What are the four methods used for setting an advertising budget?

Question

What will be an ideal response?

Answer 1

The most popular bases for establishing an advertising budget are a percentage of sales or profits, units of sales, objective (task), and executive decision.
With the percentage of sales or profits method, advertising costs have a consistent relationship to the firm's sales volume and/or profit level. Thus, as sales/profits go up/down, advertising expenditures go up/down by the same percentage. One disadvantage of using this method is that advertising may be needed most when sales and profits fall.
Using the units of sales method, the firm sets aside a fixed sum for each unit of product to be sold. It is difficult to use this method when advertising many different kinds of products, for sporadic or irregular markets, and for style merchandise. But the method is useful for specialty goods and in situations where outside factors limit the amount of product available.
While the objective (task) method is most accurate, it is also the most difficult and least used method for estimating an advertising budget. Specific objectives are set. Then the medium that best reaches this target market is chosen, and estimates are made concerning costs.
With the most popular method of all, the executive decision method, the marketing manager decides how much to spend. This method's effectiveness depends on the manager's experience and/or intuition.