible for advertising determines what advertising should do for the organization. For example, analyzing marketing indicators, the company's management comes to the conclusion that its product and its positive qualities are not properly evaluated in the market. Thus, the need to strengthen the advertising of this product is recognized.
The second stage of the advertising goal determination process is the consideration of what kind of advertising should be given, i.e. what changes need to be made to the company's advertising campaign so that the consumer can more correctly, in favor of the company, evaluate its product. In other words, what advertising methods and actions can accomplish the company's marketing task - to achieve an increase in product sales. The main goal of advertising or the entire advertising campaign is determined. IN this case this goal can be characterized in terms of image advertising as the goal of attracting the attention of consumers to the product, making them believe its content (message of the excellent qualities of the product), thereby changing their initial opinion about this product, which did not quite satisfy the company.
Stage 2. Definition of a market segment. When planning an advertising campaign, the contingent of potential buyers of the product that the company is counting on or that needs to be won must be clearly defined. The analysis of the consumer audience can be carried out in two directions.
First, a market segment is identified, i.e. the most common categories of buyers of the company's goods. Quantitative indicators of the needs of this group of people for goods, including the goods of this company, are analyzed.
The second direction is a more detailed analysis of the purchasing power and needs of a selected segment of consumers. This analysis is already individual characteristics consumers within the segment. Its important side is the consideration of the market segment from the standpoint of identifying different groups: possible (potential) buyers, new, regular, etc. Finding out what needs of these groups can be satisfied when they buy the company's product is the key to developing effective advertising for this product.
Stage 3. Selecting the main theme of the advertisement. The effectiveness of advertising depends on how clearly and clearly it conveys to the consumer information about the high consumer properties of the advertised product. The topic of advertising, therefore, must be presented in two aspects: it must be attractive to the consumer and well understood by him. The first aspect is achieved through an effective title, slogan, etc. The second aspect is determined by the size of the advertisement: the advertisement as a whole should be short, but of such volume (or length) as to contain the main information about the product.
Stage 4. Choice of means (channel) of distribution of advertising. This stage is very important in planning an advertising campaign, since a variety of media essentially require various kinds advertising materials. And before proceeding to the stage of organization (development) of advertising, managers involved in advertising at an enterprise or in an advertising agency need to determine in which media the manufacturer's advertisements will be placed.
The approach to the choice of media should be based on an analysis by an advertising manager (management team) of those possible channels through which it is most easier and faster to reach the attention of the target audience of consumers. The manager works in this case from the opposite side - from the consumer: a permanent, potential, new buyer of the company's goods. It compares the consumer characteristics of the target audience with the possibilities of influencing those with the help of the chosen media. The choice of advertising medium also depends on the goals of the company's advertising management and the content of advertising messages to the consumer.
the largest coverage of the consumer audience;
delivering a message to senior staff various organizations;
chances to do right choice significantly increase if the advertiser once again carefully examines the firm's marketing performance data. Thus, information about the segment of buyers, in terms of demography, social status, lifestyle, cultural characteristics, allows you to choose the media that best meets the characteristics of the target market. These will be the means that, to a greater extent than others, are used by people belonging to the category of potential and real buyers of the company's goods. Usually these same funds have minimal distribution among persons who are not potential buyers. For example, magazines are viewed as an advertising medium that reaches an important segment of the consumer audience.
The right approach is to advertise in media that the majority of potential buyers read or listen to. So, for firms operating in local, regional markets, the most appropriate would be the use of local funds. Advertising firms operating in the national market choose the national media accordingly, which best cover the geographic areas where their products are sold. Local press, radio, television can also be used as additional means of advertising distribution.
The purpose and theme of advertising messages also largely influence the choice of advertising channel. Communication about the appearance of a new product usually requires the creation of the effect of the extreme importance and usefulness of this product and even the relevance of its purchase. This effect is achieved by advertising on television and in newspapers.
Television and radio, working on a temporary principle, gather at different times of the day a different audience in terms of composition and size. This factor must be taken into account by the advertiser. By choosing the time of transmission, for example, of his advertising message, he essentially chooses his target audience and in the amount that is most beneficial to him.
There is another type of criterion for choosing an effective means of advertising distribution - this is a purely quantitative criterion, expressed in the cost of advertising per one or a thousand consumers. Such a quantitative analysis is not particularly difficult for a specialist and is performed on the basis of data on the cost of advertising media and readership coverage. This quantitative analysis criterion can be supplemented by one more - the calculation of the required number of repetitions of advertising for coverage. the right amount consumers.
Stage 5. Planning an advertising budget. This is one of the most difficult problems. The cost of advertising in the media can be very significant. For example, in the early 1990s, a one-time display of a typical television commercial cost US advertisers between $25,000 and $100,000. The cost of placing advertising materials is gradually increasing all over the world. Over the past 10 years, it has increased significantly - two to three times.
At the same time, it should be said that in the general system of the company's expenses for the production and sale of goods, advertising costs do not look so significant. What's more, the high costs of advertising are actually not that big when you consider how much revenue effective advertising can generate and how many potential buyers it reaches. Thus, advertising on a television channel costs less than 1 cent per person or family.
Average industrial enterprises spend no more than 1% of sales on advertising. Although large corporations, well aware of the benefits of effective advertising, spend more significant amounts on large and small advertising campaigns. The advertising budget of many of them reaches 5 - 10% of sales, and in the perfume industry it reaches 20 - 30%.
There are several methods for planning an advertising budget. They are associated with two approaches:
the budget is planned on the basis of an analysis of the effectiveness of the company's advertising activities;
the budget is planned without taking into account the analysis of the profitability of advertising campaigns.
The first approach is very complex and can only be done by advertising specialists who have very high professional training and a staff of employees who are able to conduct not only a thorough study of the performance of past advertising campaigns, but also make adequate forecasts for the future. Specific figures for advertising costs are planned based on the profitability that it can bring. This method requires the use of specially developed methods for determining profitability at different stages of an advertising campaign and allows you to additionally identify at what stage the advertising of a product is most effective, and at what stages its costs can be reduced. So, one of the well-known researchers of the advertising business K.S. Palda conducted a special analysis of the possibilities of developing an effective (necessary) advertising budget for a corporation engaged in the manufacture and sale of patented medical preparations. The study found that one dollar spent on advertising generates only $0.50 of additional sales if the advertising campaign lasts a short time; however, the profitability of one dollar of advertising costs in a long-term campaign reaches $1.63. Thus, thanks to the results of the study by Palda and his collaborators, the management of the company not only determined the allocations for advertising, but also unhesitatingly chose the strategy of a powerful advertising campaign. In most cases, however, an organization's advertising budget is calculated using methods that are not directly related to its profitability. The most famous of them are the following: the percentage method; opportunity method; parity method; method of goals and objectives.
percentage method. This is the most traditional and easiest way to plan your advertising budget. A certain percentage of sales over the past year is allocated. In this case, allocations for advertising activities increase if sales of goods were high, and, conversely, decrease with a decrease in sales. IN Lately many firms use this method, but not in relation to past sales, but to those expected for the next year.
Opportunity method. Its essence lies in the fact that the company limits its advertising budget to the amount that it can spend on advertising. In practice, such planning of the advertising budget is carried out according to a kind of residual principle: first, appropriations are allocated for all production, management and other activities, and the remaining funds can be used in advertising business firms. With this approach, the correct choice of the required amount of allocations for advertising is not at all guaranteed. As a rule, this amount will be much lower than required, and in some cases (if the company is very rich) even exceed it. Budget planning by this method is based on the assumption of its minimum sufficiency.
parity method. This is a method of planning an advertising budget, which is carried out taking into account the activities of competitors. Many leaders of organizations understand that in order to retain their market niche, they must spend at least as much on advertising as their competitors spend. The task of the marketing manager in this case is to find information about the costs of competitors for their branded products. Such information is generally available, since the prices for the main means of distribution of promotional materials are known.
Method of goals and objectives. Firms that use this method in developing an advertising budget begin by defining the specific goals of a future advertising campaign. For example, the company "Texasgulf" before the start of its advertising campaign had a market share of about 5% and solid buyers (six organizations) of its product - phosphoric acid. The goal of advertising was set - in a short period of advertising to increase the number of consumers who know about the company and its product by 10%. The advertising campaign was designed to promote phosphoric acid as a very "clean and green" product.
In accordance with this, a certain amount of money was allocated for promotional activities. It turned out that the developers of the budget were not mistaken. Advertising fully paid back the costs and brought significant profits, since the goal was not only achieved, but its results were higher - a 20% increase in the number of potential and actual buyers.
Functions of organization and coordination. In advertising management, these two functions operate simultaneously, since the creation of an advertisement or an advertising campaign is a complex process that involves several subjects and objects of management at once: the advertiser, the advertising agency, the means of advertising distribution, and, in some cases, a significant contingent of dealers and intermediaries. marketing system firms producing goods. Accordingly, at all stages of such a process, along with organizational actions and operations, there will also be elements of coordination or adjustment of the interaction of all its participants.
It is possible to single out two aspects in the organizational (including coordinating) function in advertising management. The first, or narrow, aspect is the management of the creation of promotional materials. The second, broader aspect is the management of the organization and conduct of an advertising campaign, which, in addition to developed advertisements, includes issues of means of their placement, coordination of various types of advertising in the overall system, their quantity, volume, as well as coordination of actions to achieve main goal the entire advertising process.
At the stage of advertising planning, the company's management determined its main goals and main theme. The goals must be achieved, and the subject of the message must reach the consumer if effective advertising is to be created. Thus, at the stage of organization, two categories of employees are involved in advertising activities: managers and creative workers who will develop the text and design of advertising. The main role, of course, belongs to the latter, although professional managers are needed to coordinate and manage their activities, and often as consultants on organizational and even creative issues.
The size of the advertisement is determined by the characteristics of the advertisement, the need to repeat it, the amount of advertising allocations, the prices for placement, etc. You should not reserve advertising space without making sure that the advertisement will fit exactly into the available space. If you buy too small an area for advertising, then the ad may not "fit" into it. On the other hand, the acquisition of more space than required will lead to inefficient spending of the advertising budget. In addition, practice confirms the riskiness of a one-time publication in a magazine or newspaper of one large format ad, since a series of ads (even smaller ones) will be more effective and possibly cheaper.
The evaluation of the merits of publications selected for use in the framework of the planned advertising campaign is mainly carried out by an expert. To this we can add a formal method of comparison, which turns out to be useful at the stage of preliminary planning of an advertising campaign - determining the cost of publishing one calculated line of an advertising text in 1 million copies of a circulation (the so-called milling rate). But this indicator cannot always serve as a truly reliable and accurate guide, since the size of the pages in different publications is different and, in addition, their readership may differ.
The amount of initial investment is 1,400,600 rubles.
Break-even point for 3 months of work.
Payback period - 17 months.
The average monthly profit is 101,260 rubles.
2. Description of the business, product or service
3. Description of the market
We will conduct a SWOT analysis of your project activities.
Strengths of the project | Weaknesses of the project |
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Project Opportunities | Project Threats |
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4. Sales and Marketing
5. Production plan
Let's outline the main stages of launching a printing house.
1. Registration with government agencies
Opening a printing house does not require special permissions and licenses, so before opening it is enough to register yourself as individual entrepreneur with a simplified taxation system (6% of income), as well as open a current account.
2. Search for premises and repair
As for the placement of the printing house, certain requirements are imposed on it:
- Quadrature from 40 m2;
- Extraction / ventilation of the room;
- Possibility of future expansion warehouse space For finished products.
As a room for a small printing house, an area of 40 sq. m. Too small areas will not work due to the fact that they will not allow to place all the equipment (and this is at least 5-6 cars). Plus, it is necessary to give space to operators, to allocate a warehouse for storing materials and finished products. Finally, you need to allocate an area for visitors, place a soft sofa and chairs. Rental payments for an area of 40 sq. m. depending on the location will be about 28 - 40 thousand rubles per month.
3. Purchase necessary equipment and inventory
To open a printing house, you need the following equipment:
- Offset RIP Digital Printing Machine the vast majority of printed products);
- Cutting plotter (this is an apparatus for accurately cutting any stencils or images from various materials);
- Booklet maker (device designed for binding documents (binding sheets with a staple);
- Laser MFP;
- Multifunctional thermopress (specialized modern equipment that allows you to transfer all kinds of images to different surfaces with high quality, is used to apply the desired images to caps, mugs, T-shirts);
- Cutter (used to cut paper into even pieces and align the edges);
- laminator;
- Computer;
- Consumables: paper, thermal film, oracal, magnetic vinyl, paint.
Due to the high cost of new equipment, you can look for supported options, then the price will be about 2 times lower. This business plan lists equipment that has been in production for no more than three years.
| Name | Quantity | Price for 1 piece | total amount |
| offset printing machine | 1 | 680 000 | 680 000 |
| Cutting plotter | 1 | 110 000 | 110 000 |
| booklet maker | 1 | 47 000 | 47 000 |
| Laser MFP | 1 | 37 000 | 37 000 |
| Thermopress multifunctional | 1 | 39 000 | 39 000 |
| Cutter | 2 | 4 150 | 8 300 |
| laminator | 1 | 7 500 | 7 500 |
| Computer | 2 | 27 000 | 54 000 |
| Cutting table | 1 | 6 000 | 6 000 |
| Wardrobe | 1 | 7 100 | 7 100 |
| Table | 1 | 3 900 | 3 900 |
| Chair | 6 | 800 | 4 800 |
| Microwave | 1 | 3 000 | 3 000 |
| Electric kettle | 1 | 2 000 | 2 000 |
| Sofa | 1 | 12 000 | 12 000 |
| Total: | 1 021 600 |
*Consumables include: paper, offset printing material, printer cartridge, cardboard, metal/plastic springs, calendar loops, magnetic vinyl, oracal.
4. Personnel search
The most difficult thing will be to find professional printers, since quality work will require experience and specialized education. It is better to search for such specialists on the hh.ru portal; access to a resume will cost 15,000 rubles. You will also need an experienced sales manager and administrative managers who will be responsible for meeting customers, calculating costs and transferring finished products. It is also more expedient to search for them on the above site or to search through friends or social networks.
5. Marketing policy
6. Organizational structure
The main employee of your printing house is a printer who prepares materials and a printing machine for production, adjusts and prints all types of printing products, performs preventive maintenance and repairs of a printing machine, monitors compliance with speed modes and a printing schedule. The printer's work schedule is 2/2 to 12 hours a day, the salary is the highest in the enterprise (45,000 rubles), as candidates with work experience and specialized education. Ideally, these employees should be generalists and be able to work with a plotter, booklet maker, and thermal press. But even in this case, it is necessary to hire assistants who will carry out the work under the supervision of printers. In the first months, when the customer base has not yet been developed and there are few orders, two printers are enough, then without assistants with a salary of 45,000 rubles. not enough.
The next employee to be involved is a sales manager who makes calls to potential customers and offers printing Services. The manager can work remotely, his work is paid depending on the number of services provided (15%). The candidate must also have experience in the field of sales, must develop selling scripts for conversations, submit monthly reports to the director on the number of completed contacts and conversions.
It is also necessary to hire a designer on staff who develops layouts for leaflets, booklets, business cards, postcards, calendars, and also prepares files for printing. Designer's salary - 30,000 rubles, working hours - 5/2.
Reception of clients and their consultation is carried out by the manager. He also calculates the cost of orders, receives incoming calls, responds to customer messages, etc. Since the printing house works every day, there is a need to hire two managers who work in shifts, their salary is 25,000 rubles / month.
| fixed costs | Salary | The number of employees | Sum | Average salary per month per employee |
| Supervisor | 30 000 | 1 | 30 000 | 48 173 |
| Manager | 25 000 | 2 | 50 000 | 25 000 |
| Sales Manager | 20 000 | 1 | 20 000 | 38 173 |
| Printer | 45 000 | 2 | 90 000 | 45 000 |
| Designer | 30 000 | 1 | 30 000 | 30 000 |
| Insurance premiums | 30 000 | |||
| Total payroll | 250 000 |
The full calculation of the payroll for 24 months, taking into account the bonus part and insurance premiums, is presented in the financial model.
Sales GeneratorReading time: 17 minutes
Determining the budget for marketing activities is a very important step in the media planning process. Cost planning allows you to determine as accurately as possible how to correctly allocate resources, and in the future not to go beyond the established boundaries when spending funds. At the same time, it is the budget that becomes the main constraint when planning advertising and choosing suitable media. About the correct calculation and optimal formation of the budget - in our article. The budget of an advertising campaign - that's exactly what the topic sounds like.
Is it easy or difficult to calculate the budget of an advertising campaign?
The budget of an advertising campaign and its impact on media planning - we will consider these two main issues in the article. So, every marketing campaign has its own specific budget. It is always difficult, and often even impossible, to determine exactly how much money an enterprise will need for marketing activities. Note that advertising is only one of the many parameters that affect the company's sales. Therefore, it is very difficult to understand exactly how advertising affects the sales of a particular product. In addition to advertising, both when introducing to the market and when selling, a lot depends on cost, distribution, packaging, product properties, customer preferences, the presence of competitors, the professionalism of the distributor, etc.
For example, the elasticity of sales response to lower prices is about 20 times greater than the elasticity of sales due to higher advertising costs. That is, a change in tariffs has a much stronger effect on sales than a change in the volume of advertising.
One study found that for an average brand, a 1% price reduction would increase sales by 1.76%.
At the same time, the main difference between advertising and sales promotion is that lowering prices (the most popular way to stimulate sales) costs the manufacturer much more than increasing advertising volumes, and therefore it would be a mistake to evaluate the effectiveness of these two marketing areas solely by their level. impact on sales.
In practice, no one increases advertising costs by 1% and does not reduce prices by such a small amount. To get at least a small effect, advertising costs need to be increased by at least 50%.
The conclusion is obvious: despite the fact that additional advertising has little effect on increasing sales, they, as a rule, still increased. This effect is exactly the opposite of that of price cuts, where sales have risen quite significantly, but profits have almost always fallen appreciably.
It is noteworthy that it is often more efficient not to carry out additional promotional activities and not to reduce, but, on the contrary, to raise prices. With minimum price elasticity of demand, the loss in sales caused by a 5–10% increase in cost is so small, and the additional profit is so tangible, that a price increase often brings a company an increase in net profit.
However, the formation of an advertising campaign budget, at least an approximate one, is a necessity. Why? This is necessary in order to understand how much the company allocates for advertising purposes, in question, and also in order to avoid obviously ill-considered expenses.
When developing an advertising budget, remember that the biggest changes in the sales of products and services are not caused by a change in the amounts allocated by the company for marketing purposes. Sales volumes, as a rule, largely depend on the distribution of these funds by the organization: for which target audience it works, which advertising media it uses, what advertising message it makes to potential buyers, etc.
Each company wants to form an initially full-fledged budget, which does not need to be significantly changed. This requires an objective assessment of the advertising campaign budget. From the very beginning, it should provide as accurately as possible all the costs within the framework of an advertising campaign: for marketing research, development of advertising materials, payment for advertising space, preliminary and post-testing, etc.
In the advertising budget, most often all expenses for advertising purposes are laid down for a specific time period (usually a year). They draw up the budget of an advertising campaign in the format of a table, where several sections are provided - types of expenses for a specific period.
When forming a budget, you need to determine the method of its calculation, having previously analyzed the methods for calculating the budget of an advertising campaign and choosing the best way for you to distribute it across markets, resolve procedural issues and reduce costs.
Features of planning the budget of an advertising campaign
In most companies, there are concepts of "overall budget" and "budget for the coming year for each department." In the first case, the budget for marketing activities, as a rule, is formed in relation to departments whose work is related to advertising. The entire advertising campaign budget can either go through a division of the organization, or be distributed to divisions that develop independent marketing programs.
Let's say - the first option: the communications department accounts for the entire advertising budget as a whole.
The second option: the marketing department has a budget formed just for marketing purposes; on personnel service- Funds allocated for advertising employment; to the department of external communications - means of general advertising of the company.
In many organizations, the first option is increasingly common. Use it predominantly if possible, as it is easier to track and manage costs. But decides what is better to do in each case, of course, the head of the enterprise. This decision is finally approved by the board of directors. Here everything depends mainly on the scale of marketing activities and the total amount of expenses.
If we are talking about a non-profit enterprise, then the lion's share of the budget is directed towards achieving advertising goals or solving the general tasks of the company.
The key is, of course, the decision on the development of the budget. What is the basis for its formation?
For some companies, it’s easier in principle not to develop a budget, but to direct money for marketing purposes as needed. If a marketing campaign is needed, it should be carried out. Let's say we want to advertise in the media. Let's do this and see what effect it will give.
Small businessmen, as well as sole proprietors of the business, often choose this path. They do not need to report to anyone about the work done, and therefore this issue does not bother them. But even in such situations, it is much better for business if the budget is structured. When accounting, it has a different value and is necessary to maintain financial control. Its formation allows you to compare advertising costs with other costs when calculating the income generated and excess goods.
What are the marketing costs of the advertising campaign budget?
Before you start creating a marketing budget, remember how it needs to be structured. IN real business There are 5 key items of advertising expenses:
This article describes the cost of promotions aimed at the end customer, as well as promotions for distributors, POS materials and point of sale equipment.
Advertising costs are calculated for each item separately, after which they are combined into the overall budget of the advertising campaign and optimized depending on the importance of the direction. If you know what goals the company is striving for for each commodity item, you can choose the best communication channels, or the so-called media mix.
So, you have identified communication channels that are useful for you. Next, it is necessary to establish where the marketing campaign will be carried out geographically: throughout the country (large-scale), in certain regions or at individual points of sale.
The next step is to establish the strength of the marketing impact. What parameters are taken into account? The term and duration of support, the frequency of display and the target reach of the marketing message. Taking into account the values of these parameters, the budget of each advertising campaign is calculated.
By combining the budgets of all marketing campaigns, we get a preliminary budget value that needs to be adjusted according to the following principle:
- the budget amount should not exceed the maximum investment amount calculated initially;
- the budget should provide for priority areas of activity for the company and invest in their development (it should not happen that money within the framework of the implementation of an advertising campaign does not go into a priority direction);
- it is necessary that the payback for each marketing campaign is obvious ( large enterprises often make investments that do not pay off for several years. But if we mean a small business, then the payback period of a marketing campaign should not exceed one year, and ideally six months).
Advertising campaign budgeting methods
1. Fixed budget method
In accordance with it, the company determines a specific amount that it will direct for advertising purposes, and these costs are not reviewed from year to year, no matter how things change in business and the external environment.
2. Residual cost method
The firm directs for advertising purposes the money remaining after covering all other expenses. It is mostly used by small organizations. But it happens that advertising for the advertiser is in last place, because he does not have the funds for it. As a result, no marketing activities, no big sales... Therefore, the calculation of the advertising campaign budget is very important.
3. Budgeting as a percentage of sales
Another name for it is method. fixed interest. The method is based on the fact that when developing a budget for an advertising campaign, the advertiser takes into account the estimated or actual turnover of his enterprise. It can be income, profit, indicators of the current or last year, information for the quarter or month. Interest can be constant or floating, changing every year, decreasing when specific indicators are reached, or, on the contrary, increasing when, say, profits decrease.
Advertisers use the method in its certain version quite often, since it is quite simple. It is optimal when the market situation is stable and there is no need to change the degree of brand awareness, launch a new product on the market, etc.
Less often it is used in an unstable environment, with a drop in sales, when the cost of marketing activities can be more than profit. And not every company can afford such an approach.
The method is based on the fact that the company monitors the marketing activities of its closest competitors. Based on data on advertising volumes and campaign budgets, the firm determines whether its budget should be the same or increased.
Here's an example: service firm mobile communications keeps a close eye on competitors. After calculating their marketing costs for publications (about 10 thousand rubles per month per campaign), the company sets its own budget of 12 thousand rubles. monthly.
5. Formation of the budget according to the goals and objectives of the advertising campaign
We think this is the most interesting way. The point is to preliminarily formulate the goals of the marketing campaign and calculate the costs necessary for implementation. But according to the circumstances already indicated in the previous paragraph, the calculations are very approximate. Despite this, the approach is one of the most effective.
It should be taken into account that in different life cycles product and the cost of its advertising promotion are different. There is a "Peckham formula", according to which the cost of organizing a marketing campaign in the first two years of the existence of a product on the market is 1.5 times higher than the profit.
6. Budgeting based on maximum income
The method is based on comparing marketing expenses with the income generated by advertising campaigns. Here, the ratio at which the level of income is maximum is calculated. As in the previous method, due to the influence of other parameters, the calculation result is inaccurate. This method is used to develop the budget of an advertising campaign.
The results of tests and experiments are used here. First of all, they conduct a small test advertising campaign in a small market similar to the market that the company is interested in. Based on the results, the most effective approach is calculated, which is subsequently transferred to the budget for the main marketing campaign.
As you experiment, remember the importance of doing things like:
- random selection of markets (cities, regions);
- reconciliation of data obtained before and after the experiment, and not with last year's indicators, etc.;
- comparison of visible changes in the budget (not less than 50%);
- comparison of experimental data, which was carried out over a fairly long period;
- comparison of significant audiences.
The method is very limited, and this is obvious: even between very, at first glance, similar markets, there are differences. The downside is that the trial marketing campaign can be monitored by competitors. They have the potential to beat you as an advertiser in the main market. However, if the market situation is stable, this approach is used quite often. In addition, it is used when there is little market data available.
8. Budgeting based on modeling
It uses computer data processing. In addition to it, mathematical methods are also used to build the dependence of sales and profits on the amount of the marketing budget.
The application of the method requires reliable data and large financial investments. Therefore, it is recommended to use it for large enterprises. But even if all the data is accurate, no one guarantees an absolutely correct result. That is, the budget of an advertising campaign may not be entirely correct. This is due to the fact that the financial result depends on many market parameters.
When forming the budget of an advertising campaign, the company evaluates what share it occupies in the product market, what is the total size of this market, and then calculates the necessary amount of funds to cover the same percentage marketing market. That is, if a company occupies 20% of the product market, then its advertising should also occupy 20% of the marketing market.
The method is based on the assumption of a linear relationship between investments in advertising and the share of the product market owned by the company.
To combine in one indicator their own advertising costs, competitors' marketing costs, as well as total sales, use the value of marketing costs per unit of market share. Since the total size of the marketing market changes with the size of the marketing budgets of competing firms and the number of competitors, the budget calculated in this way must be adjusted all the time.
According to the Dorfman-Stayman rule, the ratio of marketing budget to total sales is equal to the ratio of advertising elasticity of demand to price elasticity of demand. That is, the method is based on 3 indicators: the total sales of the company, the elasticity of price demand and the elasticity of advertising demand. With these indicators, you can calculate the amount of the advertising budget:
R \u003d P × Er / Etse.
When using this method, the advertising and pricing strategies of the enterprise are synchronized. The difficulty here is that it is necessary to correctly determine both indicators of elasticity, which is often not easy.
Generally speaking, the elasticity of demand for a particular indicator is the coefficient of change in total sales when the indicator changes by one percent (while all indicators remain unchanged).
If the elasticity index is less than 1, then, due to a change in the index by 1%, total sales change by less than 1% (inelastic demand). With elasticity greater than 1, a change in the indicator by 1% leads to a change in the overall level of sales by more than 1% (elastic demand).
To calculate the elasticity of price demand, use the following formula:
K = (∆q / q) / (∆P / P),
Where q is the total sales volume of the product before the price change;
∆q- the change in total sales per product after the price change;
R- the price of the product before its change;
∆Р- change in the price of the product.
As a rule, enterprises are able to independently calculate the elasticity of price demand. But as for the elasticity of advertising demand, this indicator is difficult to calculate, and therefore you can borrow it from marketing research. Based on the results of studies of many European brands, Lambin has established an advertising elasticity of demand of 0.1. In a review of the early 1980s by Leoneetal, advertising demand elasticities ranged from 0.003 to 0.482. Most of them are less than 0.2. Seturman and Tellis, along with later researchers, also indicate that the elasticity of demand for advertising does not go beyond 0.1–0.2.
The method has a limitation: it can only be used for products with elastic price demand.
There are different methods for calculating the budget of an advertising campaign. Some of them companies use according to their goals and preferences. Often different methods are used not only separately, but also in a mixed form.
How to allocate the advertising budget of the campaign
In addition to generating an overall budget, many advertisers need to allocate it across markets and brands.
How to create an advertising campaign budget for Yandex.Direct (and for other electronic platforms)
Today, this type of advertising is offered by all major search engines of the Russian Internet. When developing a budget for a search advertising campaign, you should (these parameters will just affect the amount of funds you need):
1. Make a list of keywords that will be used in the marketing campaign.
2. Select the search sites where you are going to advertise.
3. Check the frequency of the keys (words and phrases) selected by you.
The results are reflected in the table:
4. Calculate how much it costs to place ads or banners in accordance with the price of search sites.
You can find out how much it costs to place search ads at the following addresses:
- In Yandex: http://advertising.yandex.ru/price.xml?#yandextarg ( minimum price order 21 thousand rubles);
- On Google: https://ads.google.com ;
- "Aport": http://www.begun.ru/.
Important point: on some sites prices are set for impressions, on others - for clicks.
If we are talking about clicks, the calculations will not be so simple and you can ask for help from advertising sales managers on a specific site.
If the result does not satisfy you, you can try to adjust the marketing campaign:
- change requests using a more specialized phrase;
- change the region where the banner (ad) is displayed;
- change the sites where you plan to stay.
HOWEVER, the schema, however, will be the same as previously stated.
Estimate, count. Practice shows that you can find the best options for placing search advertising even with a limited budget.
You can compose the text of an advertisement yourself or entrust this issue to specialists who optimize and promote sites. Usually a separate service there is nowhere to order for writing text for an ad, but you can still search.
It can take about $50 to develop a banner. e. Everything is determined by the format, type of banner. It also happens that for one marketing campaign you need to create several banners.
Keep in mind, limiting yourself to placing a banner or an ad on the site and doing nothing else, but only getting an excellent return on investment, will not work. The campaign needs to be tracked, especially on sites where clicks become the basis for calculation. The costs here are:
Option 1. Either you or an employee of your company monitors how the advertising campaign is progressing (changes bids, edits ads), on average 1–1.5 hours every day. In this case, evaluate the time you spend on these works in terms of money and, taking into account wages employee (or yours), calculate the costs for them.
Option 2. The campaign is controlled by the manager of the search engine itself. Usually, in this situation, the amount of payment for the services of the site increases, which must be paid once.
You yourself choose the option that suits you. You just need to consider each of them when budgeting your marketing campaign.
How to calculate your TV ad campaign budget
Step #1 Set what goals you would like to achieve. For example, increase sales by 15%.
Step #2 Calculate how much money you can invest in marketing. Suppose advertisers have established that, given the current cost of goods, it is rational for you to invest no more than 2% of turnover in advertising. In reality it will look like this. If during the first quarter the company received 10 million rubles from the sale of goods, then the advertising budget for the next quarter will be calculated according to the formula 10 million rubles x 0.02 = 200 thousand rubles. You can allocate this amount to marketing activities in full or distribute it among different communication channels (television, radio, Internet, etc.).
Step #3 Ask TV workers to calculate the budget for your advertising campaign. For example, the Mediagraphy service officially sells media resources of local TV broadcasters in more than 300 Russian cities. Ask TV people what conditions apply for placement on TV. You may well tell them what goals you are pursuing (see step #1) and the “upper” budget bar (see step #2). Service specialists will compare the first and second indicators and advise what to do next.
Anyone who orders advertising on TV should remember that its price is determined not only by the planned channel for placement, but also by the city of display. The minimum cost of displaying advertising on the same channel (for example, TNT) in a city with a population of more than a million will be one, in a city where half a million to a million people live - another, in small town- third. And there is nothing surprising here, since the potential reach of advertising on TV directly depends on the population of the city, and the cost should be determined by coverage.
Graphically, the dependence of the effectiveness of television advertising on the budget of a marketing campaign can be shown as follows:
How to use this data when forming the budget of an advertising campaign? From the graph it is clear that TV advertising gives a visible effect only if the advertising budget is not less than a certain limit. This minimum effective budget we have indicated as RO ("return threshold"). In each city, the return threshold is different, and if an advertiser invests less than software in an advertising campaign in a particular city, then it may well fall into the “red zone”, that is, simply not recoup the funds invested in marketing.
Media planning professionals who have repeatedly and for a long time advertised on TV in different cities can easily guide you in local tariffs. Therefore, when you contact the TV staff and ask them about the optimal budget, they will tell you if the amount of funds you have allocated for the software advertising campaign is appropriate.
Events here can develop in two ways.
Option number 1. The “upper” budget limit you indicated (step two) does not make it possible to achieve the set results (step one). That is, your financial capabilities are beyond the “threshold of return”. Here it is better to either change the goals, or choose a less expensive way of promotion, like television.
Option number 2. The “upper” budget you define is consistent with your goals, or even allows you to scale them. Here you approve the exact amount of the budget and ask to calculate a specific media plan indicating the duration of the advertising campaign, the time of the video release during the day, as well as the desired indicators (reach, rating, audience share, etc.).
In order to ensure that the budget of your TV advertising campaign more and more corresponds to the desired results each time, it is necessary to regularly evaluate the effectiveness of the placement. There is a common formula for such an assessment - ROI (from the English "return on investment" - return on investment).
Let's say you trade bags that cost an average of 4,500 rubles. per piece The cost of each - 2700 rubles. You have invested 130 thousand rubles in TV advertising on one of the well-known channels of the city A. As a result, the sales level increased by 470 sales compared to the baseline.
Let's do the calculations gross profit with 470 bags sold. It is equal to gross proceeds (4,500 rubles x 470 pieces) minus the cost of bags sold (2,700 rubles x 470 pieces). So: 2,115,000 rubles. − RUB 1,269,000 = 846,000 rubles.
Calculate ROI. This indicator is (if calculations are made according to the above formula) (846,000 rubles - 130,000 rubles) / 130,000 rubles. = 5.51. That is, each ruble you invested in an advertising campaign on the selected TV channel brought 5.51 rubles. net profit.
The size of the advertising campaign budget and its planning for large and small firms
An American entrepreneur of the early twentieth century, John Wanamaker, once said that he knew that he wasted half of his money on advertising purposes, but he did not know which half. This famous expression is still relevant today. Almost every company has difficulty calculating the required advertising budget, and almost no one can determine exactly how much would be optimal, how to achieve a 100% return on advertising, and how relevant the topic chosen by the advertiser is.
The budget of an advertising campaign is planned by large and small enterprises in different ways. According to some experts, small budgets should be planned. Large even in case of inaccuracy achieve the desired results. Little ones have no right to make a mistake, and therefore they must aim right at the target.
Indeed, in large organizations, the effectiveness of the ongoing marketing campaign does not greatly depend on minor fluctuations in the advertising budget. This is due to the fact that with significant investments in advertising, large firms achieve their goal, despite errors in the calculation of some shares. That is, large advertisers can reduce the risks associated with the distribution of the budget for advertising campaigns to a minimum. How? If they carry out long-term and wide-ranging advertising campaigns in terms of the media involved. This picture is fully reflected by the phrase that 50% of the advertising budget goes nowhere, but no one knows which half it is, and it’s good that there is enough money for everything.
For small and medium-sized companies, the distribution of the advertising budget is a more serious issue. If the advertising budget is small, the company cannot afford large-scale promotions, since the possibility of suboptimal distribution of money inevitably arises. Indeed, the management of small enterprises, when forming an advertising budget, often relies on the principle of “minimum sufficiency”, and when distributing money, it focuses on “barter relations” and discounts depending on the amount of advertising time (space) purchased.
If a company uses this approach, then, most likely, the funds invested in an advertising campaign will not bring it the desired result. Due to the lack of access to more promising media in terms of marketing (there are no funds to provide the second, "profitable" half), it will incur significant costs.
At the same time, mention should be made of a certain threshold of marketing expenses (advertising expenses break-even threshold), associated with limited demand and the cost of advertising media, below which advertising expenses cannot be. The closer the advertising budget is to this point, the more the company is risking its investment.
As a rule, this situation occurs in small enterprises. Therefore, it is very important to optimize advertising costs and correctly allocate the marketing budget. The success of the company in the market depends on this.
Since television is the most expensive of all media, about 50% of the budget should be allocated to this channel. In second place in terms of price is the press, about 1/3 of the budget is sent there. The rest of the money is invested in radio advertising. There is another option - to get the maximum GRP with a fixed budget. Option #3 is to determine the required GPR of a marketing campaign with an unfixed budget.
In all these cases, all media are ranked according to GRP CPP (the best media have the lowest CPP). Further, from the entire list of media, select those that provide the necessary total coverage. An amount of money is invested in each communication channel equal to the effective frequency multiplied by the cost of one media outlet. The media plan is developed within the budget.
You can allocate the budget in other ways - it all depends on what the advertising campaign is for, on the advertised products, services, target audience, the situation on the advertising market, etc.
How to run an effective advertising campaign with a minimum budget
In economically successful countries where the market situation is stable, advertising costs change infrequently and not abruptly. All changes, as a rule, vary within certain values.
As for the size of the budget of an advertising campaign, as noted by a well-known researcher in the field of marketing D. Starch, “although it is impossible to say exactly how advertising costs affect sales, the relationship between indicators lies on the surface. And large enterprises invest a lot of money in advertising, not just because they are large, but because, according to American experts, the largest advertisers, compared to others, get 50% more readers of their ads for every advertising dollar invested. They spend 70% more on advertising per unit of sales and sell 170% more of those units. On average, for every dollar of advertising value, they typically receive about $3 of product sold.”
Why and how economies of scale are achieved is unclear. But there is reason to believe that they are associated with one characteristic of shopping behavior: large brands are ahead due to the fact that purchases, including repeat purchases, exceed the average value. This phenomenon is called superpenetration.
According to Kenneth Mason, “A big ad budget doesn't translate into high sales. On the contrary, high sales figures cause an increase in the advertising budget.
According to J. Walter Thompson's study of packaged goods brands, advertising costs per sales for such brands are typically 4-8%.
These are just some indicators of different times, rather averaged. It should be remembered that by placing ads, you can always save a little.
For example, an advertiser can negotiate with the media or an advertising agency to buy a space at a good discount, which, due to certain circumstances, remained unoccupied before signing the issue for print or going on the air. Such options are tucked up quite often. Of course, it is quite difficult to predict and plan advertising for them, but, most likely, this move is more than justified.
Savings can also be achieved when the media release new projects. Let's say a newspaper releases a new tab and most advertisers are wary of it. But if the advertisement in this tab is justified, then it should be placed. In the first issues, they will definitely make a significant discount. The same applies to new broadcasts on TV and radio.
At a bargain price, you can also purchase a large advertising space or advertising air. Buying space for the entire campaign at once is more profitable than buying parts of it at certain time intervals.
You can not waste money only if you choose truly effective media. Advertising in several newspapers is more profitable than in one. But advertising on one media platform can give best result than a campaign in several. The same applies to advertising on TV and radio.
Often good results gives a combination of large and small advertising.
In local media, you can save your campaign budget by using classified ads. Often it is much cheaper, and the results from it are better than from the modular one. This is especially evident in test advertising materials, when the company checks how buyers react to the offer of new products.
We recommend not to save on the development of good media materials. The cost of a quality ad is slightly higher than a bad one. But the effectiveness of the bad is much lower. It will need to be given more often, and the costs rise disproportionately.
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