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ASSIGNMENT

Submitted by:
Mekha Mohan
MBA 18
TOPIC
Q:What is the relevance of theoretical
approaches in budget setting? Do you see a
practical application of these concepts in
industry? If Yes Justify. If No why?
INTRODUCTION
A marketing communication budget provides a
formal process for planning, tracking and
measuring the impact of the expenditures on
marketing communications activities such as
advertising, direct marketing, online or events.
The budget sets out the funding required to meet
the communications objectives and provides a
method of managing the expenditure over a
budget year.
THEORETICAL APPROACHES IN
BUDGET SETTING
There are mainly two types of Approaches in
Budget setting which includes:
1) Top down approach
According to this approach, a spending limit
will be there, and the promotional budget
will be set within the limit.
2) Bottom up approach
Firstly, the promotion objectives will be set
and activities to achieve the objectives will
be planned. Then, cost of the promotional
activities are budgeted and will be approved
by top management.
RELEVANCE OF THEORETICAL
APPROACHES IN BUDGET
SETTING
1) Marginal Analysis
As per this theory a firm continue to spend on
advertising and promotional efforts, sales and
gross margins also increases to a point
2) Sales Response Models:
i. The concave-down ward function
Assumes that the effects of advertising
spending follow the microeconomic law
of diminishing returns. That is, as the
amount of advertising increases, its
incremental value decreases. Those with
the greatest potential to buy will likely
act on the first exposures, while those
less likely to buy are not likely to change
as a result of the advertising.
ii. The S-shaped response function
Assumes that initial outlays of the
advertising budget have little impact
(Range A). However, after a certain
budget level has been reached (Range
B) advertising and promotional efforts
begin to have an effect, and additional
increments of expenditures result in
increased sales. When advertising
expenditures enter new range (Range
C), however, incremental spending will
have little additional impact on sales.
ADVANTAGES
1) It will help to spend money in the right way
which will help to more profit.
2) It will help the firm to grow or to remain the
same.
3) It will ensure that the right media channels
are selected to suit the objectives without any
loss.
4) It will help in assessing all the available
media channels that can help the industry to
reach Marketing objectives as per the strategy.
5) It helps in targeting the whole market using
mass reach techniques which will results in
revenue increase, customer retention and
profitability.
Q: Do you see a practical application of
these concepts in industry? If Yes
Justify. If No why?
Yes, There is a practical application of the
concepts of budget setting in industry.
According to the Marginal analysis,
1) As the sales and gross margin increases,
the company will spend more on
advertising and promotional efforts
2) High Promotional efforts will lead to
high return
3) Sales can be determined by advertising
and promotion.
4) Thus, sales can be estimated according to
the promotion used.

According to the Sales – Response model,


1) When advertising and sales promotion
increases, sales also increase
2) After a certain budget level, advertising
and promotional efforts begin to have
an effect, and additional increments of
expenditures result in increased sales.

CONCLUSION
There is a always a practical application of the
theoretical approaches of budget setting in an
Industry. The budget as well as sales can be
estimated according to the theories in budget
setting. When the theoretical aspects of budget
setting are properly used in an industry, it will
help to increase sales margin as well as profit
volume. The better the budgeted media, the
better will be the reach.

THANK YOU

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