Compare the competition-matching approach with the arbitrary approach in determining an advertising appropriation. Which method might more easily lead to overspending or underspending on the appropriation?

Question

What will be an ideal response?

Answer 1

The competition-matching approach is one of the ways to determine advertising appropriation. Marketers following this approach try to match their major competitors' appropriations in absolute dollars or to allocate the same percentage of sales for advertising that their competitors do. Although a marketer should be aware of what competitors spend on advertising, this technique should not be used alone because the firm's competitors probably have different advertising objectives and different resources available for advertising. Many companies and advertising agencies review competitive spending on a quarterly basis, comparing competitors' dollar expenditures on print, radio, and television with their own spending levels. Competitive tracking of this nature occurs at both the national and regional levels. At times, marketers use the arbitrary approach, which usually means a high-level executive in the firm states how much to spend on advertising for a certain period. The arbitrary approach often leads to underspending or overspending. Although hardly a scientific budgeting technique, it is expedient.