There are two main ways to generate the funds needed for advertising and promotional (typically abbreviated to A & P) support:
As it is not normally practical to make a levy on distributors, unless they have a tied contract such as franchisees, or are exclusive distributors in a foreign market, the nor malpractice is to build a reserve into costing's,depending on the level of advertising and promotion support planned.
The level of the advertising reserve need not be the same for all products, although many companies do just include a standard percentage in the price. There are options,including the following.
Some of the products in your portfolio may develop well with minimal advertising and promotional support, others may need considerable support in the early stages. Highly branded consumer products tend to require greater advertising and promotional support, anything from around three per cent of turnover for mass market products, to 30 percent of sales revenue for luxury speciality high -margin products (e.g. perfumes historically have large advertising and promotion budgets as a percentage of turnover).
Most suppliers of industrial products reserve very limited funds, often under five per cent, for advertising and promotion support. But service providers typically have significant advertising and promotion activity in their competitive markets. A fundamental concept in marketing is to push your strengths. That may be liberally interpreted as placing emphasis on the market sectors and products with the most potential,where potential may be measured in such terms as:
Where there are clear risks to your market development programme, such as unstable political environments, arbitrary changes in regulations, or where you can clearly see that developing a consumer franchise is a major long-term project, then, although you perhaps should not abandon the market, you might be wise to allocate very limited promotional funds in the initial stages.
As the timing of promotional expenditures may not be directly related to when the funds are earned from product sales, a system should be agreed with the company accountants whereby accruals for advertising and promotions are noted separately in the accounts as a reserve and not allocated back to profit if not dispersed in the same period as the accrual is earned.
Spend in the marketing mix
In deciding how to spend an advertising and promotion budget consideration must be given to:
The marketer with a varied product portfolio needs to:
Within any product portfolio the available budget for advertising and promotional activity can be weighted in several ways,including:
The budget level will be a limiting factor in selecting media or promotional formats. Both consumer and industrial products require appropriate promotional support. Specific objectives, as well as budget levels, will have bearing on the allocation of budgets between alternative forms of advertising and promotion support (see Figure ).
The manager responsible for spending advertising and promotional budgets is going to be concerned with value for money. Some guidelines for selecting media are shown in the following table.
Sales Management Related Tutorials
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Motivating Through Rewards And Incentives
Providing Appraisals And Feedback For Motivation, Training And Discipline
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Sales Meetings And Conferences
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The Planning Process
Sales Force Administration
Sales Management Control
Merchandising At The Point Of Sale
Key Account Management
Alternative Sales Or Distribution Operations
Developing International Markets
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